KSLU Solved Question Papers
Insurance Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2015 Dec (70 marks) Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Insurance Law 2015 Dec (70 marks) Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2015 Dec (70 marks) examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2015 Dec (70 marks) examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2015 Dec (70 marks) 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 2½ hours · Total marks 70 · 12 questions answered
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.
Q1Explain the provisions of Insurance Act, 1938 relating to registration, cancellation and renewal of registration of Insurance Business.[10]
Answer
For full marks, cover: registration as the gateway to insurance business (section 3(1) of the Insurance Act, 1938; who may apply, section 2C; what counts as insurance business, St. Christopher, Medical Defence Union); the application and grant (section 3(2) to (2AA)); refusal and appeal to the Securities Appellate Tribunal (section 3(2B), (2C)); withholding (section 3(3)); suspension and cancellation: the eleven grounds (section 3(4)), when it takes effect (section 3(5), (5A)), its effect on existing policies (section 3(5B)), revival (section 3(5C)), winding up (section 3(5D)), the hearing (section 3(5E)); renewal: the annual renewal under the old section 3A and the annual fee that replaced it in 2015; duplicate certificate (section 3(7)); penalty (section 103); a table.
Registration: the gateway
No person may begin any class of insurance business in India without a certificate of registration for that class. The IRDAI grants it under section 3(1) of the Insurance Act, 1938. A separate certificate is needed for each class, such as life, general or health. Only certain bodies may apply: public companies, co-operative societies, statutory insurers and, since 5 February 2026, foreign re-insurers through an Indian branch (section 2C).
Whether a scheme is "insurance business" needing registration depends on its substance. In Department of Trade and Industry v. St. Christopher Motorists Association Ltd., [1974] 1 WLR 99, an association promised members a chauffeur if they were disqualified from driving. Templeman J. held this was insurance, though the benefit was a service, not money. But in Medical Defence Union Ltd. v. Department of Trade, [1980] Ch 82, members could only ask for help, which the Union had a discretion to give. That was not insurance, because no benefit was promised as of right.
Part 1: Grant of registration
- Application. It is made in the form, with the documents and fee, that IRDAI regulations specify (section 3(2)).
- The tests. The Authority registers the applicant if, after inquiry, it is satisfied of four things (section 3(2A)):
- the applicant's financial condition and general character of management are sound;
- its projected business, capital structure and earning prospects are adequate;
- registration will serve the interest of the general public; and
- it has complied with the Act and the Authority's conditions.
- Preference for health and life cover. Since 2026, the Authority must prefer an applicant that agrees to provide health cover to individuals or groups through life or general business (section 3(2AA)).
- Refusal. The Authority must record its reasons and give the applicant a copy (section 3(2B)). The applicant may appeal to the Securities Appellate Tribunal within thirty days (section 3(2C)).
- Withholding. Registration of an insurer with a foreign partner may be withheld if that partner's own country bars it from insurance business (section 3(3)).
Part 2: Suspension and cancellation
The grounds
Under section 3(4), the Authority may suspend or cancel registration, wholly or for one class of business, where the insurer:
- fails to keep the required excess of assets over liabilities (section 64VA);
- is in liquidation or adjudged insolvent;
- transfers or amalgamates its business without approval;
- defaults on, or contravenes, the Act, rules, regulations, orders or directions;
- leaves a claim in India unpaid three months after final judgment in a regular court, as the Authority has reason to believe;
- carries on business other than insurance or prescribed business;
- defaults on a direction or order of the Authority under the IRDA Act, 1999;
- contravenes the Companies Act, 2013, the 1972 nationalisation Act, FEMA or the money laundering Act;
- fails to pay the annual fee under section 3A;
- is convicted of an offence; or
- as a co-operative insurer, breaks the law that governs it.
When it takes effect
For grounds based on solvency, defaults, unpaid claims, other business, the Authority's directions or the fee, the Authority gives written notice. The order takes effect on a date not less than one month and not more than two months from receipt of the notice (section 3(5)). For liquidation, unapproved transfer, conviction or a co-operative's breach, it takes effect on service of the notice (section 3(5A)). Before an order under section 3(5E), the insurer must be given a reasonable opportunity of being heard.
Its effects
- No new business. After cancellation, the insurer may not enter new contracts (section 3(5B)).
- Existing policies survive. Rights and liabilities under policies already issued continue as if there were no cancellation. This protects policyholders.
- Revival. The Authority may revive a suspended or cancelled registration if the insurer cures the default within six months (section 3(5C)). Restoring solvency or paying the claim are examples.
- Winding up. If there is no revival, the Authority may apply to the National Company Law Tribunal after six months (section 3(5D)). The Tribunal may wind up the company, or its business in that class.
Part 3: Renewal
Until 26 December 2014, the old section 3A required every insurer to renew its registration each year. The renewal fee was linked to premium income. Each renewal had to meet the conditions for fresh registration, including the rural and social sector duties. The Law Commission's 190th Report, on revising the Insurance Act, questioned this yearly renewal.
The Insurance Laws (Amendment) Act, 2015 replaced it. Under the present section 3A, registration does not lapse each year. Instead the insurer must pay an annual fee in the manner the regulations specify. Failure to pay makes the certificate liable to cancellation (section 3A(2); section 3(4)(i)). A lost or damaged certificate may be replaced by a duplicate on a fee of up to five thousand rupees (section 3(7)).
Sanction
Carrying on insurance business without registration is punishable with a penalty up to twenty-five crore rupees and imprisonment up to ten years (section 103).
| Stage | Provision | Key rule |
|---|---|---|
| Grant | Sections 3(1), (2), (2A) | Certificate per class; sound finances and management; public interest |
| Refusal | Section 3(2B), (2C) | Reasons; appeal to SAT in thirty days |
| Suspension or cancellation | Section 3(4) to (5A), (5E) | Eleven grounds; notice of one to two months, or on service; hearing |
| Effect | Section 3(5B) | No new contracts; old policies continue |
| Revival | Section 3(5C) | Within six months, on cure |
| Winding up | Section 3(5D) | NCLT, after six months |
| Renewal | Section 3A | Annual renewal until 2014; annual fee since |
Conclusion. Registration under section 3 of the Insurance Act, 1938 is the licence for insurance business. Business without it is punishable under section 103. The IRDAI grants it on tests of soundness and public interest, with an appeal to the Securities Appellate Tribunal on refusal. It may suspend or cancel registration on the eleven grounds of section 3(4), after a hearing. Existing policies survive cancellation, and revival is possible within six months. Yearly renewal under the old section 3A gave way in 2015 to an annual fee, whose non-payment is itself a ground for cancellation.
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