Page 31 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 19

into, the insured must give the insurer a fair presentation of the risk. The duty of fair
presentation of the risk replaces the insured’s pre-contractual duty of disclosure. The above
Act also modifies the remedy available in case of a breach of fair presentation of risk and
segregates it from the duty of good faith. A substantial change has been made in the warranty
and representations clause. Representations made by the consumers and non-consumers are
no longer converted into warranty (2012 Act and 2015 Act). Under the MI Act 1906 and
common law, in the event of a breach of warranty - the policy and the contract are used to
terminate automatically. According to the 2015 Act, ‘Any rule of law that breach of a
warranty (express or implied) in a contract of insurance results in the discharge of the insurer’s
liability under the contract is abolished’. The Act further specifies that ‘an insurer has no
liability under a contract of insurance in respect of any loss occurring, or attributable to
something happening, after a warranty (express or implied) in the contract has been breached
but before the breach has been remedied’. In other words, the policy cover gets suspended
during the breach period. The policy gets activated once the breach is remedied (assuming
the breach can be remedied). The Act categorically mentions that ‘the insurer’s liability
does not affect the liability of the insurer in respect of losses occurring, or attributable to
something happening - (a) before the breach of warranty, or (b) if the breach can be remedied,
after it has been remedied’. The IA 2015 has considerably mitigated the debilitating effect of
warranty as existed before the enactment of IA 2015. Accordingly, in the MI Act 1906,
Section 33 –’ nature of breach’ and Section 34 –’ when breach is excused’ are omitted.

The Indian lawmakers must examine the various customer-centric provisions in the above
two acts to make insurance laws relevant and the insurance contract more certain. The
principles of ‘contract certainty’ could be codified to adequately protect Policy Holders’
interests, catering to its prudential mechanism that is fundamentally based upon ‘Contract
Certainty’ (pre-sale) and ‘Effective dispute resolution mechanisms’ (post-sales servicing),
with Fraud Management standing guard at both ends. Contract Certainty is also
accomplished by aligning with fundamental insurance principles like insurable interest,
good faith’ proximity cause’, ‘contribution’, ‘subrogation’, and Indemnity. What is required
is a new India code for laws relating to insurance contracts. The Marine Insurance Act 1963
in India could be converted to a new “The Indian Insurance Act – India Code for Laws
relating to insurance contracts” on the lines of the UK Acts.

4. Public Liability (Amendment) Act, 2022

The Act, after its enactment in the year 1991 following the Bhopal disaster, hasn’t been
updated/changed. For instance, arising out of an incident as defined in the Act, the
compensation payable for fatal injuries is just Rs 25,000. The Act needs to be recast and
realigned to reflect societal obligations to better protect the Indian consumers should a
similar incident happen now.

5. Ombudsman Scheme - Grievance Redressal Mechanism for ‘Personal Line’
Insurances / Redressal of Public Grievances Rules, 1998 (RPG Rules)

The Insurance Ombudsman Rules, 2017 - The objects of these Rules are to resolve all