KSLU Solved Question Papers
Insurance Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2016 Dec Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Insurance Law 2016 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Model answers written and edited by the munotes.in editorial desk.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2016 Dec examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2016 Dec examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2016 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 · 13 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.
Q1Analyse the importance of Insurance Regulatory and Development Authority.[16]
Answer
For full marks, cover: why insurance needs a regulator at all (long promises, information gaps, public savings); the IRDAI's mandate to "regulate, promote and ensure orderly growth" (section 14(1) of the IRDA Act, 1999); its importance analysed role by role: gatekeeper (registration), guardian of solvency (capital, investments, solvency margin), protector of policyholders (section 14(2)(b); the 2024 master circulars; the Ombudsman; the Policyholders' Education and Protection Fund, section 16A), supervisor of market conduct (agents, intermediaries, surveyors), developer of the market (rural and social sector duties; products; data powers in sections 14A to 14E), and enforcer (penalties under section 102; appeal under section 110); how the courts give force to its instruments (Balakrishnan; Texco Marketing) and keep them within limits (Indian Express); the limits on its independence (sections 18 and 19); an evaluation.
Why insurance needs a regulator
An insurance policy is a promise to pay in the future, sometimes decades later. The policyholder pays first and cannot check whether the insurer will still be able to pay. He also rarely understands the fine print that decides his claim. Insurers, for their part, hold huge sums of public savings. A regulator stands between them to keep insurers sound and to keep their dealings with the public fair.
The mandate
The Insurance Regulatory and Development Authority of India was set up under the IRDA Act, 1999, which came into force on 19 April 2000. Under section 14(1), it has "the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business". Its importance lies in the way it combines three tasks: regulation, development and protection of the policyholder.
Its importance, role by role
1. The gatekeeper
No one may carry on insurance business without its certificate of registration (section 14(2)(a); section 3 of the Insurance Act, 1938). The IRDAI registers only applicants with sound finances, adequate capital and fit management, and only where the public interest is served. It may suspend or cancel a registration. So it decides who may make insurance promises at all.
2. The guardian of solvency
It regulates how insurers invest their funds and keeps watch over the margin of solvency (section 14(2)(k) and (l)). An insurer whose assets fall below the required margin over its liabilities is deemed insolvent (section 64VA of the 1938 Act). It may then be wound up on the IRDAI's application. Its supervision is what makes an insurer's long-term promise believable.
3. The protector of policyholders
This is perhaps its most important role. Section 14(2)(b) charges it with protecting policyholders in matters of assignment, nomination, insurable interest, claim settlement, surrender value and other policy terms. It does so through detailed rules.
- Time limits. Its 2024 Master Circular on policyholders' interests fixes claim timelines, such as a fifteen-day survey report and a seven-day decision for general claims. Interest at the bank rate plus two per cent is due on delay.
- Fair terms. It requires free look periods for life policies, and bars repudiation for breaches that are irrelevant to the loss.
- Redress. The Insurance Ombudsman Rules, 2017 give a free forum for complaints against insurers.
- A fund for policyholders. Since 5 February 2026, penalties realised by the Authority go into a Policyholders' Education and Protection Fund, used for policyholders' education and protection (section 16A).
4. The supervisor of market conduct
It prescribes the qualifications, training and code of conduct of agents and intermediaries (section 14(2)(c)). It also prescribes the code of conduct of surveyors and loss assessors (section 14(2)(d)). It may inspect and investigate insurers and intermediaries (section 14(2)(h)). Since most mis-selling happens at the point of sale, this control matters directly to buyers.
5. The developer of the market
The word "promote" in section 14(1) gives it a developmental role.
- Reaching the unreached. It fixes the share of business insurers must write in the rural and social sectors (section 14(2)(p); sections 32B and 32C of the 1938 Act).
- Products. Its regulations decide how products are designed and filed, as in the IRDAI (Insurance Products) Regulations, 2024.
- Data. Since 2026 it may collect policy and claims information from insurers and share it with them, with the policyholder's consent (sections 14A to 14C). That information is confidential (section 14D).
6. The enforcer
It may impose penalties under section 102 of the 1938 Act. They run up to one lakh rupees a day, subject to a maximum of ten crore rupees. It may also decide disputes between insurers and intermediaries (section 14(2)(m)). Its orders may be challenged before the Securities Appellate Tribunal (section 110).
How the courts treat its instruments
They give them force. In National Insurance Co. Ltd. v. Balakrishnan, (2013) 1 SCC 731, a company's managing director was injured in the company's car in 2001. The Supreme Court held that an Act policy did not cover an occupant. But IRDA's circulars, issued as the statutory regulator, made insurers liable for occupants under a comprehensive or package policy. The insurer could not dispute that liability.
They use them to protect consumers. In M/s Texco Marketing Pvt. Ltd. v. TATA AIG General Insurance Co. Ltd., 2022 INSC 1184, a shop in a basement was insured under a fire policy whose exclusion clause did not cover basements. The insurer had inspected the shop and accepted the premium. The Supreme Court held that the IRDA's policyholder protection regulations required it to give all material information. It could not rely on the exclusion, which was an unfair term.
They keep them within limits. In Indian Express Newspapers (Bombay) Private Ltd. v. Union of India, (1985) 1 SCC 641, newspapers challenged customs notifications imposing duty on newsprint. The Supreme Court held that subordinate legislation may be struck down on three grounds. It may go beyond its parent Act, conflict with another statute, or be manifestly arbitrary. The IRDAI's regulations are subject to the same review. Since 2026 the Authority must also publish draft regulations for public comment (section 114A of the 1938 Act).
What changed when the IRDAI replaced the Controller
Before 2000, the Insurance Act, 1938 was administered by a Controller of Insurance, an officer of the Central Government. The IRDAI is instead a body corporate with its own members, drawn from fields such as insurance, finance, actuarial science and law. It has its own fund (section 16) and makes its own regulations. Since 2026, its Chairperson and whole-time members hold office for five years or until the age of sixty-five, whichever is earlier. This gives the regulator expertise and continuity that a Government department rarely had.
Accountability. Independence is balanced by accounts. Its accounts are audited by the Comptroller and Auditor-General and laid before Parliament (section 17). Within nine months of each financial year it must report its activities to the Central Government, and the report is laid before Parliament (section 20).
The limits of its independence
The IRDAI is bound by the Central Government's written directions on questions of policy (section 18). If it cannot function, or persistently defaults, the Government may supersede it for up to six months (section 19). These powers make it accountable, but they also limit its independence.
Evaluation
The IRDAI's importance is that it turned a nationalised monopoly into a regulated market without leaving policyholders unprotected. Private and foreign insurers entered after 2000 under its supervision. Its weaknesses are the ones every regulator faces: rules can lag behind products, mis-selling persists, and many policyholders do not know their rights. The 2026 changes respond with data powers, a fund for policyholders and transparency in rule-making.
Conclusion. The IRDAI is the centre of Indian insurance regulation, charged to regulate, promote and ensure the orderly growth of the business (section 14(1)). It decides who may sell insurance, keeps insurers solvent and supervises how they sell and settle claims. It also develops the market and penalises those who break the rules. Above all it protects policyholders, and the courts enforce its instruments for that purpose (Balakrishnan; Texco Marketing), while keeping them within the law (Indian Express). The Central Government's powers of direction and supersession keep it accountable.
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