Insurance Law in Brief

Many people's lives touch upon an insurance policy in one way or another. Sometimes, you do not realise that insurance policies are currently covering the place where you work, live or even the vehicle or journey you are travelling.

For instance, the car you are travelling on is likely to be insured by a motor insurance policy. In most countries, motor insurance is compulsory. Then, you may have purchased a personal accident policy to cover yourself against death or personal injuries arising out of an accident. Assuming you were travelling on that car pursuant to your employer's instructions, your employer may have also purchased a group employee's insurance policy to cover their employees who were injured whilst working. The list goes on and you get the picture.

What exactly is an insurance and why is law involved? Well, insurance is essentially a contract. In a nutshell, t is a contract between the insurance company and the policy holder wherein in consideration of the payment of an agreed premium by the policy holder, the insurance company promises to do indemnify the policy holder and / or any insured person/s named in the insurance policy against the insured perils. Therefore, you are essentially looking at a legally binding promise between the insurer and the policy holder with all the terms reduced into writing in the form of the insurance policy.

The salient features of an insurance policy would be firstly, the parties to the insurance policy namely, the insurance company and the policy holder. The policy holder may or may not be the insured person. For instance, the policy holder could be the employer (and he pays for the insurance premium) but the insured person is the employee. The beneficiary under the insurance policy could be either the policy holder, the insured person or another person altogether depending on the parties' agreement.

Next, there must be consideration moving from one party to another. Here, there must be payment of an agreed premium before the insurance company is obliged to fulfil its promises under the insurance policy. That is why in almost all insurance policies, you will find that it starts with a preamble which declares that "In consideration of the payment of premium by the Policy Holder, the Company hereby will do … this and that".

Just like any other contracts, the insurance policy, which is a contract or agreement, contains terms and conditions governing the rights and obligations of the parties to the insurance policy. Any dispute arising out of the insurance policy shall have to be evaluated against the terms and conditions to ascertain how the issues arising should be resolved. These terms and conditions may not usually be amended unless agreed by the parties to the insurance policy.

Apart from the above, there must also be an insurable interest i.e. there must be something which the insurance company can insure against. This can be in the form of legal interest or beneficial interest belonging to the policy holder. Unless there is legal interest or beneficial interest belonging to the policy holder, there is no insurable interest and any insurance policy issued would be rendered void.

Another important feature of insurance policies would be the duty of disclosure. Contracts of insurance are called contracts uberrimae fidei i.e. they are contracts of good faith wherein parties enter with a duty to exercise the utmost good faith and to make full disclosure of all material facts within their knowledge to the other party. Hence, most insurance policies would require that the prospective policy holder complete a proposal form and sign off with a declaration that he has disclosed all material facts known to him which may influence the insurance company's decision whether to accept the risk or not.