EXPLAIN THE COMPOSITION POWERS AND FUNCTIONS

OF INSURANCE REGULATORY AND FUNCTIONING

AUTHORITY

SYNOPSIS
Introduction
History and Establishment of IRDAI
Composition of IRDAI
Aim of IRDAI
Objective of IRDA
Powers, and Functions of IRDAI
IRDAI in Health Insurance Business
IRDAI on Ease of Living of Senior Citizens
Conclusion

INTRODUCTION TO IRDAI
IRDAI is responsible for safeguarding the interests of policyholders,
controlling, encouraging, and guaranteeing the insurance industry’s orderly
expansion.
The Insurance Regulatory and Development Authority of India (IRDAI) is an
autonomous and statutory body. It is responsible for managing and regulating
the insurance and reinsurance industry in India.
The Insurance Regulatory and Development Authority of India (IRDAI), which
was established by an act of parliament, specifies the composition of the
Authority under section 4 of the IRDAI Act of 1999.
History and Establishment of IRDAI
Up until the year 2000, the Indian government oversaw the regulation of the
insurance sector.
However, the IRDA was created in 2000 to implement a stand-alone apex body
at the advice of the Malhotra Committee report from 1999.
The IRDA started accepting registration requests through invitations in August
2000 and started allowing foreign businesses to invest up to 26% in the market.
Section 114A of the Insurance Act of 1938 has a number of rules and
regulations that have been set forth by the IRDA.
Regulations cover everything from safeguarding the rights of policyholders to
registering insurance businesses to do business in the nation.
There are currently 34 general insurance companies active in the country,
including the ECGC and the Agriculture Insurance Corporation of India, as well
as 24 life insurance companies.
The main objective of the Insurance Regulatory and Development Authority of
India (IRDAI) is to enforce the provisions of the Insurance Act.
Composition of IRDAI
the Insurance Regulatory and Development Authority of India is constituted by
an act of parliament. The Authority is a ten-member body, specified in section 4
, consisting of
 a Chairman;
 five whole-time members;
 four part-time members;
 All of the appointments are done by the Government of India.
Aim of IRDAI
Ensuring fair treatment for policyholders and defending their interests.
 To promote the insurance industry’s rapid and orderly expansion
(including annuity and superannuation payments), which will benefit the
general public, as well as supply long-term finance for the economy’s
rapid expansion.
 To take action when such standards are not sufficient or are not
adequately applied.
 To ensure that the industry operates with the appropriate level of self-
regulation in accordance with prudential regulation rules.
 To establish, encourage, oversee, and uphold high standards for the
competence, moral character, and financial stability of those it regulates.
 To ensure prompt resolution of legitimate claims, to stop insurance fraud
and other wrongdoing, and to set up efficient grievance redressal
mechanisms.
 To encourage fairness, openness, and lawfulness in financial markets that
deal with insurance, and to create a solid management information system
to impose strict requirements for the financial soundness of market
participants.
Objective of IRDA
The IRDA’s primary goal includes fostering competition to boost consumer
choice and lower prices while maintaining the market’s financial stability in
order to increase customer satisfaction. The primary objective of the IRDA is:
 to safeguard the policyholder’s interests and ensure fair treatment.
 to effectively regulate the insurance sector and guarantee its healthy
financial standing.
 establishing regulations on a regular basis to make sure the sector runs
well.

Powers, and Functions of IRDAI

Section 14 of the IRDAI Act, 1999 lays down the duties, powers, and functions
of IRDAI.
 Issue a certificate of registration to the applicant, renew, alter, withdraw,
suspend, or terminate such registration.
  Safeguarding the interests of policyholders in matters pertaining to policy
assignment, insurable interest, payment of insurance claims, policy
surrender value, and other terms and conditions of insurance contracts.
 Specifying the necessary credentials, moral standards, and practical
training for insurance intermediaries and agents.
 Encouraging efficiency in the management of the insurance industry.
 Charging fees and other amounts in order to carry out the objectives of
this Act.
 Governing insurance firms’ financial investments.
 Rules governing the preservation of the solvency margin.
 Resolution of conflicts involving intermediaries or insurance
intermediaries and insurers.
 Monitoring the activities of the Tariff Advisory Committee.
 Contacting insurers, intermediaries, insurance intermediaries, and other
organizations associated with the insurance business to request
information, inspect, inquire, and undertake investigations, including
audits.
 Control and regulation of the rates, benefits, terms, and conditions that
insurers may offer in relation to general insurance business if the Tariff
Advisory Committee has not done so in accordance with section 64U of
the Insurance Act of 1938 (4 of 1938).

IRDAI in Health Insurance Business

The apex authority, the IRDA, is in charge of establishing new regulations and
standards for health insurance in the country.
The Insurance Regulatory and Development Authority of India (IRDAI) has
been continuously working to lessen the compliance burden of all the regulated
organizations as part of its promotion of ease of doing business for insurance
companies.
The following are the new IRDA guidelines that the regulator has released for
health and mediclaim insurance in 2020:
If the policyholder has renewed the policy for eight years without interruption
or lapse, the insurer cannot deny a claim. The moratorium period will be used to
refer to this time frame. Except in cases of fraud or when the claim is brought
against a policy exclusion, the insurer cannot appeal the denial of the claim to
the IRDA.
With the advent of digitization, the medical industry has evolved, and one can
now contact a doctor online. The IRDA has requested that insurance companies
include telemedicine consultations in their insurance policies.
The insurance provider is responsible for paying interest on the claim amount if
the insurer delays the claim. It should guarantee that the claim is settled within
30 to 45 days following the policyholder’s last document submission.

IRDAI on Ease of Living of Senior Citizens

IRDAI has relaxed the requirements for submitting a separate proposal form for
taking Immediate Annuity products from National Pension Scheme (NPS)
earnings in this direction to make life easier for elderly persons.
In the existing situation, NPS retirees submit an exit form to NPS and a
proposal form to insurers at the time of superannuation.
Additionally, in order to encourage the adoption of technology, insurers have
been urged to use Adhaar-based authentication for the validation of life
certificates, such as Jeevan Pramaan, a Government of India project on
biometric-enabled digital services.
Conclusion
The enormous insurance industry is expanding rapidly, at a pace of 15-20%.
Insurance services together with banking services boost the nation’s GDP by
roughly 7%. The thriving and advanced insurance industry is beneficial for
economic growth as it increases the country’s capacity to take risks while
providing long-term funding for infrastructure development.
Irdai thus plays a variety of roles. It must first defend the rights of insurance
policyholders and make sure they are handled fairly. To make sure that the
interests of the average person are not compromised, it must also keep an eye on
policy issuers.
 CONTRACT OF INSURANCE

 MEANING OF INSURANCE
 PURPOSE OF INSURANCE
 GENERAL PRINCIPLE OF LAW OF INSURANCE
 DEFINITION OF INSURANCE CONTRACT
 TYPES OF INSURANCE
 NATURE AND CHARACTERISTICS OF
CONTRACT
 BENEFITS OF INSURANCE
 DIFFERENCE BETWEEN LIFE, MARINE AND
FIRE INSURANCE
MEANING OF CONCEPT OF INSURANCE
insurance is a contract represented by a policy in which a individual or entity receives
financial protection or reimbursement against losses from an insurance company. The
company pools client’s risk to make payments more affordable for the insured. Insurance is
means of protections from the financial loss from risk management primarily used to hedge
against the risk of a contingent uncertain loss.

Insurance contract: meaning

 An insurance contract is essentially a contract between two parties,
where one of them is called an “insurer” and the other party is
“insured”.
 In this type of contract, the insurer promises the insured party that
he will save or indemnify him from losses caused by a particular
contingent event, on the payment of an amount called “premium”.
 Insurer usually refers to the insurance company that sells the
insurance and the insured or policyholder is the person who buys it
by paying the premium. In a contract of insurance, the insurer or
insurance company advertises the insurance policy, which is an
invitation to offer.
 Then, on seeing the invitation to offer, the insured makes an offer to
the insurer. When the insurer accepts, it becomes an insurance
contract.

Purpose of insurance
The following are the two main purposes of insurance contracts :

1. Protection against uncertain events: The main purpose of an

insurance contract is to make the insured person secure and
 financially protected from certain uncertain contingencies that would
cause a huge financial burden.
2. Better management of finances: Many people have the tendency to
make poor financial decisions that could potentially leave them
without any support when faced with an unfortunate situation. By
subscribing to an insurance policy, the insured would be able to
make better financial decisions.

GENERAL PRINCIPLE OF LAW OF INSURANCE

In insurance, there are 7 basic principles that should be upheld, ie Insurable interest,
Utmost good faith, proximate cause, indemnity, subrogation, contribution and loss of
minimization.
1. Principle of Utmost Good Faith

This is a primary principle of insurance. According to this principle, you have to disclose
all the information that is related to the risk, to the insurance company truthfully.

You must not hide any facts that can have an effect on the policy from the insurer. If
some fact is disclosed later on, then your policy can be cancelled. On the other hand,
the insurer must also disclose all the features of a life insurance policy.
2. Principle of Insurable Interest

According to this principle, you must have an insurable interest in the life that is
insured. That is, you will suffer financially if the insured dies. You cannot buy a life
insurance policy for a person on whom you have no insurable interest.
3. Principle of Proximate Cause

While calculating the claim for a loss, the proximate cause, i.e., the cause which is the
closest and the main reason for a loss should be considered.

Though it is a vital factor in all types of insurance, this principle is not used in Life
insurance.
4. Principle of Subrogation

This principle comes into play when a loss has occurred due to some other
person/party and not the insured. In such a case, the insurance company has a legal
right to reach that party for recovery.
5. Principle of Indemnity

The principle of indemnity states that the insurance will only cover you for the loss that
has happened. The insurer will thoroughly inspect and calculate the losses. The main
motive of this principle is to put you in the same position financially as you were before
the loss. This principle, however, does not apply to life insurance and critical health
policies.
6. Principle of Contribution
According to the principle of contribution, if you have taken insurance from more than
one insurer, both insurers will share the loss in the proportion of their respective
coverage.

If one insurance company has paid in full, it has the right to approach other insurance
companies to receive a proportionate amount.
7. Principle of Loss Minimisation

You must take all the necessary steps to limit the loss when it happens. You must take
all the necessary precautions to prevent the loss even after purchasing the insurance.
This is the principle of loss minimization.

DEFINITION OF INSURANCE CONTRACT

An insurance contract is defined as ‘A contract under which one party (the insurer) accepts
significant insurance risk from another party (the policyholder) by agreeing to compensate
the policyholder if a specified uncertain future event (the insured event) adversely affects the
policyholder’.
INSURANCE CONTRACT
An insurance contract is a legal agreement that spells out the responsibilities of both the
insurance company and the insured, as well as the specific conditions of coverage and the
policy term and cost. An insurance contract is a contract under which one party (the insurer)
accepts significant insurance risk from another party (the policyholder) by agreeing to
compensate policyholder if a specified uncertain future event (the insured event) adversely
affects the policyholder. standard features of an insurance contract include the offer and the
acceptance, consideration, legal capacity and purpose, and indemnification.
NATURE OR CHARACTERISTICS OF INSURANCE

On the basis of the definitions of insurance discussed above, one can observe the
following nature or characteristics:

1. Contract
Insurance is a contract between the insurance company and the policyholder
wherein the policyholder (insured) makes an offer and the insurance company
(insurer) accepts his offer. The contract of insurance is always made in writing.

2. Consideration
Like other contracts, there must be lawful consideration in insurance also. The
consideration is in the form of premium which the insured agrees to pay to the
insurer.

3. Co-operative Device
All for one and one for all is the basis for cooperation. The insurance is a system
wherein large number of persons, exposed to a similar risk, are covered and the risk
is spread over among the larger insurable public. Therefore, insurance is a social or
cooperative method wherein losses of one is borne by the society.

4. Protection of financial risks

An insurer is protected from financial risks which can be measured in terms of
money. As such insurance compensates only financial or monetary loss or risks.

5. Risk sharing and risk transfer

Insurance is a social device for division of financial losses which may fall on an
individual or his family on the happening of some unforeseen events. When insured,
the loss arising out of the events are shared by all the insured in the form of
premium. Therefore the risk is transferred from one individual to a group.

6. Based upon certain principles

The insurance is based upon certain principles like insurable interest, utmost good
faith, indemnity, subrogation, causa-proxima, contribution, etc.

7. Regulated by Law
Insurance companies are regulated by statutory laws in almost all the countries. In
India, life insurance and general insurance are regulated by Life Insurance
Corporation of India Act 1956, and General Insurance Business (Nationalization) Act
1972, and IRDA Regulations etc.

8. Value of Risk
Before insuring the subject matter of the insurance contract, the risk is evaluated in
order to determine the amount of premium to be charged on the insured. Several
methods are being adopted to evaluate the risks involved in the subject matter. If
there is an expectation of heavy loss, higher premiums will be charged. Hence, the
probability of occurrence of loss is calculated at the time of insurance.

9. Payment at contingency
An insurer is liable to pay compensation to the insureds only when certain
contingencies arise. In life insurance, the contingency — the death or the expiry of
the term will certainly occur. In such cases, the life insurer has to pay the assured
sum.

10. Insurance is not gambling

An insurance contract cannot be considered as gambling as the person insured is
assured of his loss indemnified only on the happening of such uncertain event as
stipulated in the contract of insurance, whereas the game of gambling may either
result into profit or loss.

11. Insurance is not a charity

Premium collected from the policyholders under an insurance is the cost of risk so
covered. Hence, it cannot be taken as charity. Charity lacks the element of contract
of indemnity and compensation of loss to the person whosoever makes it.
12. Investment portfolio
Since insurers’ liability to pay compensation to the insured arises on the happening
of certain uncertain event, the insurers do not have to keep the collected premium
with them. They invest the premium received in selected securities and earn interest
and dividend on them. Thus, the insurers have two sources of income: the insurance
premium and the investment income (i.e. interest / dividend) which occurs over tim

Types Of Insurance
There are two broad categories of insurance:

1. Life Insurance
2. General insurance

Life Insurance – The insurance policy whereby the policyholder (insured) can ensure
financial freedom for their family members after death. It offers financial compensation in
case of death or disability.

While purchasing the life insurance policy, the insured either pay the lump-sum amount or
makes periodic payments known as premiums to the insurer. In exchange, of which the
insurer promises to pay an assured sum to the family if insured in the event of death or
disability or at maturity.

Depending on the coverage, life insurance can be classified into the below-mentioned types:

 Term Insurance: Gives life coverage for a specific time period.

 Whole life insurance: Offer life cover for the whole life of an individual
 Endowment policy: a portion of premiums go toward the death benefit, while the remaining is
invested by the insurer.
 Money back Policy: a certain percentage of the sum assured is paid to the insured in intervals
throughout the term as survival benefit.
 Pension Plans: Also called retirement plans are a fusion of insurance and investment. A portion
from the premiums is directed towards retirement corpus, which is paid as a lump-sum or monthly
payment after the retirement of the insured.
 Child Plans: Provides financial aid for children of the policyholders throughout their lives.
 ULIPS – Unit Linked Insurance Plans: same as endowment plans, a part of premiums go toward
the death benefit while the remaining goes toward mutual fund investments.

General Insurance – Everything apart from life can be insured under general insurance. It
offers financial compensation on any loss other than death. General insurance covers the loss
or damages caused to all the assets and liabilities. The insurance company promises to pay
the assured sum to cover the loss related to the vehicle, medical treatments, fire, theft, or even
financial problems during travel.

General Insurance can cover almost anything, and everything but the five key types of
insurances available under it are –
  Health Insurance: Covers the cost of medical care.
 Fire Insurance: give coverage for the damages caused to goods or property due to fire.
 Travel Insurance: compensates the financial liabilities arising out of non-medical or medical
emergencies during travel within the country or abroad
 Motor Insurance: offers financial protection to motor vehicles from damages due to accidents, fire,
theft, or natural calamities.
 Home Insurance: compensates the damage caused to home due to man-made disasters, natural
calamities, or other threats

Benefits of Insurance
The insurance gives benefits to individuals and organisations in many ways. Some of the
benefits are discussed below:

1. The obvious benefit of insurance is the payment of losses.

2. Manages cash flow uncertainty when paying capacity at the time of losses is reduced significantly.
3. Complies with legal requirements by meeting contractual and statutory requirements, also
provides evidence of financial resources.
4. Promotes risk control activity by providing incentives to implement a program of losing control
because of policy requirements.
5. The efficient use of the insured’s resources. It provides a source of investment funds. Insurers
collect the premiums and invest those in a variety of investment vehicles.
6. Insurance is support for the insured’s credit. It facilitates loans to organisations and individuals by
guaranteeing the lender payment at the time when collateral for the loan is destroyed by an insured
event. Hence, reducing the uncertainty of the lender’s default by the party borrowing funds.
7. It reduces social burden by reducing uncompensated accident victims and the uncertainty of
society.

Difference between Life, Marine, and Fire Insurance

Fire
Basis Life Insurance Insurance Marine Insurance

The subject
matter under
The subject matter The subject matter under
fire insurance is
Subject Matter under life insurance is marine insurance is freight,
an asset or a
human life. cargo, or a ship.
physical
property.
 Fire
Basis Life Insurance Insurance Marine Insurance

When it comes
Risk is unavoidable
to fire
when it comes to life
insurance, there
insurance. The insured Because the occurrence of
is no guarantee
amount is paid either an event is unpredictable,
Risk of risk. It is
when the policyholder the risk may or may not
possible that
reaches maturity or arise.
the insured
when he or she dies
property will
(whichever is earlier).
not catch fire.

Life insurance policies Short-term fire Short-term marine

are usually for a longer insurance. In insurance. In most cases, it
Time frame
period of time (more most cases, it is is one or a voyage period,
than 5 years). one year. or a mix of both.

Insurable
installments
Insurable interest must In the case of marine
interest must
be present when insurance, insurable
Insurable Interest exist both at the
purchasing a life interest must exist at the
time of
insurance policy. time of loss.
purchase and at
the time of loss.

Fire insurance
Payment of the Life insurance is paid in is purchased on Marine insurance is based
Premium installments. a one-time on a lump sum payment.
basis.

Indemnity If an indemnity, life Fire Insurance Marine Insurance is an

Agreement insurance is not a is an Indemnity indemnity contract. The
contract. In life contract. In fire market value of the ship
insurance, the insured insurance, only and the cost of goods
person receives the actual loss destroyed can be claimed
payment on the maturity is covered. by the insured.
 Fire
Basis Life Insurance Insurance Marine Insurance

date or after the

happening of a certain
event.

Loss is
Loss Measurement One cannot measure the measurable in Loss is measurable in the
loss of a human being. the case of fire case of marine insurance.
insurance.

The goal of
The goal of a Life
Fire Insurance The goal of Marine
The Goal insurance policy is to
is to provide Insurance is to protect
provide a safety net and
security to the one’s belongings.
a wise investment.
property.

Life insurance

Introduction
Meaning of insurance and life insurance
What is life insurance plan
Nature of life insurance
Scope of life insurance
Kinds of life insurance
Events that are insured under life insurance
contract
Difference between life insurance and other kinds
of insurance

Things to consider before buying a life insurance

policy life

INTRODUCTION
Just like you plan your meals, groceries, etc. beforehand so that you can serve
meals to your family on time, your need to plan your finances in advance as well.
There are some unforeseen incidents that need prior planning, even though they are
uncertain. One such plan is the financial arrangement for your loved ones for a future
where you may not be there for them. Life insurance plans are a necessity
because no one wants to imagine a future where their loved ones are waived off
financial support. The emotional connection cannot be compensated, but at least the
financial woes can be taken care of by opting for adequate life insurance coverage.
This is the first step towards prudent financial planning and hence being aware of the
nature and scope of life insurance is essential.
Joseph Vs Law Integrity Insurance Company (1912) - It was observed by Bunyon
J that " A contract of life Insurance may further be defined to be that in which one
party agrees to pay a given sum of money upon the happening of a particular event
contingent upon the duration of human life in consideration of immediate payment of
a smaller sum or other equivalent periodical payment by the other

After the onset of covid-19, there was a steady increase in insurance penetration in
India, which pushed from 2.82% in the year 2019 to 3.2% in the year after1. While
the figures may seem less, they equal the global average. This increase can also be
related to the fact that more and more people are realising the importance of
prioritising their finances above all other aspects. Securing the future of their loved
ones is one of the key objectives for most millennials

Life Insurance - Meaning

Life Insurance can be defined as a contract between an insurance policy holder and
an insurance company, where the insurer promises to pay a sum of money in
exchange for a premium, upon the death of an insured person or after a set period.

Life insurance plans are a necessity because no one wants to imagine a future
where their loved ones are waived off financial support.
What is a Life Insurance Plan?

A life insurance plan guarantees the lump sum payout of the death benefit to the
family of the insured in case he/she passes away during the policy tenure. In order to
provide this financial security, the insured would need to pay a premium to the
insurance company for a specific timeframe, which could be for the entire policy
tenure or for a part of the tenure.

NATURE OF LIFE INSURANCE:

There are different types of life insurance plans that you can choose from. While
some offer only life cover, others can offer a savings element as well, which is
disbursed as a maturity benefit. So, to understand the exact nature of life insurance,
you need to understand the various types as each type varies from the other.

 Term Insurance Plans

A term plan is purchased for a fixed policy tenure (that can go up to 80 years). Under
a pure protection term plan, the policyholder purchases only life cover. In case of the
death of the insured, a death benefit is payable. In case the individual survives the
policy, no benefit is paid out.

 Term Return Of Premium Plans (TROP)

A term return of premium plan, as the name suggests, is a savings cum life cover
plan. In case the policyholder expires during the tenure, the nominee receives a
death benefit. However, if the policyholder survives the tenure, he/she receives all
the premiums paid that have been paid so far.
  Money Back Plans

A money-back insurance plan ensures you get a regular income along with
guaranteed life cover. You can choose to get the income at regular intervals or
specific stages of life by paying a regular premium. Apart from this, the policyholder
may also get a maturity benefit if he/ she survives the policy tenure. The nominee
receives the death benefit in case the insured individual dies during the tenure.

 Child Insurance Plans

A child insurance plan comes with a savings unit that lets you plan your child's future
financial needs. The policyholder (parents) gets a life cover, and one part of the
premium is saved for the child's future financial goals, like a wedding or higher
education.

 Unit-Linked Insurance Plans (ULIP)

If you are looking for a life cover that also lets you invest, ULIPs are an ideal choice.
One part of the premium gives you life cover, while the other part is invested in
market-linked investment, which could be in the equity or the debt market or a
combination of the two based on your choice. However, ULIPs have a lock-in period
of 5 years.

 Endowment Plans

An endowment plan gives both life cover and savings opportunities. One part of the
premium is saved for a lump sum maturity benefit, and the other is invested for a life
cover. The insured individual receives the maturity benefit if he/she survives the
tenure. If not, the family/nominee receives the death benefit of the plan.

 Whole Life Policy

A whole life policy is a life insurance plan that covers an insured till the time they turn
99/100 years. In case the insured passes away during the tenure, the family behind
receives a death benefit. Because they have long-term/whole life cover, these are
known as whole life cover.

 Retirement Plans

A retirement plan, as the name suggests, is an ideal one for individuals planning
their retirement provides. It offers a life insurance cover and pays a lump sum death
benefit to the nominee in case the insured passes away. Apart from this, one part of
the premium is also used to provide a regular source of income as an annuity that
may be immediate or deferred.

 Group Life Insurance Plans

Most popular in the employment sector, a group life insurance plan covers all the
members of a group. All the group members collectively pay the premium and
receive life cover under one single plan.
 Essentials of Life Insurance Contract are as follows -

a) Offer and Acceptance

b) Agreement
c) Competency
d) Free Concent
e) Legal Consideration
f) Lawful Object
g) Consensus ad idem (Meeting of Mind)
h) Utmost Good faith
i) Insurable interest

SCOPE OF LIFE INSURANCE

What are the Benefits and Scope of Life Insurance Plan?
While discussing the nature and scope of life insurance, it is important to know the benefits
of life insurance as they can help the policyholder secure their loved ones in their absence and
secure a large amount to fulfill their lifelong dreams. Here is a list of all the benefits that can
help explain the scope of insurance in India:
 Protect your family’s financial future:
In the absence of the main income earner, the death benefit payout of your life insurance
plan can help your family stabilise themselves financially and take care of their monthly
expenses and other financial obligations like rent, fees, and other bills.
 Secure your kid’s future:
Your kids can use the payout amount to fulfill their financial goals like paying for their higher
education, funding their business or career, or paying for their marriage.
 Pay of any remaining liabilities:
In case you took out a loan for your studies or house, your family might be burdened with the
stress of trying to pay off the loan amount. The payout from life insurance can help your
family take care of any existing loans.
 Fulfil lifelong dreams:
If you outlive the policy term, most life insurance plans provide a maturity benefit which can
help you fulfil any lifelong goals like securing your post-retirement life or building wealth to
beat inflation.
  Life insurance tax benefits:
The nature and scope of life insurance plans in India offer tax benefits as per the prevailing
laws under sections 80C and 10(10D) of the Income Tax Act of 1961.

TYPES OF LIFE INSURANCE POLICIES

1. Term insurance plan
As the name says Term insurance plan are those plan that is purchased for a
fixed period of time, say 10, 20 or 30 years. As these policies don’t carry any
cash value their policies do not carry any maturity benefits, hence their policies
are cheaper as compared to other policies. This policy turns beneficial only on
the occurrence of the event.
2. Endowment policy
The only difference between the term insurance plan and the endowment policy
is that endowment policy comes with the extra benefit that the policyholder will
receive a lump sum amount in case if he survives until the date of maturity. Rest
details of term policy are same and also applicable to an endowment policy.
3. Unit Linked Insurance Plan
These plans offer policyholder to build wealth in addition to life security.
Premium paid into this policy is bifurcated into two parts, one for the purpose
of Life insurance and another for the purpose of building wealth. This plan
offers to partially withdraw the amount.
4. Money Back Policy
This policy is similar to endowment policy, the only difference is that this policy
provides many survival benefits which are allotted proportionately over the
period of the policy term.
5. Whole Life Policy
Unlike other policies which expire at the end of a specified period of time, this
policy extends up to the whole life of the insured. This policy also provides the
survival benefit to the insured. In this type of policy, the policyholder has an
option to partially withdraw the sum insured. Policyholder also has the option
to borrow sum against the policy.
6. Annuity/Pension Plan
Under this policy, the amount collected in the form of a premium is
accumulated as assets and distributed to the policyholder in form of income by
way of annuity or lump sum depending on the instruction of insured.

Consideration should be kept in mind while choosing insurance policy

 An ideal Life insurance plan should fit into your overall financial plan.
 Understand the policy well. It should cover your unique requirements.
 Assess your coverage needs and premium requirements.
 Check the riders and add the necessary ones to optimise your benefits.
 Always choose a trustworthy insurance company.
 Use technology to make the journey smoother and simpler.

DIFFERENCE BETWEEN LIFE INSURANCE

AND OTHER KINDS OF INSURANCE
Life Insurance Vs. General Insurance

While both categories have various types of insurance plans, the below table will
simplify the key differences –

Life Insurance General Insurance

Life insurance covers an

General insurance covers non-life
individual’s life and fixed health
Cover assets, such as houses, vehicles,
benefits like critical illnesses e.g.
health, events, travel, and more.
Cancer, heart ailments etc.

In case the insured dies during Compensation is paid only if there

Compensation the policy term, the nominees is loss or damage to the house or

receive the sum assured. Some car, during travel, or in case of

 Life Insurance General Insurance

plans pay this to the policyholder

hospitalisation for medical
if he or she outlives the policy
emergencies.
maturity.

The premium charged depends on

amount You pay a fixed premium many factors of the asset insured.

depending on the coverage and For e.g., medical insurance

Premium
this does not change during the premium will depend on medical

premium payment period. history, habits, profession, and

other lifestyle parameters.

This can be paid annually, half-

Premium Payment The premium has to be usually paid
yearly, quarterly, monthly or as a
Term as a lump sum.
lump sum.

These are typically annual policies

Life insurance policies are long
and can be renewed if required.
term policies which can continue
Tenure However, they must be renewed
for up to 99 years of age,
within the stipulated time to avoid
depending on the plan.
lapsation.

Repayment Amount The sum assured is paid out to In general insurance, the payout is

the policyholder’s nominees, called sum insured. This amount is

 Life Insurance General Insurance

provided all terms and conditions paid out if the insured asset is lost

have been complied with. or damaged.

The beneficiary can be anyone

the policyholder nominates to

receive the benefits in case of The policyholder is mostly the

Beneficiary
their death. For post maturity, the beneficiary

beneficiary can be anyone

including the policyholder.

THINGS TO CONSIDER BEFORE BUYING A

LIFE INSURANCE POLICY life

To do this, here are 7 key things you need to consider before you buy a life insurance plan.

1. The amount of coverage

This is the first thing you need to get right. Your cover should be large enough to protect your
family adequately, but not so large that you cannot afford it. Ideally, experts recommend
purchasing a life cover that is at least 10 to 15 times your annual income. However, if you want a
more accurate estimate, you can use an online life insurance coverage calculator.

Having sufficient coverage can help your family meet their everyday needs even in your absence,
without any financial trouble. In addition to that, it can also help them meet their life goals as
planned.
2. The type of policy

There are different types of life insurance policies, each with its own unique advantages. You
need to identify your needs and goals, and choose the policy type that best meets your
requirements. Here is a brief overview of the type of policy that aligns with the common financial
goals you may have.

Type of life insurance When to choose this type of life insurance

If you want a sizable life cover at affordable rates, even if it means

Term life insurance
no maturity benefits

If you want the benefits of savings and life insurance under one
Endowment life insurance
plan

If you want the benefits of investments and life insurance under

Unit Linked Insurance Plan
one plan

Whole life insurance If you want to enjoy coverage till the age of 99

If you want a life insurance plan that is aligned with the major
Child insurance plan
milestones in your child’s life, like education and marriage

Annuity plan If you want a life insurance plan that offers retirement benefits too

3. The tenure of coverage

Once you have chosen the type of plan and the amount of coverage, you need to decide on the
tenure of coverage. Every life insurance plan (except whole life insurance) offers coverage for a
specific tenure. Only deaths during this period are covered. So, it makes sense to have a life
insurance plan that comes with a longer tenure, rather than a shorter one.

Ideally, you need to opt for a life cover that is valid till you retire, at the very least. This is
because during your active working years, your family will be dependent on your income to meet
their needs. And in case something happens to you during this period, your life insurance plan
acts as a safety net for them.

4. The premium payment mode

Depending on the policy you choose, you may be eligible to pay a single, lump sum premium
upfront, or regular premium on a periodic basis. In the second case, you can choose to pay your
premium on a monthly, quarterly, semi annual or annual basis. You need to consider this aspect
and choose the premium payment mode that is most convenient for you.
In some plans, you can also choose to pay the premium for a limited period, which is shorter than
the policy tenure. So, that’s another aspect to take into account.

5. The terms and conditions of the policy

There are other terms and conditions of a life insurance policy that you need to consider. For
instance, check the grace period offered in case of delayed premium payments. Find out if there is
a waiting period involved. And take a look at the other terms governing the policy, like the
nomination, the option to avail a loan, the surrender charges and the surrender value.

6. The life insurance provider

You also need to select the right life insurance provider. To identify a good life insurance
provider, you can look at the following parameters and make a decision.

Factor What it tells you What to look for

This is the percentage of the total The higher this ratio, the better,
The claim settlement
claims received during the year that since it means the insurer
ratio
the life insurance provider has settled. promptly pays out genuine claims.

This ratio indicates how solvent the Again, the higher this ratio is, the
insurance provider is. In other words, better, because it indicates that the
The solvency ratio
it reflects the strength of the insurer’s insurer is solvent enough to settle
cash flow. claims promptly.

This will give you valuable insights Look for any recurring complaints
The reviews of existing
into how convenient the user and check for how efficient the
customers
experience is. after sales service is.

7. The add-on riders

This is another key thing to consider before you buy a life insurance plan. You can typically
purchase add-on riders at the time of buying your life insurance policy. There are different riders
that come with a policy, based on the type and the insurance provider. Here are some common
riders you can choose from.

 Waiver of premium rider

 Accidental death benefit rider
 Accidental permanent and total disability rider
 Critical illness rider
 Surgical care rider
You need to pay a nominal additional premium for these riders, and you can enjoy additional
coverage and benefits, over and above what your base plan offers.

Conclusion

Considering and evaluating these 7 things can help you figure out which life insurance plan is the
best one for you and your family. Make sure that you factor in all these aspects, because
overlooking even one of them can lead to a less-than-optimal decision. In case you have any
trouble figuring out any aspect, like the policy tenure or which riders to choose, you can always
seek the help of a financial advisor to guide you through your dilemma.

What Does Life Insurance Cover?

Broadly speaking, life insurance covers everything except suicide in the first year of buying
the plan. So, this includes death from all kinds of natural causes. In addition to this, life
covers also offer financial protection in case you pass away due to any illness or accident
during the policy tenure.

So, let's delve right in and take a look at what is typically covered by life insurance -
1. Death due to a natural disaster
Natural disasters like tsunamis, earthquakes, hurricanes, etc. cause a lot of death and
destruction. A person who passes away due to any such natural disaster will be covered by
their life insurance plans.
2. Death under the influence of alcohol or narcotics
In case the insured passes away due to intoxication by consuming alcohol or any other drugs,
life insurance will cover such instances. However, it is important that these habits were
declared while applying for Life Insurance.
3. Demise on account of participation in any dangerous activity
Some activities like hiking, paragliding, bungee jumping, car or bike racing and the like can
be extremely fun, but also extremely dangerous. So, if the insured passes away due to
accidents during such hazardous activities, life insurance will cover the same. However, it is
important to declare the indulgence in such activities while applying for Life Insurance.

4. Death from pre-existing health conditions

The insured may have some pre-existing health conditions such as heart ailments, diabetes, or
any other chronic illnesses at the time of purchasing the policy itself. These conditions need
to be disclosed during the purchase. And, if they pass away due to these conditions, the life
insurance plan will cover such deaths.
Note: This list is not exhaustive. The insurer may cover more types of deaths.

TWO EXCEPTIONS HAVE BEEN LAID DOWN, NAMELY:

(i) where death of the assured is caused due to the violation of a rule of criminal
law by the assured himself; and
(ii) Where death is the result of a suicide.

HOW CAN A NOMINEE CLAIM LIFE INSURANCE?

TO CLAIM A LIFE INSURANCE POLICY AFTER DEATH, YOU WILL NEED TO
FOLLOW THESE STEPS:
1. A claim intimation has to be sent. This can be done online, or the duly filled form can be sent
by post or by visiting a branch. A claim can also be intimated through email by mailing
claims@sbilife.co.in
2. You will need to submit the original policy copy.
3. You will then need an attested copy of the original death certificate issued by a local authority.
4. Photo identity proof and address proof of the claimant will also need to be submitted.
5. Direct credit mandate form or photocopy of the bank passbook or cancelled cheque with the
claimant's name printed must also be kept on hand.
6. Additional documents can be requested, including the medical attendant’s certificate and
hospital case papers. Also, depending on the information available, you may be required The
FIR or post-mortem report will be needed in case of an accident.
HOW MANY BENEFICIARIES CAN BE ON A LIFE INSURANCE POLICY?

You can choose one or more beneficiaries on your life insurance policy. If you choose more
than one person, you must mention the amount each beneficiary should receive after your
demise.

TAX BENEFITS
What are the tax benefits available when you invest in Life Insurance?
1. Under Section 80C of the Income Tax Act, you can claim a deduction for a
contribution towards a life insurance premium up to a maximum amount of
INR 1,50,000. Do note tax deduction is applicable only if the individual files
their tax return as per the old income tax regime, i.e. who has not opted for
the option under section 115BAC of the Act.
2. Maturity benefits are exempted under section 10(10D) of the Income Tax Act,
1961, subject to certain conditions. Death proceeds are completely
exempted.
3. The income tax laws are subject to change from time to time.
 Process of Getting life insurance claim in case
of death

Introduction
Meaning of life insurance
Definition of life insurance
Types of life insurance
Types Of life Insurance
Life Insurance – The insurance policy whereby the policyholder (insured) can ensure
financial freedom for their family members after death. It offers financial compensation in
case of death or disability.

While purchasing the life insurance policy, the insured either pay the lump-sum amount or
makes periodic payments known as premiums to the insurer. In exchange, of which the
insurer promises to pay an assured sum to the family if insured in the event of death or
disability or at maturity.

Depending on the coverage, life insurance can be classified into the below-mentioned types:

 Term Insurance: Gives life coverage for a specific time period.

 Whole life insurance: Offer life cover for the whole life of an individual
  Endowment policy: a portion of premiums go toward the death benefit, while the remaining is
invested by the insurer.
 Money back Policy: a certain percentage of the sum assured is paid to the insured in intervals
throughout the term as survival benefit.
 Pension Plans: Also called retirement plans are a fusion of insurance and investment. A portion
from the premiums is directed towards retirement corpus, which is paid as a lump-sum or monthly
payment after the retirement of the insured.
 Child Plans: Provides financial aid for children of the policyholders throughout their lives.
 ULIPS – Unit Linked Insurance Plans: same as endowment plans, a part of premiums go toward
the death benefit while the remaining goes toward mutual fund investments.

Filing a Life Insurance Claim

Claim settlement is one of the most important services that an

insurance company can provide to its customers. Insurance
companies have an obligation to settle claims promptly. You will
need to fill a claim form and contact the financial advisor from
whom you bought your policy. Submit all relevant documents such
as original death certificate and policy bond to your insurer to
support your claim. Most claims are settled by issuing a cheque
within 7 days from the time they receive the documents. However, if
your insurer is unable to deal with all or any part of your claim, you
will be notified in writing.

Life Insurance Claims Process

There are three main types of life insurance claims — maturity, death, and riders.
Beneficiaries will receive life insurance payouts in the case of the policyholder's
untimely demise. Here is a list of claims one can make under Life Insurance.

1. Death claim

Here are the steps to file a death claim.

Step 1: Written claim intimation

The beneficiary must immediately inform the insurer of the claim. Insured's name,
policy number, death site, date, claimant's name, etc. The beneficiary can obtain a
claim notification form by contacting the insurance company directly, submitting an
online request, or visiting any of the insurer's local offices. The beneficiary must
provide the following details.

 Their full name

 Policy number
 The deceased insured's full name
 The date and location of death
  The reason for death in the claim intimation

You can get a claim notification form from your insurance agent or advisor or visit
your local insurance agency. You should also check your insurance company's
website to see if the claim intimation form is available for download.

Step 2: Submit a claim form by filling it out

In the event of your untimely demise, your insurance provider would most likely ask
for the following types of paperwork. Documents required for a policyholder's natural
death include the following.

 The original policy.

 A copy of the death certificate.
 A fully completed and signed claim form.
 Any practical assignments.

In the event of an accident

 Hospital certificate
 Post-mortem report
 Medical records of the deceased, including test results, discharge summaries,
etc.
 Original or copy of the FIR
 Other documents (as asked by insurance provider)

Death due to a medical condition

 Completed and signed claim form original policy documents

 Nominee's bank account details (such as a bank statement or cancelled
check)
 Local authority-issued death certificate
 Medical records
 Statements from the treating physician and the attending physician

For a smooth claim settlement, be sure to submit all necessary paperwork. The
nominee must submit documents such as a death certificate, proof of the insured's
age, the original policy, etc. The insurance provider has 30 days from receiving the
necessary documentation to issue a final decision on the policyholder's claim. There
could be a situation, however, that necessitates more research on the part of the
insurance provider. In this scenario, the time limit for the insurance company to
resolve the claim is six months from the date it was notified of the claim in writing

CLAIM REQUIREMENTS DOCUMENTS FOR DEATH CLAIM:

 Death Certificate
 Original Policy Bond
 Claim Forms issued by the insurer along with supporting documents
 Insurable interest

Q4. What is insurable interest ? Its kind ?

Ans. Introduction

What is Insurable Interest?

Insurable interest is a requirement for issuing an insurance policy, making it legal, valid, and
protecting against intentionally harmful acts.

Entities not subject to financial loss from an event do not have an insurable interest and
cannot purchase an insurance policy to cover that event.

‘Insurable Interest’ Insurance is a collection of risk exposure to protect policyholders from

financial losses.

Types of Insurable Interest are;

 Fidelity Guarantee Insurance,

 Credit Insurance,

 Performance Bond.

Fidelity Guarantee Insurance

This type of policy covers the insured in respect of the loss sustained by him arising out of
fraud, defalcation, or dishonesty caused by the insured’s employee.

Usually, this type of insurance either handles cash or holds positions of trust to cover those
employees.
 Four types of guarantees are in use depending on the class of employees, viz., Commercial
Guarantees, for persons other than below;

Court Bonds for administrators, receivers, and other appointments.

Government Bonds, for trustees, customs, and excite people. Guarantees For Local Govt.
Officers.

Credit Insurance

Present-day international trade is mainly transacted on a credit basis, and exporters can
sustain heavy losses because of the possible insolvency of the buyers of such goods or because of
protracted default in payment on the part of buyers.

The main purpose of credit insurance is to provide financial protection to exporters arising
from nonpayment.

Performance Bond

These policies aim to protect those responsible under a contract to perform some
obligations within a specified time or as per certain pre-determined standards.

If the performance cannot be made as per the contract leading to a loss for the principal,
then the principal would have a right to claim damages or compensation for the contractor’s default
or the person who is to perform a certain obligation under the contract.

Essentials of Insurable Interest

The following are the essentials of insurable interest;

There must be property, rights, interest, life, limb, or potential liability devolving upon the
insured capable of being covered by a policy of insurance.

Such property, right, life, limb, interest, or liability must be the subject matter of insurance.

The insured must bear such a relationship, recognized by law, to that subject matter of
insurance whereby the benefits by the safety of that subject matter and is prejudiced by the loss,
damage, or destruction thereof.

Examples of Insurable Interest

 Insurable interest exists in the following cases;

Owners: Owners have got insurable interest to the extent of full value.

Part owners or joint owners: They have an insurable interest to the extent of their part or
financial interest.

Mortgagor/ Mortgagee: Mortgagor, being the owner of the property, has got insurable
interest. Mortgagee, though not the owner, has got insurable interest to the extent of the money
advanced, plus interest and an amount to cover up insurance premium.

Bailees: They have got insurable interest because of a potential liability being created if
goods belonging to others get lost or damaged whilst in their custody.

When Insurable Interest Must Exist

The question as to when insurable interest must exist varies depending on the type of
insurance. The position is as follows;

Marine: Insurable interest must exist at the time of claim, although it need not exist at the
time of effecting the policy. However, at the time of effecting the policy, the insured must prove that
he is going to acquire insurable interest soon. (Marine Insurance Act, 1906).

Fire: Insurable interest must exist both at the time of effecting the policy and at the time of
claim.

Life: Insurable interest must exist at the time of effecting the policy, and it may not exist at
the time of claim. For example, if a creditor takes out a policy on the life of a debtor and
subsequently the debtor pays back the loan, nevertheless, the creditor can continue the policy as per
original terms and shall be entitled to sum assured either on death of the debtor or on maturity,
even though at the time of claim there existed no insurable interest. (The rule was laid down in the
English Case Dalby V. The India and London Life Assurance Co., 1854).

Accident: Like fire, insurable interest must exist both at the time of effecting the policy and
at the time of claim.
 Insurable interest and insurable value with
illustration in respect of marine insurance

Meaning of insurable interest

Concept of insurable interest

Insurable interest under marine insurance

Importance of insurable interest under marine policy

Meaning Of Insurable Interest In Marine Insurance

Policy
Marine insurance covers maritime liabilities like damage or loss to cargo, ships or other marine assets. A
fundamental factor that necessitates this type of coverage in marine insurance would be insurable interest.

It is the financial stake that policyholders have in the insured property and the prime reason for the existence of
the insurance contract.

If you are a new business owner involved in the maritime industry, understanding the concept of insurable
interest can ensure your marine assets are protected from potential risks when out at sea because, without it, you
may end up taking unnecessary risks, leading to more loss.

Read on to learn more about insurable interest and what it means to have an insurable interest under marine
insurance!

What is Insurable Interest?

It is a type of investment that protects anything from a financial loss. It is the basis of all insurance policies. You
have an insurable interest in an item, event or action when damage or loss to them would result in financial loss
or hardships for you.

To exercise this interest, you need to buy insurance for the item in question so you get a payout when a loss
occurs. You must also not intentionally cause a loss to happen just to receive an insurance payout.

What is Insurable Interest Under Marine Insurance?

Insurable interest in marine insurance is essentially ‘your reason’ for buying the marine insurance policy. It can
be an object, action or event that you have a financial interest in. Any loss regarding your insurable interest
should result in a direct loss for you.

For example, if your financial interests lie in the safe shipment of your cargo, your insurable interest would be
safe delivery and you would most likely insure the vessel. In other words, your interests and profit relate directly
to the safe arrival/delivery of the cargo.

Moreover, similar to other insurance plans, you must ensure you have taken the necessary precautions against
potential losses to be eligible for the marine insurance payout when a loss inevitably occurs, i.e., the loss should
be accidental or out of your control.

Importance of Insurable Interest in a Marine Insurance Policy

Insurable interest plays a pivotal role in marine insurance. This is because ships, cargo and other marine
vessels/assets face significantly more risk when out at sea – Piracy, collisions, mechanical failures and natural
disasters like storms, hurricanes, typhoons, etc.

Without it, your policy would be meaningless and you may feel the need to take unnecessary risks since you are
not financially exposed to any consequences. Hence, you can say that insurance interest serves three main
purposes in marine insurance:

It prevents insurance fraud by ensuring that you only purchase insurance for property/assets in which you have a
financial stake.

It provides an incentive to take care of your insured property since it directly correlates to your financial well-
being.

Your entitlement to compensation is ensured if you suffer a loss/damage (subject to policy terms) to the insured
property since you have a financial stake in it.

Also Read: Principles of Marine Insurance

What Are the Principles of Marine Insurance?

Here is a list of the principles of marine insurance:

Principle of Utmost Good Faith

Every insurance product is based on utmost good faith on the part of the insurer and the insured. Marine
insurance policy is no exception. The principle of utmost good faith assumes an organisation or individual
purchasing marine insurance will furnish accurate details without withholding crucial information.

An insurance provider has every right to reject the application or claim if it believes the entity buying the policy
has concealed important information. Hence, the insured must disclose all related risks that may impact the
underwriter’s judgement and should act in good faith towards the insurer throughout the policy duration.
The breaches under the principle of utmost good faith are classified under four headings - concealment, non-
disclosure, fraudulent misrepresentation and innocent misrepresentation. Hence, providing accurate and
complete information when buying marine cargo insurance is essential.

Principle of Indemnity

Cargo insurance aims to put the insured in the same financial position after the loss where he would have been if
no loss had occurred. While an insurance company cannot replace the goods in the event of loss or damage, it
can pay a reasonable compensation.

The principle of indemnity ensures that the policy covers losses of the damaged goods only. By compensating
only to the extent of the loss incurred, the insurer makes sure you do not buy the policy to make profits.

For example, you have a marine insurance policy of ₹35 lakh. You incur a loss of ₹15 lakh during a collision.
In this case, you are eligible to receive ₹15 lakh as compensation, even if policy coverage is ₹35 lakh.

Principle of Insurable Interest

The Marine Insurance Act of 1963 clearly defines insurable interest. As per the principle, a tangible commodity
must be exposed to marine risks, and the insured entity should have a legal relationship with it.

In other words, marine insurance is applicable only when you have an insurable interest in the insurable
property at the time of loss. This means you must stand at benefit if the goods reach their destination safely and
on time.

On the other hand, you must stand at a loss if the goods are not delivered on time and in condition as expected.
So, according to the principle of insurable interest in marine insurance, you must be interested in goods reaching
safely to their destination.

Principle of Proximate Cause

The principle of proximate cause is another one of the marine insurance principles. It is a key to determining the
reason for the loss or damage to the goods or vessel. It refers to the most direct or proximate cause, which helps
analyse the genuine cause if a series of events led to the damage.

As per the principle, the insurance provider is liable to pay you if the policy covers the proximate cause of your
loss. If the proximate cause is not covered by your marine insurance policy, the insurer is not liable to pay you.

For example, pirates attack and steal your cargo on its way to Australia. Your policy covers losses incurred due
to natural forces only. In the absence of the principle of proximate cause, you could have stated fog as the cause
of the theft, as it did not allow you to see the pirates and take action on time. However, piracy will be considered
the proximate cause of your loss in a marine insurance policy.

Principle of Contribution

Often, the same perils or risks the goods are prone to are covered by one or more insurance providers. In cases
where multiple insurers cover the same cargo, the principle of contribution comes in. The principle states that
each insurance provider splits the payment proportionately in the event of a claim.

This helps ensure that you do not receive more than an indemnity and that any loss is fairly distributed between
the insurers.

For example, you insure goods worth ₹50 lakh with two insurance companies. In case of loss of goods in a
marine event, the amount of loss will be paid to you proportionately by both companies. Here is a list of factors
needed to exist before the loss is shared between the insurers:
A minimum of two policies should exist

Every policy must be a policy of indemnity

The policies should cover the same peril, subject matter and interest

Principle of Subrogation

The principle of subrogation in marine insurance follows the indemnity principle. It ensures that the insured
party does not receive more than the loss incurred. Based on this principle, you cannot use the damaged goods
after you have received a payout from the insurance provider.

Hence, the principle of subrogation limits the scope of any profit from the marine insurance contract. In case of
disposal of the damaged goods, you must return the excess amount to the insurance provider post the claim.

For example, the sum insured on your cargo is ₹5 lakh. The entire cargo gets damaged due to an accident, and
the insurer settles your claim. However, by selling the damaged goods, you earn ₹20,000. The total cash you
receive now exceeds the loss incurred by ₹20,000. As per the subrogation principle, you must return the extra
amount to the insurance provider as you are already compensated for the loss.

Types of Insurable Interest in Marine Insurance

Insurable interest under marine insurance may or may not exist when the policy was affected but must always be
present at the time of loss under marine insurance. If you no longer have an interest in the insured asset, the
policy may become void.

This is the case for a marine open policy where insurable interest may not exist at the time of policy purchase
but may eventually come into the picture during the policy’s term.

This is a necessary modification when you consider the mercantile practice (import/export) of maritime
businesses, i.e., there is always a possibility of the sale and purchase of assets during transit. Hence, there are
two main types of insurable interest in marine insurance:

Insurable Interest in Marine Insurance

Under the Marine Insurance Act (MIA) of 1906, insurable interest is clearly defined as a marine adventure
(transit) or physical object that must be exposed to marine perils and the policyholder must have a
legal/equitable relationship with the insured asset.

They must benefit from its preservation and be prejudiced by its loss/damage, where it may incur liability or
detention. Here, partial interest also falls under insurable interests.

Marine Insurance Act, 1963

18. Measure of insurable value

Subject to any express provision or valuation in the policy, the insurable value of the subject-matter insured
must be ascertained as follows:-

(1) In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including
her outfit, provisions, and stores for the officers and crew, money advanced for seamen's wages, and other
disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus
the charges of insurance upon the whole:
The insurable value, in the case of a steamship, includes also the machinery, boilers, and coals and engine stores
if owned by the assured; in the case of a ship driven by power other than steam includes also the machinery and
fuels and engine stores, if owned by the assured; and in the case of a ship engaged in a special trade, includes
also the ordinary fittings requisite for that trade:

(2) In insurance on freight, whether paid in advance or otherwise, the insurable value is the gross amount of the
freight at the risk of the assured, plus the charges of insurance:

(3) In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the
expenses of and incidental to shipping and the charges of insurance upon the whole:

(4) In insurance on any other subject- matter, the insurable value is the amount at the risk of the assured when
the policy attaches, plus the charges of insurance.

Contingent and Defeasible Interest in Marine Insurance

This is when the insured interest is defeasible, i.e., liable to rejection by the buyer/importer under the terms of
their sales agreement.

For example, an importer can reject a consignment and treat it as the seller’s risk if the delivery is
overdue/delayed.

Since contingent and defeasible interests are insurable under the MIA for “lost or not lost” insured goods, the
assured can recover this loss, even if they have not acquired the insurable interest until after the loss.

Another way to circumvent this loss would be through contingent insurance that comes into effect when the
buyer rejects the consignment, so the risk reverts to the seller.

Examples of Insurable Interest in Marine Insurance

Case 1:

Company A is a major exporter delivering raw materials to a US buyer worth millions of dollars. In this case,
Company A has an insurable interest in the safe delivery of the raw materials.

Upon safely reaching their destination, the insurable interest will not transfer to the buyer. However, if the
goods have been damaged after the transfer, the US buyer can file a claim to the insurer to get reimbursed for
any losses.

Case 2:

A logistics company that deals with the shipment of fragile items would have an insurable interest in the safe
delivery of said fragile cargo. Hence, they would need to insure the vessel carrying the goods – ships, trucks,
trains or planes.

If the vessel or inland transport has been financed/loaned through a bank, they would need insurance. When this
is the case, both parties have an insurable interest.

For the banks, it will be the vessel/transport and for the logistics company, it would be ensuring a safe delivery.
Hence, the insurable interest can be covered by:

The logistics company can buy marine insurance for the vessels and can cover all the costs in case of a loss. So.
they will repay the bank in case of a total loss.
The bank and the logistics company could take out separate insurance policies to insure their interests
separately.

The logistics company could buy insurance and assign it to the bank. In case of a loss, the logistics company
will still be reimbursed after the loan has been settled.

Key Takeaways About Insurable Interest in Marine Insurance

 Insurable interest is the basis of all insurance contracts. It is proof that you will suffer financial loss and
hardships in the event of damage/loss. Without it, your marine insurance policy would be meaningless.

 You must have a vested financial interest in the insured property in order to define it as an insurable
interest under your marine insurance policy.

 Partial, defeasible and contingent interests are all insurable under the Marine Insurance Act.

 In order to exercise or claim reimbursement for losses on insurable interest, you must have a valid
marine insurance policy in effect.

 Several parties can be involved under a marine insurance policy since there is a constant change in the
ownership of goods.

Conclusion

Insurable interest is a key component of all insurance policies. However, it plays an especially pivotal role in
marine insurance due to the risks involved in maritime transport.

Hence, in a cargo policy, the insurable interest should exist to ensure the policyholder has a financial stake in the
insured marine asset, thereby aligning their interest with the purpose of a marine insurance policy – to provide
financial coverage for damage and loss.

Tata AIG offers several types of marine insurance for this purpose to ensure your maritime assets stay safe.

Voyage deviation and its effect on

marine insurance policy

What Is Voyage Deviation In Marine Insurance?

 Author :
  TATA AIG Team

 ●

 Published on :

 16/01/2024

 ●

 2 min read

Marine insurance is crucial to safeguarding maritime assets and ensuring smooth sailing for shipowners. Amidst
the sea of terms, one that demands attention is "Voyage Deviation."

This nautical jargon refers to any intentional detour from the agreed-upon course during a sea journey. In the
realm of marine insurance, understanding voyage deviation is paramount. It involves potential risks and
implications that can impact coverage and claims.

In this blog, we will talk about the intricacies of voyage deviation in marine insurance, shedding light on why
comprehending this concept is vital for both insurers and insured parties navigating the high seas. So, let’s set
sail, shall we?

Voyage Deviation in Marine Insurance: An Overview

Voyage policy related to deviation in marine insurance refers to any intentional change in a ship's route from the
originally planned and agreed-upon course. This can happen for various reasons, such as:

Weather conditions: Avoid storms or seek safe refuge during bad weather.

Mechanical problems: Needing to divert to a port for repairs.

Cargo requirements: Responding to unforeseen circumstances with the cargo, like picking up additional cargo
or assisting a distressed vessel.

Market opportunities: Taking advantage of a price change or new destination for the cargo.

A ship strays from its planned route, which can significantly affect insurance coverage. Marine insurance
usually protects the ship and its cargo for a particular journey, and any deviation from this journey may lead to
the policy being void or restricted.

Many marine insurance policies have a "seaworthiness" requirement, meaning the vessel must be in good
condition at the voyage's beginning and stay that way. If the ship deviates from its intended course, it might be
deemed unseaworthy, potentially causing the insurer to reject coverage for losses resulting from the deviation.

Therefore, shipowners must grasp the consequences of changing course during a voyage and take steps to
reduce the associated risks. It's important to understand that such changes can also affect the ship's responsibility
for any damages or losses that happen during the deviation.

If the shift from the original route is seen as unnecessary or unreasonable, the shipowner or operator might be
held responsible for resulting damages. To avoid problems, the ship owner or operator should inform the insurer
before making any planned changes. The insurer will evaluate the risks and may adjust the policy to cover the
extra dangers.

Effect of Voyage Deviation in Marine Insurance - Financial & Legal Implications

Understanding voyage deviation and the specific clauses in the insurance policy is crucial for the insured. This
prevents accidental policy voiding, ensures proper communication with the insurer, and avoids potential
financial losses in case of claims.

Also, it is crucial to know that voyage deviation can have significant legal and financial implications for various
parties involved, including:

Breach of Contract: Deviating from the agreed-upon voyage may constitute a breach of contract with the cargo
owner or charterer. This can lead to legal action and potential liability for damages, delays, and additional costs
incurred.

Increased Insurance Premiums: Frequent or unauthorised deviations can result in higher insurance premiums
due to the perceived increased risk.

Damage or Loss of Cargo: Increased exposure to unforeseen risks by deviating from the planned route can
lead to damage or loss of cargo. The cargo owner may have limited recourse for claims if the deviation was
unauthorised or not covered by insurance.

Delays and Cost Overruns: Deviation can cause delays in delivery, disrupting the cargo owner's supply chain
and resulting in additional costs such as storage fees and missed deadlines.

Legal Disputes: If the deviation arises from disputes with the shipowner or charterer, the cargo owner may be
involved in legal action to recover losses.

General Average Contribution: In rare cases where intentional deviation is deemed necessary for the common
safety of the voyage and cargo, a general average contribution might be levied on all cargo owners to share the
resulting expenses.

Subrogation Rights: If the deviation was caused by the shipowner's or the charterer's negligence, the insurer
may have the right to pursue legal action against them to recover the amount paid out for claims.

Marine Scenarios Where the Voyage Deviation Penalties are Excused

While voyage deviation typically comes with potential penalties in a marine insurance policy, there are certain
scenarios where these penalties might be excused, either partially or entirely.

Here are some common examples:

Force Majeure Events: Encountering unexpected storms, hurricanes, or other extreme weather conditions that
pose a danger to the vessel or cargo. Also, circumstances which forced the ship to deviate to avoid imminent
threat of piracy or armed robbery or escaping conflict zones or areas of political instability for the safety of the
crew and cargo.

Engine failure or other technical issues: Diverting to the nearest port for urgent repairs if continuing on the
planned course would endanger the vessel or cargo.

Assisting a vessel or a human in distress: Responding to distress calls and providing assistance to another
vessel in danger, even if it requires changing course. Or deviating to seek medical assistance for sick or injured
crew members, even if it's not the originally designated port.

Port closures or restrictions: If the originally planned port becomes inaccessible due to unforeseen closures or
restrictions imposed by authorities, a deviation to an alternative port may be excused. Or diverting to comply
with unexpected quarantine regulations imposed by a port authority.

How Insurers Handle Voyage Deviation in Marine Insurance?

Insurers handle voyage deviation in a multifaceted way, balancing their own risk assessment with maintaining
good relationships with insured parties.

They generally handle the situation in two different approaches:

Allowing the deviation: Adjustments can involve increased premiums, additional risk mitigation measures, or
amended coverage terms for the new route. Open communication and documentation are crucial in such cases.

Requiring permission: Depending on the insurer's risk assessment, permission might be readily granted or
subject to further scrutiny and potential adjustments upon approval.

It should be noted that minor deviations within acceptable limits might be accommodated without major
adjustments, while significant changes could require permission or policy modifications.

Justifiable reasons like emergencies or safety concerns might lead to greater flexibility compared to commercial
advantage-driven deviations.

Also, a history of responsible behaviour and adherence to policy terms can increase the insurer's trust and
willingness to work with the shipowner in case of unforeseen deviations.

Also Read: How Does Marine Insurance in India Work?

How to Prevent Voyage and Deviation in Marine Insurance?

Preventing voyage deviation entirely is not always possible, as unforeseen circumstances and emergencies can
arise. However, several strategies can be implemented to reduce the risk of deviations and their potential
consequence significantly.

Negotiation and compromise: Open communication and negotiation can sometimes lead to solutions
acceptable to both parties (insurer and insured), even in potentially problematic situations.

Thorough Voyage Planning: Carefully planning the route, taking into account weather patterns, potential
hazards, and regulatory requirements. This can minimise the need for last-minute adjustments that might
constitute deviations.

Clear Communication and Procedures: Establishing clear communication protocols between the crew,
shipowner, and insurer ensures everyone is informed of any potential issues and can collaborate on safe and
responsible decisions.

Real-time Monitoring and Analysis: Utilising technologies like weather forecasting tools and real-time route
optimisation systems can help identify potential issues and adjust the course proactively, minimising the need
for drastic deviations.

Adherence to Regulations and Authorities: Complying with maritime regulations and instructions from port
authorities can avoid unintentional deviations due to non-compliance or unexpected restrictions.

An Example to Better Understand the Situation of Deviation of Voyage in Marine Insurance

Voyage deviation remains a prominent concern for marine insurance providers. Examining real-life scenarios
sheds light on how such deviations can impact marine insurance coverage.

Here’s one simple example which will help you better gauge the situation at hand:

A cargo ship faced harsh weather conditions during a voyage from China to the United States. In prioritising the
crew's and cargo's safety, the captain made an unplanned stop in Japan to wait out the storm.
Despite the necessity of the stop, it was deemed a deviation from the original voyage plan. Consequently, the
ship's insurance policy was invalidated, leaving the shipowner responsible for covering any damages or losses
from their resources.

Summing it Up,

The impact on marine insurance coverage emphasises the need for proactive measures and transparent
communication between shipowners and insurers. Navigating the unpredictable seas requires a reliable transit
insurance partner who comprehends the intricacies of maritime risks.

As you safeguard your vessels and cargo with cargo insurance, exploring comprehensive marine insurance plans
becomes imperative. Consider aligning with trusted insurers like Tata AIG, who offer tailored solutions,
ensuring a smoother voyage through the unpredictable waters of risk.

After all, in the vast expanse of the sea, a reliable voyage policy in marine insurance can be the anchor that
ensures a secure and prosperous journey.

NECESSITY AND IMPORTANCE OF SOCIAL INSURANCE

Social Insurance

Social Insurance Meaning

Social insurance refers to government-backed, citizen-funded programs that aim to

support people during financial struggles resulting from disability, reduced earnings
following retirement, loss of employment, etc. It helps account for life’s unpredictability
that a person might face during retirement or a health-related crisis.
You are free to use this image on your website, templates, etc, Please provide us
with an attribution link

The concept is based on the assumption that the equal distribution of benefits and
resources in a competitive economy does not always exist. Moreover, it enables a
dynamic economy’s participants to get risk exposure and carry out economic
activities with the confidence that during an emergency, they will get protection via
the social insurance program.

Table of contents

 Social Insurance Meaning

o How Does Social Insurance Work?
o Types
o Examples
o Benefits
o Criticism
o Social Insurance vs. Social Security vs. Social Assistance
o Social Insurance vs. Private Insurance
o Frequently Asked Questions (FAQs)
o Recommended Articles

Key Takeaways

 Social insurance refers to financial protection offered by the government

against various types of economic risks through different programs funded by
the nation’s citizens.
  A noteworthy advantage of such programs is that they offer coverage to the
insured for any externality they face owing to any economic activity conducted
in the economy.
 Some popular types of this insurance are Worker’s compensation, public
unemployment insurance, and public health insurance.
 A key difference between social assistance and insurance is that mandator
payments are not necessary in the case of the former.

How Does Social Insurance Work?

Social insurance refers to a type of social welfare that offers insurance against
different economic risks. One may get this form of insurance through the
subsidization of private insurance. Alternatively, individuals may be publicly offered
it. As noted above, citizens using such programs fund them. One can observe an
average paycheck to find the ductions for Medicare, unemployment, and Social
Security. Such deductions add to the multiple benefits that offer a safety net in the
case of illness, hardship, or retirement.

Some features of social insurance programs are as follows:

 Individuals make nominal contributions, which never exceed the amount they
can afford.
 The premiums or taxes paid on behalf of or by participants fund such
programs.
 In this case, a statute defines the program’s eligibility requirements, benefits,
and other aspects.
 The government makes explicit provisions to factor in expenses and income,
often via a trust fund.
 Such programs serve a clearly-defined population. Moreover, the government
makes participation substantially subsidized or compulsory so that the
majority of the eligible individuals decide to participate.

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Types

Some popular types of social insurance programs are as follows:

  Social Security: This refers to a system under which a nation’s government
makes regular payments to specific groups of persons, such as unemployed
persons or sick people.
 Public Auto Insurance: Public auto insurance refers to a government-backed-
and operated mandatory automobile insurance system. It enables vehicle
owners to minimize the costs they might incur because of an accident.
 Public Health Insurance: Essentially, a public health insurance plan is a
scheme offered by a government for older people, low-income families or
individuals, and persons qualifying for special subsidies. The main public
health programs in the United States are Medicaid, CHIP, and Medicare.
 Universal Parental Leave: This is an employee benefit that individuals get in
almost every country. One must note that ‘Parental leave’ may include
paternity, adoption, and maternity leave. Alternatively, one may use the term
to describe a separate family leave that either parent can get to take care of
their small children.
 Public Unemployment Insurance: Public unemployment insurance refers to
government-run insurance programs offering out-of-work persons financial
assistance if they fulfill specific eligibility requirements.
 Worker’s Compensation: It replaces the wages an employee loses after
suffering from an on-the-job injury. Moreover, such a program funds
vocational rehabilitation.

Examples

Let us look at these social insurance examples to understand the concept better.

Example #1

Suppose Sam is a person aged 67. He is suffering from cardiovascular disorder.

Although he is not in a strong financial position, he is not worried about the medical
expenses that he may have to incur owing to the benefits offered by Medicare.

The government-run social insurance initiative has four parts. Parts A and B provide
coverage for his hospital stays and specific outpatient services, respectively. Part C
allows Sam to customize his covers based on the medical requirements. Finally, D
offers him coverage for the costs incurred for purchasing prescription drugs.

Example #2

In Japan, the ruling camp and the government are looking to increase social
insurance premiums with an aim to fund unprecedented measures to address the
nation’s decreasing birth rate. The reason behind raising the premiums is to ensure
that they do not anger the citizens by increasing the tax rates. Several trillion
yen might be necessary to execute every item in a measures’ draft package to tackle
the low birthrate figures released in March 2023.

The government must win the business world’s support to increase social insurance
premiums. Moreover, they must get support from persons who do not have a child
or have already raised children.

Benefits

The advantages of social insurance are as follows:

 It bases its advantages on when a person chooses to retire, putting everyone

in control of their finances.
 This type of government-run program may provide benefits over private
insurance when a beneficiary or their family member suffers from a
hereditary or chronic disease.
 Such insurance programs solve the issue concerning asymmetric
information as they offer a range of costs for each issue patients may report.
 It provides individuals with coverage for externalities faced owing to any
activity carried out within the economy.
 The majority of social insurance programs aim to reduce inequality and
poverty.

Criticism

A serious issue of this type of insurance program is that persons insured against
specific risks usually become complacent. Moreover, the likelihood of them taking
adverse actions increases as they know that they will get compensation for such
actions’ adverse outcomes. This is called a moral hazard. Offering insurance to all
individuals is a limitation because then the insurance providers and the government
cannot track the insured and must cover the costs of their immoral actions.

Besides this issue, people also criticize some of these government-backed programs,
for example, social security, saying that they put further burden on a nation’s
employed youth owing to the total number of retired persons who are beneficiaries.

Some more noteworthy disadvantages of such programs are as follows:

 One cannot straightforwardly renounce insurance.

 These programs can be very expensive.
 They might involve a lot of paperwork.
Social Insurance vs Social Security vs Social Assistance

Fully understanding the concepts of social security, insurance, and assistance may
not be easy as some overlap in their features might make it confusing for one new to
such topics. That said, their distinct features can help individuals know their critical
differences.

Social Insurance Social Security Social Assistance

This refers to It refers to monetary

This non-government or government action
government-controlled assistance offered by the
involves transferring resources to individuals
programs that protect state to people with
whose vulnerability justifies some kind of
persons from economic insufficient or no
entitlement.
risks. earnings.

Usually, social assistance is a government

This government Social security aims to program that focuses on the economic and
imitative aims to eliminate diseases, sometimes social welfare of unemployed
safeguard one from exploitation, and squalor individuals, elderly persons, etc., via
hunger and want. besides hunger and want. pensions and other form of monetary
assistance.

One must make regular

This is a compulsory
payments to get the Typically, social assistance does not require
payment one makes to
benefits of such one to make compulsory payments.
the government
programs.

Social Insurance vs Private Insurance

The primary similarity between social and private insurance programs is that they
offer coverage to persons from all kinds of eventualities, provided they make the
required contributions. That said, one must remember that they have more
differences than similarities. Let us look at the table below to understand how they
differ.

Social Insurance Private Insurance

Generally, social insurance programs focus more Generally, the design of such programs puts
on every participant’s social sufficiency of more focus on the equity between individual
 Social Insurance Private Insurance

benefits. coverage purchasers.

Typically, participating in such a program is Individuals voluntarily participate in a private

compulsory. insurance program.

Generally, in this case, a statute and not a

contract forms the basis of one’s rights to
In this case, one’s right to benefits is
benefits. This means the program’s provisions
contractual.
can only change if the modification of the
statute occurs.

In most cases, full funding of the program does Individually bought private insurance has to be
not occur. fully funded.

History and development of insurance in india

Q1. Origin evolution and development of insurance in India?

Ans. Introduction :

History of Insurance in India dates back to the writings of Manu (Manusmriti), Kautilya
(Arthashastra), and Yagnavalkya (Dharmasastra). History of Insurance is deep-rooted to a couple of
centuries ago in the 1800s.

 The life insurance business in India was introduced in 1818 with the establishment of the
Oriental Life Insurance Company in Calcutta. However, the company failed in 1834.

 Then in 1829, the Madras Equitable set out with the business of transacting life insurance
in the Madras Presidency.

 In 1870, the enactment of the British Insurance Act came into picture and during the last
three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874), and
Empire of India (1897) were begun in the Bombay Residency.
  The era was evidently dominated by the foreign insurance offices like the Albert Life
Assurance, Liverpool and London Globe Insurance, and Royal Insurance. These entities
gave a hard competition to the ones being set up in India.

What is Insurance?

Insurance implies the protection from financial loss. It is one of the forms of risk management,
mainly used to hedge against the risk of an unforeseen loss.

Insurance is represented in the form of policy. It is a contract in which an individual or a business

seeks financial protection from a firm as a reimbursement from the insurance company for the loss
(big or small) caused to their property.

For the insurance transaction to take place, the insurer and the insured enter into a legal contract,
called insurance policy. The policy provides financial security from future uncertainties.

History of Insurance – Overview

In India, the history of insurance finds its roots in the mentions of the writings of Manu
(Manusmrithi), Kautilya (Arthasastra), and Yagnavalkya (Dharmasastra).

The writings suggest pooling of resources that could be re-distributed in times of calamities like
epidemics, floods, fire, famine, etc.

Ancient Indian history has preserved the earliest traces of insurance as in the marine trade loans and
carriers’ contracts. In all, the insurance sector in India has taken its shape inspired by the other
countries, especially, from England.

Establishment – Insurance Industry

The advent of the life insurance business in India was introduced in 1818 with the establishment of
the Oriental Life Insurance Company in Calcutta. However, the company failed in 1834. The Madras
Equitable had begun transacting life insurance business in the Madras Presidency in 1829.

The enactment of the British Insurance Act took place in 1870. Besides, in the last thirty years of the
nineteenth century, the Bombay Mutual (1871), Oriental (1874), and Empire of India (1897) were set
up in the Bombay Residency.

However, this period was particularly dominated by the foreign insurance companies like Albert Life
Assurance, Liverpool and London Globe Insurance, and Royal Insurance.

The Indian Life Assurance Companies Act of 1912 was the first statutory entity to regulate the
life insurance business in the country. The government of India began publishing the returns of the
Insurance Companies in India in 1914.

The Indian Insurance Companies Act was enacted in 1928 in order to enable the government to
collect statistical data about both life and non life businesses carried out in India by the Indian as well
as foreign insurers including the provident insurance societies.

In 1938, the earlier legislation was consolidated and amended by the Insurance Act of 1938 with a
view to protect the interest of the insurance public.
The Insurance Amendment Act of 1950 abolished Principal Agencies. Moreover, there were a large
number of insurance companies and the level of competition was high as well. Amid allegations of
unfair trade practices, the government of India therefore decided to nationalize the insurance
business.

Nationalization of Insurance Business

On 19th January, 1956, nationalizing the Life Insurance sector and Life Insurance Corporation came
into force in the same year.

Subsequently, the LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies –
245 Indian and foreign insurers in all.

The LIC had a monopoly till the late 90s when the Insurance sector was reopened for the private
sector.

General Insurance in India

The history of general insurance dates back to the Industrial Revolution in the west and the
consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a
legacy of the British occupation.

General Insurance in India has its roots in the establishment of the Triton Insurance Company Ltd. in
1850 in Calcutta by the British.

In 1907, the Indian Mercantile Insurance Ltd. was established. It was the first company to transact all
the classes of general insurance business.

In 1957, the General Insurance Council was formed. It is a wing of the Insurance Association of India.
The council framed a code of conduct for ensuring fair and sound business practices.

The amendment of the Insurance Act took place in 1968 to regulate investments and set minimum
solvency margins.

Early Insurers

 The general insurance business was nationalized with effect from 01st January 1973 by
passing the General Insurance Business (Nationalization) Act in 1972.

 107 insurers were amalgamated and grouped into four companies as National Insurance
Company Ltd., New India Assurance Company Ltd., Oriental Insurance Company Ltd., and
United India Insurance Company Ltd.

 The General Insurance Corporation of India was incorporated as a company in 1971.

Malhotra Committee

In 1993, the government set up a committee under RN Malhotra (former governor of the RBI) to
propose recommendations to reform the insurance sector in India.

The objective of the committee was to complement the reforms initiated in the financial sector.

The committee subsequently submitted its report in 1994, in which it recommended that the private
sector be permitted to enter the insurance industry.
The report also stated that the private sector be permitted to enter the insurance industry. It said
that the foreign companies be allowed to enter by floating Indian companies, preferably a joint
venture with the Indian partners.

Establishment of IRDA

As per the recommendations of the Malhotra Committee report in 1999, the IRDA (Insurance
Regulatory and Development Authority) was set up. It is an autonomous body responsible for the
regulation and development of the insurance industry in India. In April 2000, the IRDA was
incorporated as a statutory body.

The prime objectives of the IRDA includes the promotion of competition in the insurance industry so
as to enhance customer satisfaction through an increase in consumer choices and lower premiums.
The IRDA also ensures financial security of the insurance market.

The IRDA has the power to frame regulations under Section 114A of the Insurance Act of 1938. Since
2000, it has framed various regulations covering registration of companies for carrying on insurance
business, protection of policyholders’ interests, and so on.

In December 2000, the subsidiaries of the General Insurance Corporation of India were restructured
as independent companies. At the same time, the GIC was converted into a national re-insurer.

Presently, there are 34 general insurance companies including the ECGC and Agriculture Insurance
Corporation of India and 24 life insurance companies operating in India.

Insurance is a colossal sector and is growing at a faster rate of 15-20%. Along with the banking
services, insurance contributes around 7% to the country’s GDP.

The insurance sector provides long term funds for the infrastructural development as well as
strengthens the risk taking ability of the country. Hence, a well-evolved and much developed
insurance sector plays a significant role in economic development.

Crop Insurance or agricultural insurance

Crop Insurance: Crop or Agriculture Insurance covers risks of anticipated
loss in yield of various crops. Almost the entire of Crop Insurance business
comes from ‘Schemes’ or ‘Programme’. These Schemes operate on
principles of ‘Area Approach’. Coverage is compulsory for farmers taking
crop loans from rural financial institutions (RFIs) for cultivation of crops, i.e.,
loanee farmers. Non-loanee farmers can also insure their crops under the
same schemes.
Pradhan Mantri Fasal Bima Yojana (PMFBY) was introduced in all over
India from Kharif 2016 Season but due to some technical reason it was
implemented from Rabi 2016-17 Season in all districts of Assam.
Objective of the Scheme
  Providing financial support to farmers suffering crop loss/damage
arising out of unforeseen events like natural calamities.

 Encouraging farmers to adopt innovative and modern agricultural

practices.

 Stabilizing the income of farmers to ensure their continuance in

farming.

 Ensuring flow of credit to the agriculture sector, which will contribute

to food security, crop diversification and enhancing growth and
protecting farmers from production risks
Details of the Scheme
 PMFBY is compulsory for Loanee farmers and optional for non-
loanee farmers.
 Insurance Unit (Notified Area) is : Village/ Village Panchayat.
 Farmers premium rate for Kharif Season is 2%, Rabi Season 1.5% and
for Commercial / Horticultural crops 5% on Sum Insured.
Coverage of Risks
 Prevented Sowing/ Planting Risks- Due to deficit rainfall/ adverse
seasonal conditions.

 Standing Crops – Drought, Dry spells, Flood, inundation, Pests and

Diseases, Landslides, Natural Fire, and Lightening, Storm, Hailstorm,
Cyclone, Typhoon, Tempest, Hurricane and Tornado.

 Post- Harvest Losses- Maximum Two Weeks

 Localized Calamities – Localized risks of hailstorm, Landslides.

Crops Covered Under PMFBY
 Food crops ( Cereals , Millets and Pulses)- Ahu Paddy, Sali Paddy,
Summer Paddy, Wheat, Black Gram and Green Gram

 Oilseeds- Rape & Mustard

  Annual Commercial/Annual Horticultural crops- Potato, Sugarcane
and Jute
Preconditions for Implementation of the Scheme
 Claims is settled on the basis of Yield data.

 State has to conduct requisite number of Crop Cutting Experiments

(CCE) at the level of notified insurance unit area, which has been
done by the Department of Economics & Statistics.

 CCE based yield data will be submitted to insurance company within

the prescribed time limit.

 State will make necessary budgetary provision in State budget, to

release premium subsidy based on fair estimates at the beginning of
the crop season.

 Use of smart phone & Mobile application in conducting for CCE for
early calculation & settlement of admissible claims to the farmers
under PMFBY in transparent manner.
 FIRE INSURANCE

Fire Insurance: Meaning, Coverage, Types, Objectives, & Claim

Process
Fire insurance is a type of property insurance that provides financial protection against losses or
damages caused by fire. In India, this insurance policy is essential coverage for individuals and
businesses as it can help to protect their assets and mitigate the financial impact of fire-related
incidents. Let’s learn more about this insurance policy in detail.

What is fire insurance?

Fire insurance is a type of property insurance, meaning it covers losses or damages caused by fire. It
can provide financial protection for a wide range of assets, including buildings, equipment, inventory,
and personal property. In the event of a fire, the insurance company compensates the policyholder for
their losses, up to the limits of the policy.

Why is fire insurance coverage important?

Unfortunately, fire-related incidents are quite common in India, due to a variety of reasons, such as
electrical malfunctions, manmade and natural disasters, and so on. These incidents can result in
significant financial losses for individuals and businesses, as well as damage to property and assets.
One of the objectives of fire insurance is to help you mitigate the financial impact of these incidents
and provide financial protection against the damages. Additionally, fire insurance is also mandatory in
India for certain types of businesses, such as those involved in the storage or handling of hazardous
materials. This is to ensure that these businesses have the necessary financial resources to respond to
fire incidents and protect everyone from potential harm.

Characteristics of Fire Insurance

Now that you are familiar with the fire insurance definition, you must understand its characteristics.
These fire insurance characteristics play a crucial role in ensuring that the insurance policy suits your
requirements.

 Insurable Interest in Property

Fire insurance is issued when the insured has an insurable interest in the property. Insurable interest
means that the survival of the insured items and the losses suffered due to destruction matter to the
policyholder. The policyholder must have an insurable interest when buying the policy and filing a
claim.

 Utmost Faith
A fire insurance contract rests on the principle of utmost good faith, which means that the
policyholder must share all vital information related to the subject of the insurance policy. There
should be no secrets. This clear communication should enable the insurer to analyse the associated
risks with more precision.
The insured should provide details about the property’s location, construction style and design,
probability of fire incidents, and other related information. The insurance provider has the authority to
terminate the policy if any information is hidden or inaccurately disclosed.
The insurance company, at its end, should spell out the inclusions and exclusions of the policy with
transparency. There should be no hidden charges or clauses.

 Personal Insurance Contract

The nature of fire insurance is such that it protects property against loss and damage, making the
policyholder’s role inevitable. Thus, insurance companies must gather complete information about the
policyholder and monitor their behaviour.
Additionally, the policyholder cannot amend the terms of insurance without the consent of the insurer.
The insurer can terminate the policy with immediate effect if the property’s possession is transferred
to a third party without intimation.

 Indemnity Contract
The claim amount is restricted to the sum insured limit. You cannot apply for a claim if there is no
loss.

 Personal Right
The policyholder, or the person whose name is written in the fire insurance policy, is entitled to
receive compensation in case of losses or damages.

 Direct Fire Damage

You can avail the benefits of fire insurance only if the direct and immediate cause of the damage or
loss is fire. If a tangible property and its contents are damaged directly by an accidental fire, you can
file a claim for the losses.
Moreover, direct fire damages extend to the losses suffered by the building’s contents when
firefighters spray water and smoke to put out the fire.

 Description of Property
It is necessary to mention the property’s location and description in the fire insurance contract. The
insurer will provide compensation only if the fire incident occurred at the mentioned location. The
claim will be rejected if the location changes. Thus, inform the insurer about a location change to
avoid last-minute hassles.
Types of fire insurance policies in India
The following are the types of fire insurance policies that are available in India:
1. Valued policy: A predetermined value is given for an item or property by the insurer in this policy.
Since the value of a property or an item that has been damaged in the fire cannot be ascertained, the
insurer fixes their value in advance at the time of purchase of the policy. During the time of claim, it is
this predetermined amount that is paid to the policyholder.
2. Average policy: In this policy, you as the policyholder can have the insured amount to be less than
the actual value of your property. If the value of your property is Rs.30 Lakhs, you can set the insured
value at Rs.20 Lakhs. The compensation amount will not exceed this level.
3. Specific policy: The compensation amount in this policy is fixed. For example, if the damaged item
was worth Rs.5 Lakhs and the coverage of the policy is Rs.3 Lakhs, you would receive only Rs.3
Lakhs as that is the maximum amount of compensation offered under the policy. However, if the
amount of loss is within the coverage amount, you get full compensation.
4. Floating policy: In this policy, you as a business owner can secure more than one property of
yours under its coverage. If your properties are in different cities, the policy will cover all of them.
5. Consequential loss policy: If vital machinery and equipment of your business get damaged in a
fire, you would get compensated for those losses in this policy. This policy ensures that your business
does not remain shut for long due to the loss of machinery.
6. Comprehensive policy: This policy offers extensive coverage. It offers coverage not only against
damage caused by fire but also against the damage which may happen due to natural and manmade
calamities. It also covers damages and loss caused due to the theft*.
7. Replacement policy: In this policy, if your property gets completely damaged, you are
compensated either with the depreciated value being considered. Or you are compensated as per the
actual value of your property. Always make sure to know the purpose for which you are buying the
policy and choose the fire insurance coverage accordingly.

What are the inclusions and exclusions?

Listed below are the inclusions and exclusions of this type of general insurance coverage*:
Inclusions:

 Loss of valuable property due to fire

 Loss of goods due to fire
 Cost of temporary accommodation due to damage to your property
 Amount compensated to the firefighting servicemen
 Fire caused to short-circuit or faulty connection
Exclusions:

 Fire caused due to emergencies such as war, rioting, or earthquake

 Fire caused due to ill intentions
 Fire caused during the burglary
Some policies also provide coverage for other types of losses, such as loss of rent or damage to third-
party property. Policyholders need to understand the specifics of their policy and the types of losses
that it covers.*

Conclusion
As one can see, a fire insurance policy can provide financial protection against losses or damages
caused by fire and mitigate the financial impact of fire-related incidents. If you wish to get financial
coverage for your property not just from fire, but also from other factors, you can also consider opting
for home insurance to safeguard your property and the valuables in it.

Marine insurance

Q3 Marine insurance : Nature, Features , principle

and types of marine policies
Ans :
Nature - Nature:
Marine insurance is concerned with overseas trade.
International trade involves transportation of goods
from one country to another country by ships. There are
many dangers during the transhipment. The persons
who are importing the goods will like to ensure the safe
arrival of their goods.
The shipping company wants the safety of the ship. So
marine insurance insures the coverage of all types of
risks which occur during the transit. Marine insurance
may be called a contract whereby the insurer undertakes
to indemnify the insured in a manner and to the extent
thereby agreed upon against marine losses.

Marine Insurance :

Marine insurance was the earliest form of insurance,

with origins in the Greek and Roman marine loan. It
was the oldest risk hedging instruments our ancestors
used to mitigate risk in medieval times .

The term originates from the fact that goods intended

for international trade were traditionally transported by
sea. Despite what the name implies, marine insurance is
applicable to all modes of transportation of goods.
When the goods are sent by air, their insurance is also
known as marine cargo insurance.

Insurance is often compulsory in many export trade

contracts. It can be the obligation of the exporter or the
importer to pay the insurance cost on the shipment,
depending on the terms of the contract.

Marine Insurance is a type of insurance that covers

cargo losses or damage caused to ships, cargo vessels,
terminals, and any transport in which goods are
transferred or acquired between different points of
origin and their final destination. Providing protection
against transport-related losses, this voyage policy
provides a haven for shipping companies and couriers
because it protects them from costly potential losses
while transporting goods by water.

Despite following laws and safety regulations,

transporters can’t control natural occurrences that might
disrupt the cargo or vessel. Things like weather hazards,
encounters with pirates, and cross border conflicts are
very common in water transportation and the damages
associated with these situations can cause a significant
financial hardship for ship owners. This is where a
marine insurance policy comes to the rescue, protecting
the interests of shipping corporations and transporters
by providing them with insurance coverage needed to
defend against possible losses.
Another great feature of marine insurance is that
transporters can choose coverage options applicable to
their specific trade. Coverage requirements can
differ, so shipping businesses can choose an insurance
plan that is customized.
Different policies are available to provide coverage
according to the size of the ship and routes taken.
policies are well-defined contracts and marine insurance
has strict policy requirements. Insurer requirement

Difference between Fire Insurance & Marine

Insurance
Fire insurance is an insurance that covers the risk of
fire. The subject matter is any physical asset or
property. The moral responsibility is an important
condition here. There is no expected profit margin in
terms of fire insurance. The insurable interest must be
present before taking the policy and also at the time of
loss.

Whereas, Marine insurance is one that encompasses

risks associated with the sea. The subject matter is the
ship, freight or cargo. It does not consist of any clause
related to the moral responsibility of the cargo owner or
the ship. 10 to 15% profit margin is expected in terms
of marine insurance. Also in marine insurance the
insurable interest must be only at the time of loss.
Insurable interest :
Insurable interest is a type of investment that protects
anything subject to a financial loss. A person or entity
has an insurable interest in an item, event or action
when the damage or loss of the object would cause a
financial loss or other hardships. To have an insurable
interest a person or entity would take out an insurance
policy protecting the person, item, or event in question.
The insurance policy would mitigate the risk of loss if
something happens to the asset —like becoming
damaged or lost.
Insurable interest is an essential requirement for issuing
an insurance policy that makes the entity or event legal,
valid and protected against intentionally harmful acts.
People not subject to financial loss do not have an
insurable interest. Therefore a person or entity cannot
purchase an insurance policy to cover themselves if
they are not actually subject to the risk of financial loss.

A contract of marine insurance is a contract based upon

the utmost good faith, and if the utmost good faith be
not observed by either party, the contract may be
avoided by the other party. Disclosure by assured-If the
assured fails to make such disclosure, the insurer may
avoid the contract.
Marine Insurance Act 1906, Section 17, provides
that:
"A contract of marine insurance is a contract based
upon the utmost good faith and, if the utmost good faith
be not observed by either party, the contract may be
avoided by the other party". It is the duty of parties to
help each other to come to a right conclusion .It is the
duty of the assured not only to be honest and
straightforward but also to make a full disclosure of all
material facts. A failure to disclose, however,
innocently, entitles the insurer to avoid this contract ab
initio and, upon avoidance, it is deemed never to have
existed.
 Subrogation
Subrogation in insurance is used to describe a legal
right the insurance company holds to legally pursue a
third-party responsible for the damages caused to the
insured. when an insurance company pays you the
amount you claimed in a situation where the third party
was responsible for the damage in question, you
subrogate your rights to the insurance company. This
means you give the insurance company the legal right
to sue the person who caused the accident to recover the
money paid to you for the damages.
 contribution
The principle of contribution is implemented when
multiple insurance policies are covering the same
property or loss, the total payment for actual loss is
proportionally divided among all insurance companies.

Marine insurance

Introduction

Meaning of marine insurance

Marine Insurance

Marine Insurance is a type of insurance that covers cargo losses or damage caused to ships, cargo
vessels, terminals, and any transport in which goods are being transferred or acquired between
different points of origin and their final destination. It provides protection against transport-related
losses, and is a crucial safeguard for shipping companies and couriers against costly potential losses
while transporting goods by water.

Factors out of a transporter's control, such as weather hazards, encounters with pirates, and cross
border conflicts are very common in water transportation and the damages associated with such
situations can result in a significant financial hardship for ship owners. Herein, marine insurance
protects the interests of shipping corporations and transporters by providing them with insurance
coverage needed to defend against possible losses.

FEATURES OF MARINE INSURANCE

1. Offer & Acceptance: It is a prerequisite to any contract. Similarly, the goods under
marine (transit) insurance will be insured after the offer is accepted by the insurance
company.
2. Payment of premium: An owner must ensure that the premium is paid well in
advance so that the risk can be covered.
3. Contract of Indemnity: Marine insurance is contract of indemnity and the insurance
company is liable only to the extent of actual loss suffered.
4. Utmost good faith: The owner of goods to be transported must disclose all the
relevant information to the insurance company while insuring their goods.
5. Insurable Interest: The marine insurance will be valid if the person is having
insurable interest at the time of loss.
6. Contribution: If a person insures his goods with two insurance companies, then in
case of marine loss both the insurance companies will pay the loss to the owner
proportionately.
7. Period of marine Insurance: The period of insurance in the policy is for the normal
time taken for a transit. Generally, the period of open marine insurance will not
exceed one year.
 8. Deliberate Act: If goods are damaged or loss occurs during transit because of
deliberate act of an owner then that damage or loss will not be covered under the
policy.
9. Claims: To get the compensation under marine insurance the owner must inform the
insurance company immediately so that the insurance company can take necessary
steps to determine the loss.

Principles of Marine Insurance

 Principle of Good faith - Parties demand absolute trust on the part of both; the
insurer and the guaranteed.
 Principle of Proximate Cause - The proximate cause is not adjacent in time; also, it
is inefficient. Nevertheless, it is the definitive and adequate cause of loss.
 Principle of Insurable Interest - Any object presented as a marine risk and the
assured covering the insurance of goods - both should have legal relevance. Also, a
series is devoted called 'Incoterms' to respectfully assign the insurance of goods to
each party.
 Principle of Indemnity - The insurance extended to the parties will only be
applicable up to the loss. The parties can't buy insurance to gain profits. If they do,
they won't get more than the actual loss.
 Principle of Contribution - Sometimes, the risk coverage for goods has more than
one insurer. In such cases, the amount has to be fairly distributed amongst the
insurers.


TYPES OF MARINE INSURANCE:

1. Hull Insurance – offers protection for physical

damages to the boat or vessel along with its
operating equipment, including machinery. This
policy is applicable for all water vessels and
limited to commercial-based ocean crafts. Barges,
tugboats, oil rigs located offshore, floating
equipment, and other similar installations can
benefit from this type of insurance.
2. Cargo Insurance – provides coverage for physical
damage to cargo that is conveyed or travelled as
 part of the shipment process. Depending on the
chosen coverage, some policies offer theft
protection or coverage for other forms of losses
besides physical damage.
3. Marine Liability Insurance – also called P&I or
protection and indemnity, this coverage offers
protection for third-party liabilities that owners and
corporations are exposed to during water
operations. It includes coverage for injuries,
illnesses, or even loss of life caused by vessel
operation. Medical expenditures, damage to other
vessels and cargo, collision incidents, and related
expenses as a result of quarantine may also be
covered.
4. Freight Insurance :In freight insurance, if the
goods are damaged in transit, the operator would
lose freight receivables & so the insurance will be
provided on compensation for loss of freight
.
PROCEDURE FOR TAKING OUT A MARINE
INSURANCE POLICY
The procedure involved in taking out a Marine Insurance policy is quite
simple and straight forward. The intervention of an insurance broker is
not always required, though his service may be utilized by those who do
not have knowledge about marine insurance practice.
Generally, the following steps are to be adopted while taking out a
marine insurance policy:
1. Selection of the Company
2. Selection of Agent or Broker
3. Marine Declaration Form
4. Assessment of the Risk
 5. Payment of premium
6. Issue of Cover Note
7. Issue of Policy

Lets see the steps briefly.

1. SELECTION OF THE MARINE INSURANCE COMPANY
In India, the four subsidiaries of General Insurance corporation of India
such as National Insurance Co., New India Assurance Co., Oriental
Insurance Co. and United India Insurance Co. and some private general
insurers are authorized to undertake marine insurance business. The
person, who is willing to take a marine insurance policy will have to
choose any one of the above mentioned companies.
2. SELECTION OF AGENT OR BROKER
After having chosen a suitable company for taking marine policy, the
proposer will have to decide whether to take the policy directly from the
concerned company or through an agent or broker. As the proposer is
not aware of all the rules and regulations relating to marine insurance,
he is forced to contact a nearby agent of the marine insurance company.
The agent, who possesses a specialized knowledge about the affairs and
goings in the world, will provide necessary information to the proposer
to take out a marine insurance policy without any difficulty. He will
assist the proposer not only in the matter of taking policy but also offer
sound advice on other matters. He charges a nominal amount for his
services.
3. MARINE DECLARATION FORM
Generally, a proposal form is submitted with the marine insurance
company to initiate the process of insurance. But in marine insurance,
instead of proposal form, a Marine Declaration Form or Requisition
Form is to be submitted with the insurer.
This form requires the proposer to give all the details about the risk such
as name of the insured, the number of cases, the item, the port of
destination, the value of the goods (which is IPO more than the actual
value), the name of the carrying vessel, the place where the claim, if
any, is payable in case of damage, marks on the goods to be shipped etc.
This information may either be sent over the phone or maybe sent in
writing, which is handed over to the marine insurance company either
directly or through the agent.
The agent will see that the declaration requisition form is in order and
will pass on to the insurer. It is to be noted that the amount for which the
marine insurance is effected is the cost of the goods together with
shipping expenses plus 10% or 15% added thereto for anticipated
profits.
4. ASSESSMENT OF THE RISK
Having received the Marine Declaration Form, the officials of the
insurance company will evaluate the risk to be insured. The risk insured
must be found to exist in the condition as is mentioned in the declaration
form. The officials then, after ascertaining the amount of risk involved,
will determine the rate of premium to be paid by the insured along with
the stamp fee. These calculations are made on the back side of the
declaration form filled up by the insured.
5. PAYMENT OF PREMIUM
Once the declaration form is accepted, the proposer is asked to pay the
required premium fixed to the insurer. The premium maybe paid either
in the form of cash or cheque or any other agreed mode of payment.
6. ISSUE OF COVER NOTE
As soon as the proposer has paid the required premium, the insurer will
issue a Cover Note, subject to the conditions of the company’s printed
policy and the relevant institute clauses, if any, to the extent of the
amount mentioned.
The cover note contains information about the name of the marine
insurance company, the name of the insured, amount insured, name of
the vessel, port of destination, port of departure, rate of premium etc.
This cover note covers the property pending preparation of the final
policy. However, the cover note will become void if policy is not
received prior to or within 24 hours of the issue of transport carrier’s
receipts.
7. ISSUE OF MARINE INSURANCE POLICY
Finally, the insurer will prepare a final marine insurance policy on a
proper form with full details and stamps and will hand over the same to
the insured.
CLAIM PROCESS

Claim Settlement Process in Marine Insurance

The claim settlement process in marine insurance involves a series of steps and
considerations, all aimed at reaching a fair and equitable resolution for the insured
party. Here is an overview of the claim settlement process in marine insurance:

Notification of Loss
The first step in the claim settlement process is the notification of loss. This is the
process of informing the insurer that an incident has occurred that may result in a
claim. The notification should be made as soon as possible after the incident
occurs, and should include all relevant details, such as the date and time of the
incident, the location, and the nature of the damage or loss.

Documentation and Assessment

Once the insurer has been notified of the loss, the next step is to provide
documentation and assess the damage. This may include providing photographs or
videos of the damage, as well as any other relevant evidence. Thorough and
accurate documentation is essential for the assessment of the claim.

Survey and Assessment

In many cases, the insurer will appoint a marine surveyor to assess the extent of the
loss or damage. The surveyor's role is to investigate the circumstances surrounding
the incident, inspect the damaged goods or vessel, and provide an independent
assessment of the claim. The surveyor's report is a critical factor in determining the
validity of the claim.

Claim Review
The insurer's claims department will review the submitted documentation and the
surveyor's report. They will assess the claim's validity, comparing the information
provided with the terms and conditions of the insurance policy. If the claim is valid
and falls within the policy's coverage, the insurer will proceed to the next steps.

Quantification of Loss
Once the claim is approved, the insurer will calculate the amount of compensation
owed to the insured party. The settlement amount may include the cost of repairing
or replacing damaged goods, as well as any associated costs, such as transportation
expenses or additional charges incurred as a result of the loss.

Settlement Offer
The insurer will make a formal settlement offer to the insured party. This offer
outlines the amount to be paid to the insured, along with any terms and conditions
associated with the settlement. The insured can either accept or negotiate the offer.

Negotiation and Agreement

If the insured is not satisfied with the initial settlement offer, negotiations may take
place to reach a mutually acceptable agreement. It is in both parties' interests to
arrive at a fair resolution.

Payment
Once the insured party accepts the settlement offer, the insurer will process the
payment promptly. The insured will receive compensation for the agreed-upon
amount, helping them recover their financial losses resulting from the maritime
incident.

Conclusion of the Claim

With the payment made and any necessary paperwork completed, the claim is
considered settled, and the insurer's obligations are fulfilled.

It's important to note that the specific details of the claim settlement process may
vary depending on the insurance policy, the nature of the loss, and the terms and
conditions agreed upon between the insured and the insurer. Effective
communication and cooperation between all parties involved are essential to ensure
a smooth and efficient resolution of marine insurance claims.

 Documents Required for Claim Process

To make the claims under marine insurance and be able to reap the benefits, the
correct documents should be submitted. In case of any lapse, there is a chance
of the risk being rejected. Some of the documents are:
• Duly filled in claim form
• Original insurance certificate with the policy number
• Copy of Billing Lading
• Survey report or missing certificate
• Original invoice, packing list, shipping specification
• Copies of correspondence exchanged
Subrogation
Subrogation in insurance is used to describe a legal right the insurance
company holds to legally pursue a third-party responsible for the
damages caused to the insured. when an insurance company pays you
the amount you claimed in a situation where the third party was
responsible for the damage in question, you subrogate your rights to the
insurance company. This means you give the insurance company the
legal right to sue the person who caused the accident to recover the
money paid to you for the damages.
Contribution
The principle of contribution is implemented when multiple insurance
policies are covering the same property or loss, the total payment for
actual loss is proportionally divided among all insurance companies.

WHAT IS COVERED IN MARINE

INSURANCE?
A typical marine insurance policy frequently covers the following areas:
· Total loss protection
· Earthquake or lightning strike
· Sinking, stranding, fire, and explosion
· Dumping or washing overboard
· Natural disasters
· Unpredictable administrative costs
· Accident, collision, overturning, derailment
· Cargo loss during loading or unloading
· General Average
WHAT ALL ARE NOT COVERED BY MARINE
INSURANCE?
While the specific terms and conditions of marine insurance policies can vary, there are
several common exclusions and limitations typically found in most marine insurance
policies. These may include:
· Packing is inadequate or unsuitable.
· The insured committed a willful act.
· Normal weight loss or volume loss,
· Liquid leakage or normal wear and tear of the insured item.
· Delay of goods
· The subject matter insured has a vice or nature inherent in it.
· Unsuitability/unseaworthiness of the conveyance
· Owners, managers, or operators of the vessel/carrier defaulting on their financial
obligations.

Essentials of marine contract

Elements :

Its basic elements include those what are the essentials of every contract-:

1. Proposal- The insurance applicant at the time of approaching the company prepares a slip
accompanied by other documents which is considered the proposal.

2. Acceptance- The insurer accepts the slip and agrees to issue a marine insurance policy
forming a big part of the legal contract.

3. Consideration- The premium is the consideration and is paid at the time of the contract.

4. Policy Issuance- The insurer issues the policy after the premium is paid.

5. Insurable Interest- Dealt with in questions below.

6. Warranties- Warranties are those statements by which the policyholder promises to fulfil or
not to fulfil certain conditions.

7. Other Important aspects- The contract must be based on principle of Utmost Good Faith as
well as Doctrine of Subrogation (Policyholder should not get more than actual loss or
damage).

Types of Marine Insurance policies:

1. Floating policy: Large exporters may opt for an open policy, also known as a
blanket policy, instead of taking insurance separately for each shipment. An
open policy is a one-time insurance that provides insurance cover against all
shipments made during the agreed period, often a year. The exporter may need
to declare periodically (say, once a month) the detail of all shipments made
during the period, type of goods, modes of transport, destinations, etc.

2.Voyage policy: A specific policy can be taken for a single lot or consignment
only. The exporter needs to purchase insurance cover every time a shipment is
sent overseas. The drawback is that extra effort and time is involved each time
an exporter sends a consignment. With open policies, on the other hand,
shipments are insured automatically.
3.Time policy: Time policy is generally issued for a year’s period. One can
issue for more than a year or they may extend to complete a specific voyage.
But it is normally for a fixed period. Also under marine insurance in India, time
policy can be issued only once a year.
4.Mixed policy: Mixed policy is a mixture of two policies i.e Voyage policy
and Time policy.
5.Named policy: Named policy is one of the most popular policies in marine
insurance policy. The name of the ship is mentioned in the insurance document,
stating the policy issued is in the name of the ship.
6.Port Risk policy: It is a policy taken to ensure the safety of the ship when it is
stationed in a port.
7.Fleet policy: Several ships belonging to the company/owner are covered
under one policy. Where it has the advantage of covering even the old ships.
Also the policy is a time based policy.
8.Single Vessel policy: In single vessel policy only one vessel is covered under
marine insurance policy.
9.Blanket policy: In this policy, the owner has to pay the maximum protection
amount at the time of buying the policy.
 SALIENT FEATURES OF MARINE INSURANCE ACT 1963

In a major fire that broke out in a cargo ship carrying nearly 3,000 cars off the Netherlands
coast, an Indian crew member was killed and 20 others were injured. Dutch coastguards
warned that the fire could last days.

the need for safeguarding valuable cargo, vessels, and businesses against uncertainties
became apparent. Enter marine insurance – a financial lifeline for those venturing into the
cargo business, ensuring their investments are shielded from the tempestuous elements and
unforeseen perils. In this article, we embark on a journey to explore the delicate domain of
marine insurance. We will try to unravel its features and characteristics that have weathered
the test of time.

What is Marine Insurance?

Loss or damage to cargo or goods occurring during transportation from the point of origin to
the point of destination is covered by a marine policy. According to Section 5 of the Marine
Insurance Act of 1906 (MIA), anyone with an insurable interest may purchase a marine
insurance policy. Marine insurance policies come in a variety of forms, including those for
courier and postal services, as well as for land, air, rail, and sea transportation.

The most frequent reasons for marine cargo loss during transit include fire, explosion,
hijackings, accidents, collisions, and overturns. A marine insurance policy might provide
carefully crafted plans, in addition to covering theft, malicious damage, shortages, non-
delivery of products, damages during loading and unloading, and cargo mishandling.
Depending on business requirements, coverage can be tailored, and it is offered for a wide
range of cargo and items, whether you are a manufacturer or trader.

What are the Features and Characteristics of Marine

Insurance?
1.Coverage for Physical Loss or Damage: Marine cargo insurance
covers the loss or damage to goods and cargo during transportation. This can include damage
from accidents, theft, fire, natural disasters, and other unforeseen events.

2. Various Modes of Transport: This insurance can apply to various modes

of transportation, including shipping by sea, air, road, rail, or even a combination of these. It
is adaptable to the specific needs of the cargo and the chosen method of transport.
3. Customizable Policies: Marine cargo insurance policies are highly
customizable. Businesses can tailor their policies to suit their unique cargo, routes, and risk
tolerance. Coverage can be adjusted to include or exclude specific risks or perils.

4. Worldwide Coverage: Marine cargo insurance provides coverage for

shipments that travel across international borders and through different countries. It offers
protection throughout the entire journey, from the moment the goods leave the seller's
premises until they reach the buyer's destination.

5. All-Risk vs. Named Perils: Policies can be either "all-risk" or "named

perils." All-risk policies cover a broad range of perils unless specifically excluded, whereas
named perils policies only cover specific risks explicitly listed in the policy.

6. Valuation Methods: Marine cargo insurance policies typically offer multiple

valuation methods for determining the insured value of the cargo. Common methods include
invoice value, market value, and cost-plus freight.

7. Open and Specific Policies: Open policies provide continuous coverage for
an insured's cargo shipments over a specified period, while specific policies cover a single
shipment or a series of shipments between specific locations.

8. General Average: Marine cargo insurance often includes provisions for the
general average. This means that if a ship experiences a major incident, such as jettisoning
cargo to save the vessel, all parties involved (insured cargo owners and the shipowner) share
the loss proportionately.

9. Subrogation Rights: In the event of a loss, the insurer may have the right to
subrogate, which means they can seek reimbursement from third parties responsible for the
loss. This helps to recover some or all of the insurance payout.

10. Deductibles and Excess: Policies may include deductibles (the portion of
the loss that the insured must cover) and excess (the maximum amount the insurer will pay in
the event of a loss), which can affect the cost of the insurance premium.

11. Claims Handling: Insurers typically have established procedures for filing
claims in the event of a loss. Prompt and accurate reporting of losses is crucial to the claims
process.
RISK AND CLASSIFICATION OF RISK
MEANING OF RISK
DEFINITION OF RISK
SCOPE OF RISK
ELEMENTS OF RISK UNDER THE INSURANCE CONTRACT
MEANING

The term of risks in insurance says that how the insurers evaluate their risks in issuing
insurance policies to the policyholders on the loss that may occur due to loss, theft, or
damage to the property or even someone is injured. This concept also says the types of
those risks are involved in the issuance of insurance. It also helps the insurers to evaluate
the risk and calculate the claims that can be paid in the future at any point in time if the
damage or loss occurs.

An insurance risk is a threat or hazard that the insurance provider has committed to
provide coverage for under the terms of the policy. If these risks or hazards materialise,
they could result in monetary loss as well as physical harm or property damage.
The insurance provider is required to give the policyholder the agreed-upon
reimbursement sum in the event that the insured event occurs and a claim is made.

Examples of insurance risks include the risk of fire, earthquake losses, or even liability
when an insured is found responsible for causing bodily injury, death, or property damage
to 3rd parties.

Insurers generally calculate the premium with reference to these elements./ insurance
premiums are calculated based on three factors:

 The chance that a certain insurance risk will be realized.

 The severity of the damage if the insurance risk is realized.
 The number of risks the insurer is assuming liability for.
The amount of insurance risks the policy is covering also plays a big role. A policy that
offers coverage for a greater number of perils or risks will be more expensive than one that
does not cover as many. This is because the probability that the policy will need to
respond to pay is greater.

Definition of risk
Definition of 'risk' in insurance is the "uncertainty of the
occurrence of an event that can cause economic losses".

SCOPE OF RISK -
The insurer indemnifies the insured only against the loss caused during the period insured, for
which the direct and proximate cause is the peril insured against. In Xantho's case the scope
of the risk is neatly described as: 'It is open to the parties by agreement to extend or limit the
liability of the insurer in respect of the operation of the risk. In the absence of such
agreement: (1) the risk includes (a) the loss caused, i.e., risk brought about by the negligence

not only of the insured but even by his servants or strangers and (b) risk brought about
wilfully or maliciously by the insured's servants or strangers, but the risk does not include (a)
loss caused by the wilful misconduct of the insured or caused with his convenience whether it
amounts to a crime or not, (b) loss que to ordinary wear and tear and (c) inherent vice of the
subject matter insured as in (d) and (c) the risk is such that it must happen and the risk in
insurances is uial which may happen and not which must happen.

The effect of an alteration on the policy further depends on the fact whether the policy
contains any express prohibition on alteration. Where there is no express condition against
alterations, the effect of any alteration in the risk depends upon the fact whether the statement
in terms referring to the future is a mere representation of the existing situation and nothing
more or it is a contractual condition. If it is of the first type an alteration does not affect the
policy. On the other hand, if the representation is construed as a contractual condition any
alteration in the subject matter vitiates the policy. In some policies, there may be express
conditions relating to the alteration of the risk. Those conditions may prohibit alterations,

(a) absolutely,

(b) without prior notice,

(c) without prior sanction, or

(d) increasing the risk.

Where there is an express absolute prohibition of alteration, any alteration even if trivial
would render the policy void. If the prohibition is in regard to alterations increasing the risk,
the alterations which do not increase the risk will not void the policy. Whether alteration
increases or decreases the risk is a question of fact. This must be proved by the insurance
company. There may be conditions prohibiting alterations without notice and in such a case
mere giving of prior notice is sufficient. On the other hand there may be a prohibition from
alteration not only without giving mere notice but without obtaining previous sanction. Then
for the continued Validity of the policy, the alteration must be made with prior sanction.
Every alteration increasing risk must be sanctioned. Simply because the insurer sanctioned an
alteration increasing the risk on a prior occasion, he is not bound to sanction another
alteration which increases the original risk though it does not go in excess of the prior
sanctioned alteration. Such an increase in risk caused by an alteration also requires a fresh
sanction.

Once there is an alteration the insurance company can avoid the policy even though the loss
was not caused by the alteration.
ELEMENTS OF RISK:

Risk depends upon various elements of the event insured against in its happening sooner
or later. these circumstances must be disclosed by the insured and the insurers generally
calculate the premium with reference to these elements:

In life insurance the risk depends upon :

1. Mode of living
2. Occupation
3. Environment
4. Position and status in life
5. Character
6. Heredity
7. Previous illness &
8. Special dangers
In property insurence the risk depends upon

1. The nature of the property (movable or immoveable or any other )

2. Character
3. Area
4. Situation and locality
5. exposure to outside dangers
6. Inherent defect
7. The title of the property
In marine insurance the risk depends upon ;

1. Voyage &its nature ( voyage means along journey involving travel by sea or inspace
)
2. The route of voyage
3. The Winds & storms in the locality
 4. The danger of war,capture ,seizure
5. Pirates
6. Mutiny of crew
7. Insurrection of natives & dangerous coasts,

Types
The following are the different types of risk in insurance:

#1 – Pure Risk
 Pure risk refers to the situation where it is certain that the
outcome will lead to loss of the person only or maximum it
could lead to the condition of the break-even to the person, but
it can never cause profit to the person. An example of pure risk
includes the possibility of damage to the house due to natural
calamity.
 In case any natural calamity occurs, it will damage the house of
the person and its household items, or it will not affect the
person’s home and household items. Still, this natural calamity
will not give any profit or gain to the person. So, this will fall
under the pure risk, and these risks are insurable.

#2 – Speculative Risk
 Speculative risk refers to the situation where the direction of the
outcome is not specific, i.e., it could lead to a condition of loss,
profit, or break-even. These risks are generally not insurable. An
example of speculative risk includes the purchase of the shares
of a company by a person.
 Now, the prices of the shares can go in any direction, and a
person can make either loss, profit, or no loss, no profit at the
time of the sale of those shares. So, this will fall under the
Speculative risk.
#3 – Financial Risk
Financial risk refers to the danger in which the outcome of the event
is measurable in terms of the money, i.e., any loss that could occur
due to the risk can be measured by the concerned person in monetary
value. An example of financial risk includes a loss to the goods in the
company’s warehouse due to the fire. These risks are insurable and are
generally the main subjects of all risk insurance.

#4 – Non-Financial Risk
Non-Financial risk refers to the risk in which the outcome of the event
is not measurable in terms of the money, i.e., any loss that could occur
due to the risk cannot be measured by the concerned person in the
monetary value. An example of the non-financial risk includes the risk
of poor selection of the brand while purchasing mobile phones. These
risks are uninsurable since they cannot be measured.

#5 – Particular Risk
Particular risk refers to the risk which arises mainly because of the
actions or the interventions of the individual or the group of some
individuals. So, the origin of the particular risk by individual-level and
impact of the same is felt at a localized level. An example of a specific
chance includes an accident on the bus. These risks are insurable and
are generally the main subjects of the insurance.

#6 – Fundamental Risk
Fundamental risk refers to the risk which arises due to the causes
which are not under the control of any person. So, it can be said that
the fundamental risk is impersonal in its origin and the consequences.
The impact of these risks is essentially on the group, i.e., it affects the
large population. The fundamental risk includes risks on the group by
events such as natural calamity, economic slowdown, etc. These risks
are insurable.
#7 – Static Risk
Static risk refers to the risk which remains constant over the period
and is generally not affected by the business environment. These risks
arise from human mistakes or actions of nature. An example of static
risk includes the embezzlement of funds in a company by its
employees. They are generally easily insurable as they are easy to
measure.

#8 – Dynamic Risk
Dynamic risk refers to the risk which arises when there are any
changes in the economy. These risks are generally not easy to predict.
These changes might bring financial losses to the members of the
economy. An example of the dynamic risk includes the changes in the
income of the persons in an economy, their tastes, preferences, etc.
They are generally not easily insurable.

PUBLIC LIABILITY INSURANCE