Page 272 - DMGT303_BANKING_AND_INSURANCE

Unit 13: General Insurance

4. The policies must be in force at the time of loss. Notes
5. The policies must be legally enforceable.

Proximate Cause/Causa Proxima

It is very important to state the perils against which the insurance cover is granted. The perils
have to be specially mentioned in the insurance policy. When the actual loss takes place the
insured has to prove that the loss has occurred due to the insured peril and against not expressly
or impliedly excluded peril.

If stocks are stolen, the loss will not be indemnified under the fire policy, as burglary is not the
insured peril. If a bomb dropped by an enemy in war burns stocks, then the loss is caused by war,
which is an excluded peril under standard fire policy.
Hence the insurance company is not liable to pay a loss caused by an uninsured peril or an
excluded peril.

In actual situations a loss may be caused by more than one cause. The difficulty arises in
determining the loss which was the nearest to the loss. The insurance companies indemnify the
proximate cause of loss and not the remote cause.

Example: To distinguish 'proximate cause' and 'remote cause'.

1. A person insured under a personal accident policy went out hunting and met with an
accident. Due to shock and weakness, he was unable to walk, he fell down on the ground.
Whilst lying on the wet ground he contracted cold which developed into pneumonia
which caused his death. The court held that the proximate cause of death was the original
accident and pneumonia (a disease which is not covered under the policy) only a remote
cause. Hence the claim was paid.
2. An insured suffered accidental injuries and was taken to hospital. While undergoing
treatment he contracted an infectious disease which caused his death. In this case, the court
gave the ruling that the 'proximate cause' of death was the disease and the original accident
only a 'remote cause'. Hence, the claim was not payable under a personal accident policy.

13.2 Origin and Growth of the General Insurance Industry before and
after Liberalization

Prior to the nationalization, 107 insurance companies of which 63 were domestic companies and
44 foreign companies - transacted general insurance business in India, but the type of insurance
covers were very limited. After nationalization of the general insurance sector, this business
came to be transacted by GIC through its 4 subsidiaries and at present it has more than 160
products/policies available in the market. The four subsidiaries of GIC are: National Insurance
Co. Ltd. (Kolkata), New India Assurance Co. Ltd. (Mumbai), Oriental Insurance Co. Ltd. (Delhi)
and United India Insurance Co. Ltd. (Chennai).
With the opening up of the insurance sector in January 2000 to private insurers again, it is hoped
that insurers will design more products on need basis. The coverage of general insurance will
increase. The public at large has also welcomed this.

As the figure above shows GIC did general insurance business assisted by its four subsidiaries
with the help of actuaries, surveyors and agents. Customers have been very much satisfied with
the services of GIC and its subsidiaries.

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