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B.A. LL.B. (Five Years) Sem 8 Insurance Law 2012 Dec Question Paper with Solutions

KSLU Solved Question Papers

Insurance Law

Previous Year Question Paper with Solution

B.A. LL.B. (Five Years) · Sem 8

2012 Dec Examination

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Mumbai

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First published on munotes.in on 21 October 2026.

Published by munotes.in, Mumbai.

Model answers written and edited by the munotes.in editorial desk.

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munotes.in is an independent study resource for students of Karnataka State Law University. It is not affiliated with Karnataka State Law University, and is not endorsed by it.

The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.

The question paper reproduced here is the paper as set by Karnataka State Law University at the 2012 Dec examination.

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Contents

The questions below are the paper as Karnataka State Law University set it at the 2012 Dec examination, in the order it was set.

MarksPage

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MarksPage

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The Paper as Set

The questions in this volume are the questions asked at the 2012 Dec examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.

Duration 3 hours  ·  Total marks 100  ·  20 questions answered

Instructions printed on the paper

  • N.B. (1) Answer all 5 questions. (2) One essay type and one short note question or problem from each Unit have to be attempted, which is referred as Part (a) and Part (b) in all the Units. (3) Figures to the right indicates marks. (4) Answers should be written completely either in English or in Kannada.

How to use this volume

Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.

Read the original question paper

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Q1

Unit I

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(a)Explain briefly the provisions of Insurance Act 1938.[15]

Answer

For full marks, cover: the Act's history and place (the principal statute, amended in 1950, 1968, 1999, 2015 and by the 2025 Act from 5 February 2026); its provisions in seven themes, each with its key sections: (1) who may insure and on what licence (sections 2C, 3, 3A, 3AA, 5, 6); (2) money: accounts, actuary, investments, solvency and premium (sections 10 to 13, 27 to 30, 64V to 64VB; Seema Malhotra); (3) governance and the Authority's control (sections 31A to 34H, 35 to 37A, 52A to 52G); (4) the policyholder's protections (sections 38, 39, 41, 45, 47, 50, 51, 113; Sarbati Devi; Mithoolal Nayak); (5) intermediaries and surveyors (sections 40, 42, 42D, 64UM; Sri Venkateswara Syndicate); (6) public duties and re-insurance (sections 32B to 32D, 101A to 101C); (7) penalties, adjudication and appeal (sections 102 to 105E, 110, 114A); a table.

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The Act and its place

The Insurance Act, 1938 is the principal statute governing insurance business in India. It followed failures of insurers in which policyholders lost their savings, and it has been rebuilt many times. The Insurance (Amendment) Act, 1950 restricted who could insure. The 1968 Act added Part IIB, on tariff control. The IRDA Act, 1999 replaced the Controller with the Authority and opened the market. The Insurance Laws (Amendment) Act, 2015 rewrote much of it. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 amended it again from 5 February 2026. It is administered by the IRDAI.

Theme 1: Who may insure, and on what licence

  1. Permitted bodies (section 2C). Only a public company, a co-operative society or a foreign re-insurer's branch doing only re-insurance may carry on insurance business. Since 2026, a statutory body set up by an Act of Parliament to do insurance business is added. A new insurer other than an Indian insurance company has been barred since 1999.
  2. Registration (section 3). A certificate is needed for each class of business. The IRDAI may refuse, suspend or cancel it, with an appeal to the Securities Appellate Tribunal. An annual fee is payable (section 3A).
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  1. Foreign investment (section 3AA). Since 2026, foreign investors may hold up to 100 per cent of an Indian insurance company.
  2. Name and capital (sections 5, 6). No deceptive name; paid-up capital of Rs. 100 crore, or Rs. 200 crore for a re-insurer.

Theme 2: Money, solvency and premium

  1. Accounts and audit (sections 10 to 12). Life funds must be kept separate from other funds. Accounts and balance-sheets must be prepared and audited.
  2. The actuary (sections 12A, 13). Every life insurer must appoint an actuary, whose report on the liabilities is filed with the Authority.
  3. Investments (sections 27 to 30). Assets equal to liabilities must be invested in the prescribed pattern. Policyholders' funds may not go abroad (section 27E), and loans to insiders are banned (section 29).
  4. Solvency (sections 64V, 64VA). Assets and liabilities are valued in the prescribed way, and an excess of assets is required.
  5. Premium before risk (section 64VB). No risk may be assumed until the premium is received in advance.
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The last rule is enforced by the courts. In National Insurance Co. Ltd. v. Seema Malhotra, (2001) 3 SCC 151, a premium cheque was dishonoured. The Supreme Court treated insurance as a contract of reciprocal promises. When the cheque bounces, the insurer need not perform, because an agreement without consideration is void.

Theme 3: Governance and the Authority's control

  1. Managers and remuneration (sections 31A, 31B, 34A). The appointment and terms of managing directors and managers are controlled, and excessive remuneration may be restricted.
  2. Investigation and directions (sections 33, 34). The Authority may inspect any insurer and give directions in the policyholders' interest.
  3. Removal and additional directors (sections 34B, 34C). It may remove managerial persons and appoint directors. It may also search and seize records (section 34H).
  4. Amalgamation (sections 35 to 37A). Amalgamations and transfers of business need the Authority's sanction.
  5. Administrator (sections 52A to 52G). Where an insurer is acting against policyholders' interests, the Board may be superseded and an Administrator appointed.

Theme 4: The policyholder's protections

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  1. Assignment (section 38) and nomination (section 39). Since the 2015 amendment, in force from 26 December 2014, a nominee who is the policyholder's parent, spouse or child is beneficially entitled (section 39(7)). This changed the old rule. In Sarbati Devi v. Usha Devi, (1984) 1 SCC 424, a wife nominated under two life policies claimed the whole amount. The Supreme Court held that a nominee only received the money for the heirs, and the deceased's mother and son took equal shares with her.
  2. No rebates (section 41). No one may offer a rebate of commission or premium as an inducement to take a policy.
  3. Repudiation (section 45). After three years from issue or revival, a life policy cannot be questioned on any ground. Within three years, the insurer may act for fraud or material misstatement, with written reasons. The older rule required fraud to be proved. In Mithoolal Nayak v. Life Insurance Corporation of India, AIR 1962 SC 814, the assured had hidden recent treatment for a serious illness. The Supreme Court upheld repudiation, as the statement was material, false and knowingly made.
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  1. Payment into court (section 47) where the claimants are uncertain.
  2. Lapse and options (section 50); copies of proposals and medical reports (section 51); surrender value and paid-up policies (section 113).

Theme 5: Intermediaries and surveyors

  1. Commission and expenses (sections 40, 40B). Payment for procuring business is limited to agents and intermediaries, within the limits set.
  2. Agents and intermediaries (sections 42, 42D). Agents are appointed by insurers under the Authority's rules, and intermediaries need registration.
  3. Surveyors (section 64UM). Claims are assessed by licensed surveyors. In Sri Venkateswara Syndicate v. Oriental Insurance Co. Ltd., (2009) 8 SCC 507, cotton stocks were destroyed by fire and several surveyors were appointed. The Supreme Court held that an insurer cannot keep appointing surveyors to get the report it wants. It needs cogent reasons to depart from a report.

Theme 6: Public duties and re-insurance

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  1. Rural, social and motor third party business (sections 32B to 32D). Every insurer must write the prescribed share of rural and social sector business, including crop insurance, and general insurers must write motor third party business.
  2. Re-insurance (sections 101A to 101C). Every insurer must re-insure with Indian re-insurers at least the share of each general insurance policy that the Authority specifies. That share cannot exceed thirty per cent of the sum assured.

Theme 7: Penalties, adjudication and appeal

  1. Penalties. Default in returns, directions, solvency or treaties attracts up to Rs. 1 lakh a day, to a maximum of Rs. 10 crore (section 102). Insurance business without registration attracts up to Rs. 25 crore and ten years' imprisonment (section 103).
  2. Adjudication (sections 105C to 105E). An adjudicating officer imposes penalties after inquiry, weighing the factors listed.
  3. Appeal (section 110). Orders of the Authority are appealable to the Securities Appellate Tribunal.
  4. Rules and regulations (sections 114, 114A). The Central Government makes rules, and the Authority makes regulations.
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ThemeKey sectionsPurpose
Entry2C, 3, 3A, 3AA, 5, 6Only sound, licensed insurers
Money10 to 13, 27 to 30, 64V to 64VBFunds safe and sufficient
Governance31A to 37A, 52A to 52GRegulator's oversight
Policyholders38, 39, 41, 45, 47, 50, 51, 113Fair dealing and certainty
Intermediaries40, 42, 42D, 64UMHonest selling and fair claims
Public duties32B to 32D, 101A to 101CReach and stability
Enforcement102 to 105E, 110, 114APenalties and appeal
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Conclusion. The Insurance Act, 1938, as amended up to 2026, governs insurance business from entry to exit. It admits only permitted, registered and adequately capitalised insurers (sections 2C, 3, 6). It keeps their funds safe and solvent (sections 27, 64VA, 64VB; Seema Malhotra). It gives the IRDAI wide powers over management, and protects policyholders through assignment, nomination and the three-year rule of section 45 (Sarbati Devi; Mithoolal Nayak). It regulates intermediaries and surveyors (Sri Venkateswara Syndicate) and imposes rural and re-insurance duties. All this is enforced by penalties, with an appeal to the Securities Appellate Tribunal.

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