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Insurance Law

Insurance law is generally the practice of law surrounding insurance, including Insurance Policy and claims. It can be broadly broken into three categories - regulation of the business of insurance; regulation of the content of insurance policies, especially with regard to consumer policies; and regulation of claim handling wise.

In order to understand insurance law, it is useful to understand insurance first. Insurance is a contract in which one party (insured) pays money and the other party promises to reimburse the first for certain types of losses (illness, property damage, or death) if they occur.

There are many types of insurance. The government runs some kinds of insurance, like Social Security disability, worker's compensation, and unemployment insurance. However, the term "insurance law" usually refers to the law surrounding private insurance. The most common types of private insurance are health insurance, automobile liability insurance, homeowner's insurance, life insurance, title insurance, and malpractice insurance, marine insurance.

Insurance law is the name specified to practices of law surrounding insurance, covering insurance claims and policies. Insurance regulation that governs the business of insurance is particularly aimed at assuring the solvency of insurance companies. Thus, this sort of regulation regulates reserve policies, capitalization, rates and various other "back office" procedures.

The primary legislation regulating the insurance in India is the Insurance Act of 1938. The provisions of the Indian Contract Act, 1872 are applicable to the contracts of insurance.


The office of controller of Insurance was replaced and a new authority, called as IRDA i.e. Insurance Regulatory and development Authority came into existence. The Insurance Regulatory and Development Authority is the main organization or supervisory body that regulates the insurance sector in the country. It sets rules and regulations for the functioning of the insurance industry. This act also put an end to the monopoly of Life Insurance Corporation of India over life insurance business and other nationalized insurance companies and opened the gates even to private sector players. Entry norms have been prescribed under this act. The powers, functions of this IRDA inter alia include all those powers necessary to promote and ensure an orderly growth of this business and reinsurance business. It is also intended to protect the interest of the policyholders in matters relating to nomination, assignment, insurable interest, settlement of claims, surrender value of the policy, condition relating to insurance contract, to supervise the functioning of tariff advisory committee, etc. The Insurance Regulatory and Development Authority is the main organization or supervisory body that regulates the insurance sector in the country. It sets rules and regulations for the functioning of the insurance industry.

There are two types of principles:

Principle of subrogation:

Basically this principle is applicable only in Non- life Insurance and with specific reference to fire and marine Insurance. Subrogation means, after an event occurs which resulted in the loss to insured, and insurer has paid the claim to insured, then the insurance company get a right to step into shoes of the insured. Thus, after getting the claim, the insured releases all his rights over the subject matter of insurance, in favour of Insurance Company.

Principle of contribution:

Insurance companies are in a position to underwrite a liability on its own. However, sometimes the value of a subject matter is so high, that for one insurance company it becomes difficult to assume so much risk. In such situations, instead of avoiding the business, the Insurance Company underwrites part of business. A part of the high value of asset is insured by a single insurer and the remaining part is insured by other companies. At the time of claim the formula of contribution is applied in such cases.

The Insured has a right to recover the entire amount from one Insurance company on a priority basis. After settling the entire claim, one insurance company, has a right to claim contribution from other Insurance Companies. The concept of contribution simply means that finally the loss has to be shared by Insurance companies, in the proportion of their underwriting.

  • To protect the interest and fair treatment of the policyholder.
  • To regulate the insurance industry in fairness and ensure the financial soundness of the industry.
  • To regularly frame regulations to ensure the industry operates without any ambiguity.