Insurance is a contract in which one party (insured) pay a some of the money on regular basis (premium) to the other party (insurer) who promises to reimburse the first party for certain kinds of losses (illness, property damage, disability or death) if they occur.
Insurance law falls into three major categories.
- First, the insurance company will hire lawyers to represent the insured in the event it is sued for something related to the insurance contract. They are known as Insurance defense lawyers, For example, an automobile insurance company will hire an attorney to represent the insured driver when sued for causing injury to another person (third-party claim).
- The second category of insurance law helps insured people determine when an insurance company must pay a claim.
- Thirdly insurance company hires an attorney to make sure the company complies with all the laws and regulations.
The government also seems some kind of insurance like social security disability, worker’s compensation and unemployment insurance. However, the terms insurance law refers to the law that revolves around private insurance. The most common types of insurance are life insurance, motor vehicle insurance, home owner’s insurance, and title insurance, etc.
The insurance transfers the risk of loss to the other party to the contract in exchange for a fee called premium. Insurance law and regulations manage and control how contracts are made and enforced. They manage the offering, buying, selling, and claim processes. In India, this regulatory body is known as the Insurance Regulatory and Development Authority (IRDA).
IRDA was constituted under IRDA act 1999 passed by Govt. of India passed in parliament. It is a 10 member body including a chairman, five full time and four part-time members appointed by Govt. of India.
The important principles of insurance are
- A contract in Nature:- An insurance contract comes into existence when one party makes an offer or proposal of a contract and the other party accepts the proposal. The person entering into a contract should enter with his free consent.
- Principle of utmost good faith: – Under this insurance contract, both the parties should have faith in each other. On part of the insured, it is the duty of the client to disclose all the fact to the insurance company. Any fraud or misrepresentation of facts can result in cancellation of the contract.
- Insurable interest:– Under this principle, the insured must have interest in the subject matter of the insurance Absence of such interest makes the contract null and void and the insurance company in such case will not issue the policy. The insurable interest must exist at the time of purchase of the insurance. For example, a creditor has an insurable interest in the life of a debtor. For example, any person is considered to have an unlimited interest in the life of his spouses.
- Principle of indemnity:– This principle states that an insured may not be compensated by the insurance company for any amount exceeding the insured’s economic loss. This principle is observed more strictly in properly insurance than life insurance.
The purpose of this principle is to bring back the insured to the same financial position that existed before the loss or damage occurred.
- Principle of subrogation:– The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. It allows the insurer to follow legal recourse to recover the amount of loss. For example, if you get inquired in a road accident, due to reckless driving of a third party, the insurance will compensate your loss and will see the third party to recover the money paid as a claim to you.
- Double Insurance: – Double insurance means insurance of the same subject matter with two different companies or with the same company under two different policies. Double insurance policy is adopted where the financial position of the insurer is doubtful. The insured cannot recover more than the actual loss and cannot claim the whole amount from both the companies.
- Principle of proximate cause:– It means the “nearest cause” or “direct cause”. This principle is applicable when the loss is a result of two or more causes. The proximate cause means that the most dominant and most effective cause of loss is considered. This method is often used when there are a series of causes of damage or loss.
Insurance law regulates the following aspects
- Whether the insurance company has enough capital to have a sound and secure business.
- What premiums a company can charge for a policy.
- Requirements of inclusions in an insurance policy.
- Measures to ensure that insurance companies engage in fair competition without price fixing.
- Penalties for bad practices
- When people must buy insurance like auto insurance minimums in some states.
Consumers rely on insurance in order to protect their financial assets. Both insurance companies and consumer rely on the other party to be fair and honest. Attorney’ facilitates the process, but they also work in compliance with the norms and regulation.
For attorneys in this field, the insurance law may provide a stable career that allows them to use their skills in order to advance their client interest and contribute to this billion dollar industry.