III IC-85 - Subject Content: Principles, Policy Lifecycle and Regulation
IC-85 is an Insurance Institute of India paper, and the official source does not itemise its units, so marks spread across the whole subject area. Questions cluster around the legal principles that decide whether a loss is payable, the policy lifecycle from proposal to claim, and the Indian regulatory framework that governs insurers and intermediaries.
Principles that decide liability
- Insurable interest - must exist at inception for life insurance; at the time of loss for property and liability covers.
- Utmost good faith - every material fact must be disclosed; non-disclosure or misrepresentation makes the contract voidable at the insurer's option.
- Indemnity - property and liability policies restore the pre-loss financial position; they never create profit.
- Subrogation and contribution - corollaries of indemnity; subrogation arises only after the insurer has paid, while contribution apportions a loss between concurrent policies covering the same interest.
- Proximate cause - the dominant, effective cause governs cover, not the last event in the chain.
Policy lifecycle and claims
Proposal → underwriting → acceptance and premium → schedule, conditions, warranties, exclusions → endorsements → renewal → claim. On a claim: intimation, appointment of a licensed surveyor where the loss exceeds the regulatory threshold, assessment, then settlement or reasoned repudiation.
Regulation
Insurance Act 1938; IRDA Act 1999 as amended by the Insurance Laws (Amendment) Act 2015; IRDAI product and intermediary regulations; grievance escalation from the insurer's Grievance Redressal Officer to IRDAI's IGMS, then the Insurance Ombudsman under the 2017 Rules.
Worked example
A fire policy covering "fire, lightning, explosion": lightning strikes the roof and the fire brigade's water damages stock. Proximate cause is the insured peril, so the water damage is payable as an inseparable consequence. Had an excluded earthquake toppled the wall, the excluded peril is proximate and the claim fails even though a fire followed.
Traps that cost marks
- Applying the life-insurance insurable-interest rule to a property loss.
- Claiming subrogation before payment has been made.
- Assuming "all risks" is unlimited - wear and tear, inherent vice, war and nuclear risks remain standard exclusions.
- Confusing a warranty (strict, condition precedent) with a mere representation.