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B.A. LL.B. (Five Years) Sem 8 Insurance Law 2021 Oct Question Paper with Solutions - KSLU

KSLU Solved Question Papers

Insurance Law

Previous Year Question Paper with Solution

B.A. LL.B. (Five Years) · Sem 8

2021 Oct Examination

munotes.in

Mumbai

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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The Paper as Set

The questions in this volume are the questions asked at the 2021 Oct 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 · 15 questions answered

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Read the original question paper

Q1What is Insurance ? State the insurance Legislations in India.[16]

Answer

For full marks, cover: what insurance is: as a device for pooling and transferring risk, as a contract (the Explanation to section 2(6D) of the Insurance Act, 1938 from 2026; the three marks in Prudential; a service benefit is enough, St. Christopher Motorists), and as a business and a social institution; its functions; the insurance legislation of India grouped by purpose: regulating the industry (Insurance Act, 1938 and its major amendments; IRDA Act, 1999), nationalisation (LIC Act, 1956; GIB(N) Act, 1972; Consumer Education and Research Centre), the contract law (Marine Insurance Act, 1963; Indian Contract Act, 1872; Transfer of Property Act, 1882; Married Women's Property Act, 1874), compulsory cover (Motor Vehicles Act, 1988; Public Liability Insurance Act, 1991), social insurance (Code on Social Security, 2020), and remedies (Consumer Protection Act, 2019; Insurance Ombudsman Rules, 2017); the recent amendment wave (2023, 2025, 2026); a table.

Part I: What insurance is

As a device

Insurance is a device for sharing the losses of a few among the many who face the same risk. Each person pays a small, certain sum, the premium, into a common fund. Those who actually suffer a loss are paid out of it. In this way an uncertain and possibly ruinous loss is exchanged for a small, certain cost. The insured transfers his risk to the insurer, and the insurer pools many such risks so that its total losses become predictable.

As a contract

Since 5 February 2026, the Explanation to section 2(6D) of the Insurance Act, 1938 defines an "insurance contract" as one by which the insurer, "on payment of premium, undertakes to assume risk and to pay to the insured person an agreed compensation for loss, damage or liability arising from a contingent event".

The courts had earlier given the marks of such a contract. Prudential Insurance Co. v. Commissioners of Inland Revenue, [1904] 2 KB 658, arose from a stamp duty dispute. Channell J. named three marks. There is a payment of money or benefit on an event; the event is uncertain; and it is adverse to the insured's interest. In Department of Trade and Industry v. St. Christopher Motorists Association Ltd., [1974] 1 WLR 99, an association promised members a chauffeur if they lost their licence. That was held to be insurance, though the benefit was a service, not money.

As a business and a social institution

Insurance is also a regulated business, carried on only by registered insurers. And it is a social tool: the State uses it to protect road victims, farmers, workers and the poor.

Its functions

Protection. It replaces what a family or business loses.
Certainty. It turns an unknown loss into a known cost.
Risk sharing. The losses of a few are spread over many.

Loss prevention. Insurers reward safety and require precautions.
Credit. Lenders lend more readily against insured property and lives.
Capital formation. Life insurers invest long-term savings in the economy.

Part II: The insurance legislation of India

1. Laws that regulate the industry

The Insurance Act, 1938 is the principal Act. It governs registration of insurers, capital, accounts, investments and solvency, control over management, agents and intermediaries, surveyors, and penalties. It has been amended many times. The 1950 amendment confined the business chiefly to public companies and co-operatives. The 2015 amendment raised foreign holding to 49 per cent and rewrote the rules on assignment, nomination and section 45. The 2021 amendment raised foreign holding to 74 per cent. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 came into force on 5 February 2026, except its section 25. It allows foreign holding up to 100 per cent and defines an insurance contract.

The Insurance Regulatory and Development Authority Act, 1999 created the IRDAI, in force from 19 April 2000. It sets out the Authority's composition and its duty to "regulate, promote and ensure orderly growth" of insurance. The Insurance Ombudsman Rules, 2017 were made under section 24 of this Act.

2. The nationalisation Acts

The Life Insurance Corporation Act, 1956 nationalised life insurance and created the Life Insurance Corporation of India. Its objects bind it in law. In Life Insurance Corporation of India v. Consumer Education and Research Centre, (1995) 5 SCC 482, the Supreme Court struck down a condition confining the cheapest policy to employees of Government and reputed firms. A State insurer must frame its terms fairly, under Article 14.

The General Insurance Business (Nationalisation) Act, 1972 nationalised general insurance. It took over the shares of 55 Indian insurance companies and the undertakings of 52 other insurers. They were merged into four companies, held at first by the General Insurance Corporation of India. It was amended in 2021. The Jan Vishwas (Amendment of Provisions) Act, 2026 then replaced its imprisonment provision with a monetary penalty from 23 June 2026.

3. The contract law

The Marine Insurance Act, 1963 codifies marine insurance: insurable interest, good faith, warranties, the voyage, losses and indemnity. It came into force on 1 August 1963.
The Indian Contract Act, 1872 governs every insurance contract: its essentials (section 10), wagers (section 30) and contingent contracts (sections 31 and 32).
The Transfer of Property Act, 1882 deals with a buyer's right to fire insurance money (section 49) and the assignment of fire policies (section 135).
The Married Women's Property Act, 1874, section 6, lets a husband insure his life for the benefit of his wife and children as a trust.

4. Laws that compel cover

The Motor Vehicles Act, 1988 makes third party insurance compulsory (Chapter XI) and sets up the Claims Tribunals (Chapter XII). Chapter XI, as substituted by the 2019 amendment, took effect from 1 April 2022. Further changes came from 15 August 2026.

The Public Liability Insurance Act, 1991 requires owners handling hazardous substances to insure against liability for accidents. Its Jan Vishwas changes took effect from 1 April 2024.

5. Social insurance

The Code on Social Security, 2020, in force from 21 November 2025, now governs employees' state insurance and employees' compensation. It replaced the Employees' State Insurance Act, 1948 and the Employee's Compensation Act, 1923.

6. Remedies for policyholders

The Consumer Protection Act, 2019 treats insurance as a "service", so a wrongful repudiation is a deficiency in service.
The Insurance Ombudsman Rules, 2017 give a free forum for complaints, with awards of up to fifty lakh rupees.

How the laws work together

A single accident can bring several of these laws into play. Suppose a fire breaks out in a chemical factory, burning its stock and injuring workers and neighbours.

The insurer must be registered under the Insurance Act, 1938, and IRDAI's rules fix how fast it must settle the claim.
The factory's fire policy is a contract governed by the Contract Act and the policy's conditions, and it pays only the actual loss.
The neighbours get fixed relief under the Public Liability Insurance Act, 1991, from the compulsory policy the owner must carry, without proving fault.
The injured workers are compensated under the Code on Social Security, 2020.
If a claim is wrongly rejected, the owner may go to a Consumer Commission. A small business within the limits may go to the Insurance Ombudsman.

The example shows why the subject cannot be learnt from one Act. Each statute answers a different question: who may insure, what the contract means, who must buy cover, and where a wronged policyholder goes.

Purpose	Statute
Regulate insurers	Insurance Act, 1938; IRDA Act, 1999
Nationalise	LIC Act, 1956; GIB(N) Act, 1972

Purpose	Statute
Contract law	Marine Insurance Act, 1963; Contract Act, 1872; TPA, 1882; MWP Act, 1874
Compel cover	Motor Vehicles Act, 1988; Public Liability Insurance Act, 1991
Social insurance	Code on Social Security, 2020
Remedies	Consumer Protection Act, 2019; Ombudsman Rules, 2017

Conclusion. Insurance is a device and a contract by which, for a premium, the insurer assumes a risk (section 2(6D); Prudential). It pays on a contingent event. Indian insurance law is spread across several statutes with different purposes. The Insurance Act, 1938 and the IRDA Act, 1999 regulate insurers, and the LIC and GIB(N) Acts nationalised the industry. The Marine Insurance and Contract Acts govern the contract, the Motor Vehicles and Public Liability Acts compel cover, and the 2020 Code covers social insurance. All have been amended between 2023 and 2026, so current law must always be checked.

B.A. LL.B. (Five Years) Sem 8 Insurance Law 2021 Oct Question Paper with Solutions

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