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MODULE IV
Legal Aspects of insurance-Insurance Act1938-Indian Contract Act-Consumer Protection Act 1986-Insurance ombudsman-Contract of agency-Special principles of insurance contracts including reinsurance and double insurance LEGAL FRAMEWORK OF INSURANCE BUSINESS

Insurance is made available to the public through the medium of contracts that detail the rights and duties of the parties to the insurance agreement. These contracts may range from implied or oral agreements, to formal written contracts issued by companies. Most of the insurance contracts are expressed in writing even when an oral binder initiates the transaction. Insurance contracts are complicated because of the technical nature of the subject matter, the statutory requirement that certain language be employed, and the need to avoid terms that may be construed as ambiguous. However, the need for legal clarity may lead to a contract that is beyond the comprehension of the typical insurance consumer. Furthermore, the technical nature of many contracts often distracts from the mutual understanding of its terms by the parties to the contract. Insurance contract can broadly be classified into two categories (a) life and (b) non-life insurance. The subject matter of life insurance is life of the assured. In a life policy the life is covered for a certain amount which is payable on the maturity of the policy or on the death of policyholder which is earlier. The amount is payable on death to the nominee/legal heir of the deceased.

Non-life insurance can again be categorised according to the uncertainties and events covered by the respective policies. Some examples of non-life insurance policies are householders insurance and fire insurance. Personal accident insurance is linked to human life hence would not strictly fall in the category1 of non-life insurance though the characteristic of uncertainty which attracts to non life insurance is manifested even in personal accident and medical insurance policies respectively.

The primary law governing contracts of insurance is the Indian Contract Act, 1872. However, there many issues not covered by the said Act. This may relate to torts, consumer rights, transfer of property, agency issues etc.

Torts and Crimes

Torts
A tort is a private wrong. It occurs whenever someone acts or fails to act in such a manner that an individual's peace of mind or right are jeopardized. It refers to any individual's action that effectively deprives another of his right to security of person, reputation, or property. Torts differ from crimes in that the latter are public wrongs. A crime is any act that the legislature determines to be punishable by law. The same act may include all of the elements of a particular tort and a particular crime, in which case there exists a public remedy in the form of punishment prescribed by law and a private remedy that is often in the form of monetary damages. Torts are important in insurance because they are a major source of loss covered by liability insurance. The automobile insurance policy is essential because it provides for payment of judgments awarded by the courts in negligence cases as well as the costs of litigation or claims settlement. The comprehensive- personal liability insurance policy covers losses arising from negligent conduct unrelated to the care, custody, or control of the automobile or to business pursuits. The comprehensive general liability insurance policy covers losses occurring as a direct result of negligence in many business-situations. Crimes

Sometimes that are recognized by statute are specific to insurance, while others are relevant to insurance law because they are crimes committed to obtain funds illegally from insurance companies. A few example of crimes are: a) Rebating : passing of commission/incentives by agents to prospective insureds to purchase on insurance policy. b) Twisting : inducing an individual to terminate are life insurance policy in...
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