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CS Professional · Banking and Insurance - Laws and Practice

Functions in Insurance and Compliance Related Thereto

This chapter covers what insurers do (mainly underwriting and claims), how the General Insurance Council and its Executive Committee are set up under the Insurance Act, 1938, what Section 64L requires of that Committee, and the compliance duties of insurers and intermediaries. Answer case questions by stating the provision, applying the facts, then concluding.

What this chapter covers

This chapter sits in the Insurance Laws half of Paper 7, Elective 7.4, Banking and Insurance - Laws and Practice. Insurance Laws carries 50 of the paper's 100 marks. The chapter moves from practice to law. First it explains the working functions of an insurer: underwriting (deciding which risks to accept and on what terms) and claims (assessing and settling what policyholders are owed).

Then it moves to the self-regulatory layer in Part IV A of the Insurance Act, 1938. The Life Insurance Council and the General Insurance Council are representative bodies of insurers. Their authority is the Executive Committee (Section 64E). The official text covers the Councils (Section 64C), the Committee's composition (Section 64F), vacancies (Section 64G), duration (Section 64H), joint meetings (Section 64N), general powers of the Councils (Section 64R), and the functions of the General Insurance Council's Committee (Sections 64L and 64M).

The last topic ties everything to compliance: what insurers and intermediaries must do in day-to-day business. Examiners like this link, because a case study can give you an insurer's conduct and ask which duty or provision applies. It also connects to audit (Section 12), which makes an insurer's accounts subject to audit, and to the Authority's role as regulator.

The paper is written and case-based, so you earn marks by naming the right provision, applying it to the facts and concluding. This chapter is rule-heavy and short on calculation, which makes it a good place to score if you learn the exact wording. Small details decide marks: who nominates whom, how long the Committee lasts, and what the Committee may and may not do. Many students skim these and lose marks to vague answers.

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

  1. 1Functions of Insurance Companies: Underwriting and ClaimsStart with the business itself, so the later legal provisions have a practical context.
  2. 2General Insurance Council under the Insurance Act, 1938Next learn what the Councils are, who sits on the Executive Committee, its term, vacancies and powers, before studying one Committee's specific functions.
  3. 3Section 64L: Functions of Executive CommitteeWith the structure clear, the functions of the General Insurance Council's Executive Committee are easy to place and remember.
  4. 4Compliance Duties of Insurers and IntermediariesFinish by applying everything to conduct and compliance, which is how case questions are framed.

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

Treat this as a chapter of precise rules plus practical judgement. Read the Act's words, then practise applying them to short facts.

  1. Read the underwriting and claims material once for understanding. Be able to explain each function in your own words, with a simple example such as a motor policy or a fire policy.
  2. Read Sections 64C, 64E, 64F, 64G, 64H, 64N and 64R from the Act. Note who elects, who nominates, the duration, and what happens when a vacancy arises.
  3. Make a one-page table for the General Insurance Council's Executive Committee: composition, chair, term, vacancy rule and powers. Rewrite it from memory until it is exact.
  4. Learn Section 64L as a list: advise insurers on standards of conduct and sound practice, advise the Authority on controlling expenses and commission, report prejudicial insurers to the Authority, and act in incidental matters notified with the Authority's approval. Add the power to collect fees under bye-laws and the waiver proviso.
  5. Link Section 64L with Section 64M: the Committee meets at least once before 31 March each year to advise the Authority on expense-of-management limits, and the Authority may warn an insurer and later act after two disregarded warnings.
  6. Practise three or four short case questions. For each, write the provision, the facts that matter, and a one-line conclusion. Keep answers under a page.
  7. In the last days, revise the compliance duties of insurers and intermediaries from your study material and attach each duty to a practical example.

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

  • Giving the Executive Committee a regulatory or penal power, such as fining insurers.

    Fix: Remember that under Section 64L the Committee advises and reports. The Authority acts, for example by warning an insurer under Section 64M.

  • Confusing the composition of the Life and General Insurance Committees.

    Fix: Learn them side by side. Both have four elected insurer representatives and one eminent nominee. The General Committee has four nominated representatives of agents, third party administrators, surveyors and loss assessors, and policyholders. The Life Committee's nominated list differs.

  • Stating the term of the Committee wrongly or forgetting that outgoing members continue.

    Fix: Write both parts: three years from the first meeting, then dissolution, with outgoing members continuing until a new Committee is constituted.

  • Writing answers on underwriting and claims as general theory without applying facts.

    Fix: Use the case facts. Name the function involved, say what the insurer should do, and conclude.

  • Quoting old rules, such as the Authority nominating to fill casual vacancies.

    Fix: Use the current text. Vacancies are now filled as laid down in the Council's bye-laws, following the 2015 amendment.

  • Writing section numbers that you are unsure of.

    Fix: Quote a section number only when certain. A correct rule in plain words earns more than a wrong number.

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

  • Underwriting means assessing and selecting risks and fixing terms and premium; claims means assessing and settling policyholder claims.
  • The authorities of the Life Insurance Council and the General Insurance Council are their Executive Committees (Section 64E).
  • The General Insurance Council represents insurers carrying on general, health and re-insurance business (Section 64C).
  • The General Insurance Council's Executive Committee has four elected insurer representatives, one eminent person unconnected with insurance nominated by the Authority, and four nominated persons representing agents, third party administrators, surveyors and loss assessors, and policyholders (Section 64F).
  • The Chairperson is elected from among the four elected insurer representatives.
  • If the electing bodies fail to elect a member, the Authority may nominate a person to fill the vacancy.
  • An Executive Committee lasts three years from its first meeting; outgoing members continue until a new one is constituted (Section 64H).
  • Casual vacancies are filled as laid down in the Council's bye-laws, and the new member serves until the Committee is dissolved (Section 64G).
  • No act of the Committee can be questioned merely because of a vacancy or a defect in its constitution (Section 64G).
  • Section 64L: the Committee advises insurers on conduct and sound practice, advises the Authority on commission and expenses, and reports prejudicial conduct to the Authority.
  • The Committee may collect fees under bye-laws; the Council may waive them for a year by resolution, if approved by the Authority.
  • Section 64M: the Committee meets at least once before 31 March each year to advise on expense limits under Section 40C.

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

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

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

It sets out the functions of the Executive Committee of the General Insurance Council. These include advising insurers on standards of conduct and efficient service, advising the Authority on commission and expenses, and bringing to its notice any insurer acting against policyholders' interests. It also allows the Committee to collect fees under the bye-laws.

How is the Executive Committee of the General Insurance Council constituted?

It has four insurer representatives elected by the Council's members, one eminent person unconnected with insurance nominated by the Authority, and four persons nominated by the Authority to represent agents, third party administrators, surveyors and loss assessors, and policyholders. One of the elected representatives is elected Chairperson.

How long does the Executive Committee last?

Three years from the date of its first meeting, after which it is dissolved and a new one is constituted. The outgoing members continue to hold office and discharge their duties until the new Committee is constituted.

How should I answer a case question from this chapter?

State the relevant provision in plain words, apply it to the given facts, and end with a clear conclusion. Add a practical compliance point where it fits, such as what the insurer or Committee should do next.