KSLU Solved Question Papers
Insurance Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2018 Jun Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Insurance Law 2018 Jun Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2018 Jun examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2018 Jun 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 history and growth of Insurance in India.[16]
Answer
For full marks, cover: the stages of the history of insurance in India, life and general together: (1) risk sharing before modern insurance; (2) the first companies under British trade (the Oriental Life Insurance Company, Calcutta, 1818; the Bombay Mutual Life Assurance Society, 1870) and the first general insurers (the National Insurance Company, 1906); (3) regulation (1912, 1928, the Insurance Act, 1938 and its 1950 amendment); (4) the nationalisation of life insurance (Ordinance of 19 January 1956; the LIC Act, 1956; 245 insurers absorbed) and of general insurance (the 1971 emergency Act; the 1972 Act, in force 1 January 1973; 107 insurers grouped into four companies under the GIC); the constitutional limits (R.C. Cooper) and the public duty of a State insurer (Consumer Education and Research Centre); (5) liberalisation (the Malhotra Committee, 1993 to 1994; the interim regulator, 1996; the IRDA Act, in force 19 April 2000; the market reopened in August 2000; tariffs ended from 1 January 2007, Balakrishnan); (6) growth since 2000 (foreign holding from 26 to 100 per cent; the GIC as re-insurer from 2003; LIC's share capital, 2021; the 2021 provision for privatising public sector insurers; social insurance schemes); a timeline and an evaluation.
1. Before modern insurance
India knew risk sharing long before insurance companies. The joint family looked after a widow and children. Merchants spread commercial risks through their guilds and credit networks, and caste and village funds met the cost of funerals. But there was no insurer carrying risks as a business for a premium.
2. The first companies
Modern insurance arrived with British trade.
- 1818. The Oriental Life Insurance Company at Calcutta is treated as the first insurance company in India. It insured mainly European lives and failed in 1834.
- 1870. The Bombay Mutual Life Assurance Society was the first Indian office to insure Indian lives at ordinary rates. British offices had charged Indians a heavy extra premium.
- 1906. The National Insurance Company was founded. It is the oldest general insurer still operating in India.
- The swadeshi years. Indian offices multiplied, and by the 1930s there were well over a hundred, many of them small and weak.
3. Regulation: 1912 to 1950
Failures of weak offices led, step by step, to regulation.
- The Indian Life Assurance Companies Act, 1912 required deposits and actuarial valuation of life offices.
- The Indian Insurance Companies Act, 1928 required insurers to file statistical returns.
- The Insurance Act, 1938, still the principal Act, brought registration, capital, separate funds, prescribed investments and control of agents, under a Controller of Insurance. It covered life and general business alike.
- The 1950 amendment confined insurance business mainly to public companies and co-operative societies.
4. Nationalisation: 1956 and 1972
Life insurance. By an Ordinance of 19 January 1956 the Government took over the management of the life insurers. The Life Insurance Corporation Act, 1956 then created the Life Insurance Corporation of India. IRDAI's own account records that it absorbed 154 Indian and 16 non-Indian insurers and 75 provident societies, 245 in all. The Corporation received the exclusive privilege of life insurance business (section 30), with a Government guarantee of its policies (section 37).
General insurance. The management of the general insurers was taken over under the General Insurance (Emergency Provisions) Act, 1971. The General Insurance Business (Nationalisation) Act, 1972 then nationalised the business with effect from 1 January 1973. According to IRDAI, 107 insurers were amalgamated into four companies: National Insurance, New India Assurance, Oriental Insurance and United India Insurance. These were held by the General Insurance Corporation of India.
The constitutional setting. Nationalisation had to respect the Constitution. In Rustom Cavasjee Cooper v. Union of India, (1970) 1 SCC 248, the nationalisation of fourteen major banks was struck down because it impaired shareholders' rights and the compensation was not just. Both insurance Acts fixed the compensation to be paid to the old insurers.
The public duty. A State monopoly also had to serve the public fairly. In Life Insurance Corporation of India v. Consumer Education and Research Centre, (1995) 5 SCC 482, the Corporation's cheapest policy was offered only to people in Government or reputed private employment. The Supreme Court struck down that condition under Article 14. A statutory insurer must frame its products in line with the purpose for which it was created.
5. Liberalisation: 1993 to 2007
- The Malhotra Committee. In 1993 the Government set up a committee under R.N. Malhotra, a former Governor of the Reserve Bank. It reported in 1994, recommending private entry and an independent regulator.
- The regulator. An interim regulatory authority was set up in 1996. The IRDA Act, 1999 came into force on 19 April 2000. It ended the monopolies of the LIC and the GIC (section 30A of the 1956 Act; section 24A of the 1972 Act). The IRDA invited applications in August 2000, and private insurers re-entered the market.
- The end of tariffs. 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 a package policy did, under the regulators' circulars. It recorded that the Tariff Advisory Committee was the statutory regulator fixing tariffs and policy terms until 31 December 2006. From 1 January 2007 that role passed to the IRDA, and insurers came to price most general insurance themselves under its supervision.
6. Growth since 2000
- Foreign capital. Foreign holding in Indian insurers was limited to 26 per cent in 1999. It rose to 49 per cent in 2015 and 74 per cent in 2021. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 allows up to 100 per cent from 5 February 2026.
- The GIC as re-insurer. From 21 March 2003, the GIC ceased to hold the four companies and became the national re-insurer.
- The LIC as a company with shareholders. The Finance Act, 2021 gave the Corporation share capital and allowed shares to be issued to the public. The Government must hold at least 51 per cent.
- Privatisation made possible. The 1972 Act was amended in 2021 (section 24B). It now ceases to apply to a public sector insurer once the Government gives up control.
- Social insurance. Government schemes now spread cover to people who never bought it. They include life and accident cover through bank accounts from 2015, and crop insurance for farmers.
- Grievance redress. Policyholders gained a cheap forum for complaints. The Insurance Ombudsman Rules, 2017 replaced the Redressal of Public Grievances Rules, 1998. They were widened in 2023 to cover small businesses and awards of up to fifty lakh rupees.
| Year | Event |
|---|---|
| 1818 | Oriental Life Insurance Company, Calcutta |
| 1870 | Bombay Mutual Life Assurance Society |
| Year | Event |
|---|---|
| 1906 | National Insurance Company |
| 1912, 1928 | First statutes |
| 1938 | Insurance Act |
| 1956 | Life insurance nationalised: 245 insurers into the LIC |
| 1973 | General insurance nationalised from 1 January: 107 insurers into four companies |
| 1994 | Malhotra Committee report |
| 2000 | IRDA Act in force (19 April); market reopened (August) |
| 2007 | Tariffs end (1 January) |
| 2015, 2021, 2026 | Foreign holding 49, 74, 100 per cent |
Evaluation
The history moves in one long arc. Unregulated growth led to failures; regulation came next; then the State took ownership in the name of public purpose. After half a century of monopoly, the market was reopened under a regulator to bring in capital and competition. Each stage kept something of the last. The 1938 Act still governs, the State insurers still compete, and the courts still hold them to their public duty.
Conclusion. Insurance in India grew from European companies in the nineteenth century and Indian offices in the swadeshi years, through regulation in 1912 and 1938. Life insurance was nationalised in 1956 and general insurance from 1 January 1973 (R.C. Cooper; Consumer Education and Research Centre). The IRDA Act, 1999 ended the monopolies, and tariffs ended in 2007 (Balakrishnan). Since then foreign capital has risen to 100 per cent, and the State insurers have been opened to public shareholding. Social schemes have also spread cover more widely.
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