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CS Professional · Banking and Insurance - Laws and Practice

Functions in Insurance and Compliance Related Thereto (Part II)

This chapter covers what an insurer does day to day and the compliance attached to each function: underwriting, policy issue, premium, claims, surveyors and loss assessors, intermediaries, reinsurance, investment and reporting. You solve questions by naming the function, applying the Insurance Act, 1938 rule to the facts, and concluding with the compliance step.

What this chapter covers

This chapter follows the life of an insurance contract from the insurer's side. It starts with the Insurance Councils under the Insurance Act, 1938, then moves to underwriting, policy issuance and premium rules, then claims and policyholder protection. It ends with the people and arrangements that support the insurer: surveyors, loss assessors, intermediaries, reinsurers, investments and reports to the regulator.

One rule you must know well is Section 64UM of the Insurance Act, 1938. It deals with surveyors and loss assessors in general insurance. In outline: a person must hold the specified academic qualifications and be a member of the Indian Institute of Insurance Surveyors and Loss Assessors to act, must follow the code of conduct set by regulations, and an insurer cannot admit or settle a claim at or above the amount specified in the regulations without a report from an approved surveyor or loss assessor. The insurer may still pay a different amount from the one assessed.

The chapter sits in the Insurance Laws half of Paper 7.4, which carries 50 marks. It builds on the earlier insurance law chapters, such as the contract of insurance and the regulator's powers. Questions here are usually case-based, so you must apply the provisions to facts and not just recite them.

Insurance Laws carry 50 marks of the 100 in this elective, and this chapter covers the operating side of an insurer, which is where case-based questions are most natural. The paper is open book, but you only gain marks if you can find the right provision fast and apply it to the facts. A student who has mapped the chapter function by function can write a clean provision, analysis and conclusion answer in the time available.

Functions in Insurance and Compliance related thereto (Part II): topics in the order to study them

  1. 1Insurance Act 1938: Functions of Insurance CouncilsStart with the Act's framework and the bodies it creates, so the later functions have a legal base to attach to.
  2. 2Underwriting, Policy Issuance and Premium ComplianceThis is the first step of every contract, so learn it before claims, which depend on the policy and premium position.
  3. 3Claims Settlement and Policyholder ProtectionClaims follow from the policy, and policyholder protection rules make sense only once you know how policies are issued.
  4. 4Surveyors, Loss Assessors and IntermediariesSection 64UM links directly to claims, so study it right after claims settlement while the process is fresh.
  5. 5Reinsurance, Investment and Regulatory ReportingThese are back-office and regulator-facing functions, easiest to learn last once the core insurer functions are clear.

How to prepare Functions in Insurance and Compliance related thereto (Part II)

Treat the chapter as a chain of functions, each with a rule, a duty and a consequence for breach. Prepare it so you can find and apply each rule quickly in an open book paper.

  1. Read the Insurance Act, 1938 provisions for each topic once, and mark them with tabs so you can reach them in seconds in the exam.
  2. Make a one-page map of the insurer's functions in order: underwriting, issue, premium, claims, survey, reinsurance, investment, reporting.
  3. Learn Section 64UM in plain words: who may act, the qualification and membership condition, the code of conduct, the claim threshold set by regulations, and the insurer's freedom to settle at a different amount.
  4. For each function, write down who must act, what must be done, and what happens on non-compliance.
  5. Practise two or three short case problems per topic. Write each as provision, analysis of facts, conclusion.
  6. Add a compliance line to each answer, such as the report to obtain, the record to keep or the filing to make.
  7. In the last week, revise only your map, your tabs and the points you got wrong in practice.

Common mistakes in Functions in Insurance and Compliance related thereto (Part II)

  • Saying a surveyor's report binds the insurer to pay exactly the assessed amount.

    Fix: State that the report is mandatory above the threshold, but the insurer may settle at a different amount.

  • Quoting a fixed rupee threshold for the surveyor requirement.

    Fix: Say the claim amount is the one specified in the regulations by the Authority, and check the current regulation if a figure is given in the question.

  • Ignoring the firm or company proviso in Section 64UM.

    Fix: Whenever the facts involve a firm or company, check each partner or director against both conditions.

  • Writing the topic from memory without applying it to the facts.

    Fix: Use provision, analysis, conclusion every time, and cite the facts in the analysis.

  • Treating the chapter as a list of unrelated topics.

    Fix: Study it as one chain from underwriting to reporting so you can link claims, survey and reinsurance in one answer.

  • Relying on the open book and not preparing.

    Fix: Tab the key provisions beforehand and practise finding them under time, since three hours go fast.

Last-day revision: Functions in Insurance and Compliance related thereto (Part II)

  • Section 64UM governs surveyors and loss assessors in general insurance business.
  • To act, a person needs the qualifications specified by regulations and membership of the Indian Institute of Insurance Surveyors and Loss Assessors.
  • For a firm or company, every partner or director who may survey or assess a loss must meet both conditions.
  • Surveyors and loss assessors must follow the code of conduct set by regulations.
  • A claim at or above the regulatory threshold cannot be admitted or settled without a report from an approved surveyor or loss assessor, unless the Authority directs otherwise.
  • The insurer may pay or settle a claim at an amount different from the surveyor's assessment.
  • The Authority can call for an independent report from another approved surveyor, and the insurer bears the cost.
  • After such a report, the Authority may direct the insurer to settle at a higher or lower figure, and the insurer must comply.
  • No lower-figure direction is made where the amount is already paid and recovery would cause undue hardship to the insured.
  • For claims below the threshold, the insurer may use another person if an approved surveyor would be disproportionately costly.
  • The Authority can exempt a class of claims where custom or impracticality justifies it.
  • In every answer, state the provision, apply it to the facts, then conclude with the compliance step.

Functions in Insurance and Compliance related thereto (Part II) practice questions

Functions in Insurance and Compliance related thereto (Part II) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Functions in Insurance and Compliance related thereto (Part II): frequently asked questions

What does Section 64UM of the Insurance Act, 1938 deal with?

It deals with surveyors and loss assessors in general insurance. It sets who may act, requires compliance with a code of conduct, and requires an approved surveyor's report for claims at or above the regulatory threshold. It also gives the Authority powers to call for independent reports and give directions.

Can an insurer settle a claim for less than the surveyor assessed?

Yes. The proviso to Section 64UM(4) says the insurer's right to pay or settle at an amount different from the approved surveyor's assessment is not taken away. The Authority can still direct a different figure after an independent report.

Is a surveyor always needed for a claim?

No. The mandatory report applies to claims at or above the amount specified in the regulations. Below that, the insurer may use another person if an approved surveyor would cost disproportionately, and the Authority can still direct a report or exempt certain classes of claims.

Is this chapter in the open book paper?

Yes. Elective papers, including Banking and Insurance, are open book. You still need to know where each provision is and how to apply it to facts in the time available.