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

Suraksha Life Insurance Ltd. was directed by IRDAI to stop a particular practice under section 34 of the Insurance Act, 1938. Compliance caused the insurer's agent network a loss of business. The agents claim compensation from the insurer under their contracts. What is the position under section 110D?

Agents have no right to compensation. Section 110D bars any claim, in contract or otherwise, for loss arising from the operation of section 34 or from an insurer's compliance with an order or direction given under the Insurance Act, 1938.

  1. AAgents can claim compensation because their contracts predate the order
  2. BAgents can claim compensation only if the loss exceeds one crore rupees
  3. CNo person has any right, in contract or otherwise, to compensation for loss by reason of operation of section 34 or compliance with an order under the ActCorrect
  4. DAgents can claim compensation only after the insurer is heard by the Authority

Explanation

Section 110D bars any claim for compensation, whether in contract or otherwise, for loss caused by operation of sections 34, 34A, 34E or 37A or by an insurer's compliance with an order or direction under the Act. The agents' contracts do not override this bar. The option based on pre-existing contracts is wrong because the bar applies in contract too.

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