KSLU Solved Question Papers
Insurance Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2018 Dec Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Insurance Law 2018 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 2018 Dec examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2018 Dec examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2018 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.
Q1Explain the composition and functions of Insurance Regulatory and Development Authority.[16]
Answer
For full marks, cover: the background and establishment of the Authority (IRDA Act, 1999, section 3); its composition, the members' qualifications and the expertise proviso (section 4), term to age 65 from 2026, removal, pay and the cooling-off bar (sections 5 to 8), the Chairperson, meetings and staff (sections 9 to 12); its duty and functions (section 14), grouped by who they protect; its powers under both Acts (registration, inspection and investigation, directions with disgorgement, control of management, penalties and adjudication, regulations, the 2026 information powers, delegation); its money and accountability (the Fund and the 2026 Reserve Fund, section 16; the Policyholders' Education and Protection Fund, section 16A; audit by the Comptroller and Auditor-General, section 17; annual report, section 20; laying before Parliament, section 27; appeal to the Securities Appellate Tribunal); the Central Government's controls (policy directions, section 18; supersession, section 19); the courts' view of its rules (Texco Marketing, Indian Express Newspapers).
Background and establishment
For about forty years after nationalisation, the Life Insurance Corporation and the public sector general insurers did almost all insurance business in India. A Government officer, the Controller of Insurance, supervised them. In 1994 the Malhotra Committee recommended letting private insurers in under an independent regulator. Parliament then passed the Insurance Regulatory and Development Authority Act, 1999.
Under section 3, the Authority was established from 19 April 2000. It is a body corporate with perpetual succession and a common seal. It can own property, make contracts, and sue or be sued in its own name. Since 2015 it is called the Insurance Regulatory and Development Authority of India (IRDAI).
Part I: Composition
The members
| Member | Number | Term | Remuneration |
|---|---|---|---|
| Chairperson | One | Five years or until 65 | Salary fixed by rules |
| Whole-time members | Not more than five | Five years or until 65 | Salary fixed by rules |
| Part-time members | Not more than four | Up to five years | Allowances only |
All members are appointed by the Central Government under section 4. They must be persons of ability, integrity and standing. Their knowledge or experience must lie in life insurance, general insurance, actuarial science, finance, economics, law, accountancy or administration. The 2025 amending Act added information technology from 5 February 2026.
The expertise proviso. The Chairperson and the whole-time members must include experts in three fields. At least one must know life insurance, one general insurance, and one actuarial science.
Independence
- Term (section 5). Five years, or until the age of sixty-five, whichever is earlier, with eligibility for reappointment. A member may resign by three months' notice.
- Removal (section 6). Only for insolvency, incapacity, conviction involving moral turpitude, a conflicting interest, or abuse of position. A member must be heard before removal on the last two grounds.
- Pay (section 7). It cannot be varied to a member's disadvantage after appointment.
- Cooling-off (section 8). For two years after leaving, the Chairperson and whole-time members need the Government's approval to take Government service or a post in an insurance company.
Working arrangements
The Chairperson has general superintendence of administration (section 9). Meetings follow regulations, and questions are decided by majority, with a casting vote for the person presiding (section 10). A vacancy or a procedural defect not affecting the merits does not invalidate its acts (section 11). It appoints its own officers and employees (section 12).
Part II: Functions
Section 14(1) gives the Authority the duty "to regulate, promote and ensure orderly growth of the insurance business and re-insurance business". Section 14(2) lists its functions in clauses (a) to (q). They are best grouped by whom they serve.
- For policyholders. Protecting their interests in assignment, nomination, insurable interest, claim settlement and surrender value (clause (b)), and controlling rates and terms in general insurance (clause (i)).
- For a sound market. Registering insurers (clause (a)), and inspecting and auditing insurers and intermediaries (clause (h)). Prescribing accounts (clause (j)), and regulating investments (clause (k)) and the solvency margin (clause (l)).
- For those who sell and service insurance. Fixing qualifications and codes of conduct for agents and intermediaries (clause (c)), and for surveyors and loss assessors (clause (d)). Deciding disputes between insurers and intermediaries (clause (m)).
- For growth and society. Promoting efficiency (clause (e)) and professional bodies (clauses (f) and (o)), and levying fees (clause (g)). Fixing the share of rural and social sector business (clause (p)).
- Enforcement. Imposing penalties (clause (n)), and any other prescribed power (clause (q)).
Part III: Powers
- Registration. No insurer may do business without its certificate, which it may suspend or cancel (section 3 of the Insurance Act, 1938). This power cannot be delegated (section 23 of the IRDA Act).
- Inspection and investigation. It may appoint an Investigating Officer to examine an insurer's affairs and books (section 33 of the Insurance Act).
- Directions. It may direct insurers in the public interest or to protect policyholders. Since 2026 this includes directing disgorgement of wrongful gains (section 34).
- Control of management. The appointment of a managing director needs its approval (section 34A). It may supersede an insurer's board and appoint an Administrator for up to a year (section 52A).
- Penalties. Up to one lakh rupees a day, to a maximum of ten crore rupees, for failures such as not keeping the solvency margin (section 102). They are imposed after an adjudicating officer's inquiry (section 105C).
- Regulations. It makes binding regulations under section 26 of the IRDA Act and section 114A of the Insurance Act, after publishing drafts for public comment.
- Information. Since 5 February 2026, sections 14A to 14E let it collect policy and claim data. It may share the data with insurers, with the person's consent, to fight fraud.
Part IV: Money and accountability
- Its Fund (section 16). Grants, fees and charges go into the Authority's Fund, which meets its expenses. From 2026, twenty-five per cent of the yearly surplus goes into a Reserve Fund, and the remaining surplus goes to the Consolidated Fund of India.
- The policyholders' fund (section 16A). From 2026, penalties it collects go into a Policyholders' Education and Protection Fund.
- Audit and report. Its accounts are audited by the Comptroller and Auditor-General and laid before Parliament (section 17). It must report its activities to the Government within nine months of each financial year (section 20).
- Parliament and appeal. Every regulation is laid before Parliament, which may change or annul it (section 27). Its orders can be challenged before the Securities Appellate Tribunal (section 110 of the Insurance Act).
Part V: The Central Government's controls
- Policy directions (section 18). The Authority is bound by the Government's written directions on questions of policy, though not on technical and administrative matters. It must be heard first where practicable.
- Supersession (section 19). If the Authority cannot function, persistently defaults, or the public interest requires, the Government may supersede it for up to six months. A Controller of Insurance then exercises its powers until it is reconstituted.
How courts treat its rules
M/s Texco Marketing Pvt. Ltd. v. TATA AIG General Insurance Co. Ltd., 2022 INSC 1184, shows the force of its regulations. An insurer knowingly insured a shop in a basement and later rejected a fire claim under a basement exclusion. The Supreme Court relied on the Authority's 2002 regulations on policyholders' interests, which required full disclosure by the insurer. Having not complied, the insurer could not rely on the exclusion.
Indian Express Newspapers (Bombay) Private Ltd. v. Union of India, (1985) 1 SCC 641, marks the limit. It arose from customs duty on imported newsprint. The Supreme Court held that delegated legislation can be struck down if it exceeds the parent Act, conflicts with another law, or is manifestly unreasonable. The Authority's regulations are delegated law and face the same tests.
Conclusion. The IRDAI is a body corporate under section 3 of the IRDA Act, 1999, of up to ten members appointed by the Central Government. Life, general and actuarial experts must sit among its full-time members. Fixed terms, protected pay and limited removal secure its independence. Its section 14 functions and its powers under both Acts let it license, supervise, direct, penalise and make binding rules (Texco Marketing). It is checked by audit, Parliament, the Securities Appellate Tribunal, the courts (Indian Express Newspapers) and the Government's limited powers of direction and supersession.
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