I. INTRODUCTION OF INSURANCE LAW
The basic objective behind ‘Introduction of Insurance’ in human lives is ‘To eliminate or significantly lessen the risk to people's lives and possessions’. Under the law of insurance, several persons are linked together by sharing a risk that is associated with an individual.
As per the law of insurance, the insurance contract has two parties:
1. Insurance Company/Insurer
2. Policy Holder/Insured
The Insurer through an ‘Insurance Contract’ agrees to make good any loss to the assets or life during a course of time which has been ensured as given under Section 10 of Indian Contract Act, 1872 for a consideration called ‘Premium’.
II. NEED FOR INTRODUCTION OF INSURANCE LAW
Every asset has some economic value associated with it. In addition, there is a chance that these assets will suffer harm from threats like fire, malfunctions, floods, earthquakes, etc., rendering them inoperable or damaged. A house is exposed to the possibility of catching fire, a person is exposed to the risk of an accident or death, and different assets are vulnerable to different types of risks.
A family will directly lose money if the family's primary provider passes away because the family's income will then cease. A solution that lessens the financial strain on the family is a ‘Life Insurance Contract’. Thus, the following justifies the need for insurance:
• The Law of Insurance is an essential instrument for ensuring that society as a whole feels safe.
• Under the Insurance Law, having insurance on an asset simply means that, in the event that the asset suffers any loss in value, the insurance company will carry the loss and compensate the insured by paying him. It does not mean that the asset is protected against risks or that its exposure to risk is reduced.
• Introduction of Insurance has irrefutably proved to be a helpful instrument for encouraging savings and investing, particularly among lower- and middle-income households. These savings are invested with the goal of boosting the economy.
III. LEGISLATIVE REGIME LEADING TO INTRODUCTION OF INSURANCE IN INDIA
The primary legislation regulating the insurance law in India is the Insurance Act of 1938. Some other existing legislation in the area are as follows:
• The Life Insurance 15 Corporation (LIC) Act, 1956,
• The Marine Insurance Act, 1963,
• The General Insurance Business (GIB) (Nationalization) Act, 1972
• The Insurance Regulatory and Development Authority (IRDA) Act, 1999.
The provisions of the Indian Contract Act, 1872 are applicable to the contracts of insurance, whether for life or non-life. Likewise, the provisions of the Companies Act, 1956 are applicable to the companies carrying on insurance business. The subordinate legislation comprises Insurance Rules, 1939 and the Ombudsman Rules, 1998 framed by the Central Government under Sec.114 of the principal Act as also 32 regulations made by the IRDA under Sec.114 A of the principal Act and Sec.26 of the IRDA Act 1999.
IV. TYPES OF INSURANCE
Following are the types of Insurance Business recognized by the Insurance Act, 1938:
I. Life Insurance Business
II. General Insurance Business
1. Marine insurance
2. Fire insurance
3. Miscellaneous insurance
V. PRINCIPLES OF INSURANCE LAW
Apart from the essentials of a contract which are given under Section 10 of Indian Contract Act, 1872 there are certain additional ‘Principles of Insurance Law’ in India as follows:
1. Principle Of Utmost Good Faith (Uberrimae Fidei) Under Insurance Law
• This law of insurance principle states that ‘Both the parties should have good faith towards each other.’
• Insurer to provide correct, complete and clear information of subject matter, terms and conditions of the Contract.
• This principle is applicable to all types of insurance contracts.
2. Principle Of Insurable Interest Under Insurance Law
• Insured must have an insurable interest in subject matter.
• Life Insurance - Refers to ‘Life Insured’ as insurable interest.
• Marine Insurance - There should be insurable interest at the time of occurrence of loss.
• Fire Insurance - There should be insurable interest at the time of taking policy and occurrence of loss.
• Owner has insurable interest as long as he is the owner.
• This principle of law of insurance is applicable to all types of insurance.
3. Principle Of Indemnity Under Insurance Law
• This insurance law principle involves a ‘Guarantee or assurance to put insured in the same position as before the loss.’
• Applicable on fire, marine and other general insurance.
• Insurer agrees to compensate for the actual loss.
4. Principle Of Subrogation Under Insurance Law
• As per this principle of insurance law, after the insurer is compensated for the loss due to the damage to property insured, the rights to ownership of the property passes to the insurer.
• This principle naturally follows ‘Principle of Indemnity’ and is applicable wherever indemnity is applicable.
• Example: A has taken Fire Insurance. Due to an act of B, A’s house catches fire. C which is an insurance company pays the amount. Thereafter, C has the right to sue B for damages, as C is the owner of the property.
5. Principle Of Contribution Under Insurance Law
• As per this law of insurance principle, only compensation of actual loss can be claimed either from one insurer or all the insurers.
• A has taken fire insurance of Rs.3,00,000/- from B’s company and of Rs.2,00,000/- from C’s company. When fire occurred, a suffered damages worth 3 lakhs. A may claim the 3 lakhs either full from B’s company or 2 lakhs from B and one lakh from C’s company.
6. Principle Of Causa Proxima (Nearest Cause) Under Insurance Law
• According to this law of insurance principle, Loss can be caused by more than one cause in succession to another.
• Property may be insured against some causes and not all causes.
• The proximity clause or nearest course is to be found. Proximate cause is one against which insurance exists.
• Example: A took marine insurance for damages of goods by water. At sea, rats made holes in A’s ship due to which water entered and damaged the goods. Though A was not insured for damages by rats, the proximate cause of water will give him the amount of insurance.
7. Principle Of Loss Minimization Under Insurance Law
• Insured should try to minimize the loss to the insured property. He should at the time of occurrence of an uncertain event take all possible measures.
• For Example: A has taken fire insurance. His house catches fire in such a situation, A should make efforts to minimize the loss, for example: call fire brigade, get help etc. He should not just sit and do nothing and then just recover the amount from the insurance company.