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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part III)

Sunrise General Insurance Ltd., acting on an IRDAI direction, stops writing a certain class of business. A distributor, Mr. Verma, says he lost commission and sues the insurer in contract for compensation, relying only on the fact that the insurer complied with the direction. Under the Insurance Act, 1938, what is the position?

Mr. Verma cannot claim. Section 110D says no person has any right, whether in contract or otherwise, to compensation for loss incurred by reason of an insurer complying with an order or direction given under the Insurance Act, 1938, so his contractual claim fails.

  1. AHe can claim compensation in contract, because commission is a contractual right
  2. BHe cannot claim, because no person has any right, in contract or otherwise, to compensation for loss caused by an insurer's compliance with an order or direction given under the ActCorrect
  3. CHe can claim compensation only if the insurer is a life insurer
  4. DHe can claim compensation only after the Executive Committee of the General Insurance Council approves

Explanation

Section 110D bars any right to compensation, whether in contract or otherwise, for loss incurred by reason of compliance by an insurer with any order or direction given under the Act. Option A ignores the words 'in contract or otherwise'. The class of insurer and the Council's approval are irrelevant.

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