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Insurance Contract And The Indian Market Conditions

Insurance Contract And The Indian Market Condition

A contract of insurance is an agreement whereby one party, called the insurer, undertakes, in return for an agreed consideration, called the premium, to pay the other party, namely the insured, a sum of money or its equivalent in kind, upon the occurrence of a specified event resulting in a loss to him. An insurance agreement should satisfy all essentials of valid agreement i.e.

(a) Proposal

(b) Acceptance

(c) Consideration

(d) Competency to Contract

(e) Free Consent

(f) Lawful object

A insurance contract have some basic features namely:

(a) It is aleatory in nature

(b) It is a contract of adhesion.

(c) It is based on the principle of utmost good faith

(d) It is executor in nature

(e) It is unilateral and conditional

(f) Insurance contracts are usually personal agreements between the insurance company and the insured individual.

There are mainly two types of insurance businesses recognised under the Insurance Act, 1938:

(i) Life insurance business

(ii) General insurance business (also called “Non-Life” business). This is sub divided into the following 3 sub-categories:

i. Fire insurance business

ii. Marine insurance business

iii. Miscellaneous insurance business

An insurance intermediary is a person or a company that helps you in buying insurance. Insurance intermediaries facilitate the placement and purchase of insurance, and provide services to insurance companies and consumers that complement the insurance placement process. Traditionally, insurance intermediaries have been categorized as either insurance agents or insurance brokers.

The market players in insurance industries includes

(A) Agents,

(B) Brokers,

(C) Surveyors and Loss Assessors,

(D) Health Third Party Administrators,

[Post Image Courtesy of EverydayPlus at FreeDigitalPhotos.net]

Section 2(10) of the Insurance Act, 1938, defines an Insurance Agent as an insurance agent licensed under Section 42 of the said Act and who received or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business including business relating to the continuance, renewal or revival of policies of insurance.

Regulation 2(i) of the IRDA (Insurance Brokers) Regulations, 2002, defines Insurance Broker as a person for the time being licensed by the Authority under Regulation 11, who for remuneration arranges insurance contracts with insurance companies and/or reinsurance companies on behalf of his clients.

The basic difference between an Insurance Broker and an Insurance Agent is that while an Insurance Broker represents the client, while an Insurance Agent represents the insurance company. As a corollary to the above, an Insurance Broker is licensed to recommend the products of any insurance company, whereas Insurance Agent at any point in time can sell the insurance products of only one insurance company with which he is attached.

A Surveyor or a Loss Assessor is relevant for general insurance business, where assessment of the loss of the subject matter insured is very important for deciding the claim amount. As general insurance contracts are indemnity contracts in nature, the amount paid by the insurance company cannot exceed the amount of actual loss incurred.

The job of the Surveyor or a Loss Assessor is therefore to arrive at the exact amount of loss incurred and his role is critical to a general insurer.

IRDA has issued standard instructions and guidelines applicable for approval/renewal of agents training institutes.

vide ref: IRDA/AGTS/CIR/GLD/269/12/2011 dated 7th December 2011

Insurance Law And Practice - ICSI

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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