LIFE AND GENERAL INSURANCE SPECIAL FEATURES OF INSURANCE CONTRACT

ANIL KUMAR K.Y DEPARTMENT OF COMMERCE,

SIMS

SPECIAL FEATURES OF INSURANCE CONTRACT1. Aleatory : if one party to a contract might receive considerably more in value than

he or she gives up under the terms of the agreement, the contract is said to be aleatory.

Insurance contracts are of this type because, depending upon chance or any number of uncertain outcomes, the insured may receive substantially more in claim proceeds than the amount was paid to the insurance company in the form of premiums.

On the other hand the insurer could ultimately receive significantly more amount than the insured party if a claim never filed.

2. Adhesion : In a contract of adhesion, one party draws up the contract and

presents it to the other party on a “take it or leave it “ basis; the receiving party does not have the option of negotiating revising

or deleting any part or provision of the document. Insurance contracts are of this type, because the insurer writes the

contracts and the insured either adheres to it or is denied coverage.

3. Utmost good faithAccording to this principle, both the parties (i.e. insured and insurer) should have

faith over each other. As a client it is the duty of the insured to disclose all the facts to the insurance

company, any fraud or misrepresentation of facts can result into cancellation of the contract.

The insured must disclose all the material facts known to him at the time the contract is entered into, if the insured fails to disclose all the material facts relating to the subject matter of insurance, the contract can be avoided by the insurer

4. Executory It is stated in the insurance and agreement that the insurer will only

perform its obligation after certain events takes place ( in other words, losses occur)

5. Unilateral insurance contracts are unilateral ; the insured performs the act of paying the

policy premium, and insurer promises to reimburse the insured for any covered losses that may occur.

It must be noted that once the insured has paid the policy premium, nothing else is required on his or her part; only insurer has responsible any further action .

6. Personal contract:Insurance contracts are usually personal agreements between the insurance

company and the insured, and are not transferable to another person without the insurer’s consent.

7. Warranties and representations A warranty is a statement that is considered guaranteed to be true whereas

representation is a statement that is believed to be true to the best of the other part’s knowledge.

According to the laws of most states and in circumstances the responses that a person gives on an insurance application are considered to be a representations, and not warranties.

8. Misrepresentations and concealmentsA misrepresentation is a statement, whether written or oral, that is false.Whereas concealment, on the other hand, is the failure to disclose information

that one clearly knows about.In order to void a contract, the insurance company must prove that the

applicant misrepresented information and willfully and intentionally concealed information.

9. Conditional Insurance contracts are conditional, when a loss is suffered, certain conditions

must be met before the contract can be legally enforced. For example, the insured must satisfy the condition of submitting to the insurance company sufficient proof of loss or prove that he or she has an insurable interest in the persons insured.

10. Fraud Fraud is a intentional attempt to persuade, deceive or trick someone in an

effort to gain something of value. If an insurance applicant intentionally lies in order to gain something then it is considered as fraud.

If an applicant misrepresentations some information with no intent for gain , then no fraud has occurred.

Insurance laws Insurance laws is the practice of law surrounding insurance, including

insurance policies and claims. It can be broadly broken into three categories :

Regulation of the business of insurance Regulation of the content of insurance policies Regulation of claim handlingInsurance business is governed by a number of acts: The first statute in India to regulate the life insurance business was the

indian life assurance companies act,1912 The insurance act of 1938 was the first legislation governing all forms of

insurance. Life insurance in india was completely nationalizes on jan 19 1956,

through the LIC act All 245 insurance companies operating in the country were merged into 1

entity, the life insurance corporation of india.

The general insurance business act 1972 was enacted to nationalize the about 100 general insurance companies.

Untill 1999, there were no private insurance companies in india . The government then introduced the IRDA act 1999 to allow private companies.

Foreign investment was also allowed and capped at 26% holding in the Indian insurance companies.

In 2015 the limit of FDI in insurance sector has been raised to 49% subject to certain conditions

A minimum capital of 400 crore is required to set up an insurance business.

Thank you