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STUDY MATERIAL

LICENTIATE EXAMINATIONPRACTICE OF GENERAL INSURANCE: IC-11 QUESTION-ANSWERS  

1. 1   IRDA Act, 1999 made amendments in the Insurance Act, 1938.  Enumerate any three of these new provisions.

Answer: 

1. According to the new provisions the minimum requirement of paid-up share capital is to be Rs. 100 crore for the life insurance business or general insurance business and Rs. 200 crore for the reinsurance business.
2. Sec. 6A is amended making the maximum holding of shares by individual promoter to be not more than 26% of the share capital and the interest of the foreign company or the non-resident not more than 26% of the share capital.
3. New Sec. 32B and 32C are mandatory provisions that the insurers should take part in the rural insurance business to cover the risks of crops and agriculture, machinery and other rural non-traditional business and insurance for backward and socially neglected people below the poverty line.

Answer:

There are three consumer dispute redressal agencies.  All the three agencies have powers of a Civil Court and no fee for filing a complaint or appeal is charged.  It can be filed personally or even be sent by post.  No advocate is necessary for the purpose of filing a complaint. These three agencies are:

1. District Forum:  The forum has jurisdiction to entertain where value of the goods or services and the compensation claimed is less than Rs. 20 lakhs.  The order of the District Forum shall be final unless an appeal is filed within 30 days from the date of award.
2. State Commission:  This redressal authority has original, appellate and supervisory jurisdiction. It entertains appeals from the District Forum. It has original jurisdiction to entertain complaints where the value of goods/service and compensation claimed exceeds Rs. 20 lakhs but does not exceed Rs. 100  lakhs. In supervisory jurisdiction it can call for the papers for any consumer dispute pending with District Forum.
3. National Commission.  The final authority established under the Act is the National Commission. It will have original, appellate as well as supervisory jurisdiction.  Its original jurisdiction entertains disputes, where goods/services and the compensation claims exceeds Rs. 100 lakhs.  It has supervisory jurisdiction over State Commission. An appeal shal lie within 30 days from the order of the National Commission to Supreme Court.

The policy is issued only on building and machinery but not on stock.  The cover is generally not available on old buildings or old machinery. Special features are as follow:

1. Under the reinstatement Value Policy, the insurers pay, not the depreciated value (i.e. market value), but the cost of replacement of the damaged property by new property of the same kind.  The sum insured is required to reflect the new replacement value and not the market value as under the normal policy.
2. The difference between the amount payable on the basis of market value and the new replacement value will become wider and wider, particularly when due to inflation, the cost of rebuilding and the prices of machinery show a sharp increase.
3. The basis of settlement of claims is modified by attaching the Reinstatement Value Clause to the policy.  Under the standard fire policy, losses are settled on the basis of market value of the property on the date of loss.  This value, which takes into account depreciation, wear and tear, etc. will not be found adequate by the insured who desires to replace the property by  a new one of the same kind, type and capacity.

Answer:

Arbitration is different from litigation and is a method of settling disputes under contract in accordance with the Arbitration and Conciliation Act, 1996. The above Act allows the parties to submit disputes under a contract to the more informal, less costly and private process of arbitration. 

Fire and most miscellaneous policies contain an arbitration condition which provides for settlement of differences by arbitration.   There is no arbitration condition in marine insurance policies.  Most important thing about arbitration is  that disputes regarding the amount of claim under the policy are to be referred to arbitration.  If the insurer repudiates the claim on the ground that the policy is void because it was obtained through fraud, there can be no arbitration.  If the contract is void, then all the conditions therein are equally void.

The dispute is submitted to the decision of a single arbitrator to be appointed by the parties. In the event of any disagreement between them upon a single arbitrator, two arbitrators are appointed by the parties. These two arbitrators appoint umpire, who presides at the meetings.   The procedure during these meetings resembles that of court of law. The decision of the arbitrator is a condition precedent to any right of action against the insurer in a court of law.   There is no appeal to the Court against an arbitrators award except on certain grounds specified in the said Act e.g. misconduct of the arbitrator, discovery of new evidence etc.

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