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CS Professional · Banking and Insurance - Laws and Practice

Functions in Insurance and Compliance related thereto (Part V)

This chapter covers what insurers and the industry do day to day: underwriting, claims, reinsurance, distribution through intermediaries, the role of the General Insurance Council's Executive Committee, and compliance that protects policyholders. Solve questions by naming the function, stating the rule, applying the facts and concluding.

What this chapter covers

This chapter moves from insurance contracts and regulation to how an insurer actually works. You study the functions in the order a policy lives: the risk is assessed (underwriting), the cover is shared (reinsurance), it is sold through intermediaries, and claims are settled. Around all this sits compliance and policyholder protection.

A distinct statutory block is the Life Insurance Council and General Insurance Council under Part of the Insurance Act, 1938. You must know how the Executive Committee is formed, how long it lasts, what it does and how it advises the Authority on expenses of management. These sections are short and exact, so they are easy to lose marks on if you paraphrase loosely.

This chapter links to the rest of the Banking and Insurance paper. Insurance contract principles, IRDAI regulation and the Insurance Act provisions on solvency and expenses all feed into the functions here. Insurance Laws carry 50 marks of the paper, so this chapter supports a large scoring area.

The paper is written and case-based, so examiners can ask you to advise an insurer or policyholder on a situation involving claims, intermediaries or the Council. This chapter mixes practical processes with exact statutory text, so structured answers that cite the right provision score well. The Council sections are fact-heavy and predictable, which makes them reliable marks if you learn the composition, duration, functions and limits precisely.

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

  1. 1Underwriting in InsuranceStart here because every policy begins with risk selection and pricing, and later topics build on it.
  2. 2Reinsurance and Risk TransferIt follows underwriting because reinsurance is how an insurer passes on part of the risk it has accepted.
  3. 3Insurance Intermediaries and DistributionLearn how the policy reaches the customer, and who is regulated, before you study what happens at claim stage.
  4. 4Claims Management and SettlementClaims are the end of the policy cycle and need the underwriting and distribution background to answer case questions.
  5. 5Functions of General Insurance Council Executive CommitteeThis is the statutory block; study it once the business functions are clear so you see why the Council advises on conduct and expenses.
  6. 6Regulatory Compliance and Policyholder ProtectionFinish with compliance, which ties all the functions together and suits case-based conclusions.

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

Split the chapter into practical functions and statutory text. Treat them differently: understand the first, memorise the second.

  1. Read underwriting, reinsurance, distribution and claims as one policy lifecycle and draw it as a simple flow on one page.
  2. For each function, write three lines: what it is, who does it, and what can go wrong for the insurer or policyholder.
  3. Learn the Council sections directly from the Act. For the General Insurance Council Executive Committee, note composition, the Chairperson's election, three-year duration, and how vacancies are filled.
  4. Make a small table in your notes for the Executive Committee's functions: advise insurers on conduct and sound practice, advise the Authority on commission and expenses, report prejudicial conduct, and act in incidental matters notified with approval.
  5. Practise case questions: identify the function, state the rule, apply the facts, then conclude in two lines.
  6. Revise compliance and policyholder protection last, linking each point to a function you have already learnt.

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

  • Mixing up the composition of the Life and General Insurance Council Executive Committees.

    Fix: Note the difference: the life committee has three nominated persons plus one each from self-help groups and Insurance Co-operative Societies; the general committee has four nominated persons including third party administrators and surveyors.

  • Saying the Executive Committee fixes expense limits itself.

    Fix: State that the Committee advises the Authority, and the Authority fixes the limits, with due regard to conditions in the preceding year.

  • Writing that the Committee's acts are void if a seat is vacant.

    Fix: State that no act can be called in question merely because of a vacancy or a defect in constitution.

  • Giving a theory answer to a case question on claims or intermediaries.

    Fix: Use the provision, analysis, conclusion format and tie each point to the facts given.

  • Treating the Council's duration as fixed with no continuity.

    Fix: Add that outgoing members continue to hold office and discharge duties until the new Committee is constituted.

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

  • Underwriting means assessing and pricing risk before accepting it.
  • Reinsurance lets an insurer transfer part of its risk to another insurer.
  • Claims handling covers intimation, investigation, assessment and settlement.
  • The Executive Committee of the General Insurance Council has four elected member representatives, an eminent person from outside insurance nominated by the Authority, and four nominated representatives of agents, third party administrators, surveyors and loss assessors, and policyholders.
  • The Chairperson of that Executive Committee is one of the four elected representatives.
  • An Executive Committee lasts three years from its first meeting; outgoing members continue until a new one is constituted.
  • If a body fails to elect a member, the Authority may nominate a person to fill the vacancy.
  • An act of the Committee cannot be questioned merely because of a vacancy or a defect in its constitution.
  • The General Insurance Council's Executive Committee must meet at least once before 31 March every year to advise on limits for expenses of management under the proviso to section 40C(1).
  • After a warning to an insurer for breaching section 40C, two warnings disregarded allow the Authority to take prescribed action.
  • The Executive Committee may collect fees laid down in the Council's bye-laws from general insurers.

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

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

What does the Executive Committee of the General Insurance Council do?

It aids and advises general insurers on standards of conduct, sound practice and efficient service to policyholders. It advises the Authority on controlling commission and other expenses and brings to its notice any insurer acting against policyholders' interests. It also acts in incidental matters notified with the Authority's approval.

How long does an Executive Committee of the Insurance Councils last?

Three years from the date of its first meeting, after which it stands dissolved and a new one is constituted. The outgoing members continue in office and perform prescribed duties until the new Committee is formed.

Who fixes the limits for expenses of management of general insurers?

The Authority fixes them. The Executive Committee of the General Insurance Council meets at least once before 31 March each year to advise on the limits under the proviso to section 40C(1). The Authority may fix different limits for different groups of insurers.

What happens if an insurer breaches the expenses of management limits?

The Authority may give the insurer a chance to be heard and then administer a warning. If two such warnings are disregarded, the Authority may take such action as may be prescribed.

Is this chapter more theory or case-based?

Both. The business functions are usually tested through cases, while the Council provisions are tested on exact statutory points. Prepare each in the way it is likely to be asked.