QUESTION 1

Insurance is needed to protect business and personal assets against losses due to claims filed
against the business or due to property damage caused by people or natural perils. All
business are exposed to risks such as accidents, burglary, fire, loss of goods in transit, injury
to workmen and other risks to their property and operations.

In light of the above, explain the concept of insurance, the nature of contract of insurance and
the types of insurance in reference to the Financial Services Act 2013.

ANSWER:

The terms for insurance: A form of protection or compensation to persons or

business against any loss suffered due to fire, thefts, accident, death or personal
injuries.

Parties that involved in this insurance contract:

Insured
Insurer

There is no validity of a contract if there is no consideration, which is the act or

promise offered by one party and accepted by the other as the price of his promise. In
Insurance contracts the consideration is the premium that the Insured pays to the
Insurer as the price of the promise that the Insurer has made that he shall indemnify
the insured. Hence premium payment is the consideration on part of the insured and
the promise to indemnify is the consideration on part of the Insurer.

Insurance classified into 2 types under Section 5 of FSA 2013:

a. Life business
- Policy that involved with personal accident, disease or sickness.
b. General business
- Depending loss of particular event.

Under the nature of contract of insurance explains:

Contracts of Indemnity: where the insured is indemnified against

unforeseeable loss or damage which may or may not occur. Example; damage
to property by fire or loss by buglary.
- In the case, Newfield Peninsula Malaysia Inc v The Owners of the Ship or
Vessel Tanjung Pinang 1

Insurable Interest: the insured has to have an insurable interest. Not all
risks can be insured. A person is said to have an insurable interest in a
property if he will suffer loss in the event of the property being destroyed.
Example; the owner of a car has an insurable interest in the car since he
would suffer a monetary loss if the car meets with an accident.
- Case: Macaura v Nothern Assurance Co Ltd (1925)

Renewal of the Policy: before the expiration, the insurer will send the
insured a renewal notice, usually 28 days prior to the policy lapsing. The
renewal notice is an offer by the insurer to the insured, with acceptance
taking place generally on payment of the premium.
- Case: Strickland v Turner (1852)
 Utmost Good Faith: insurance contract require the contracting parties to
disclose to each other all information which would influence either partys
decision to enter into the contract, regardless of whether such information
was requested or not. The contract are based on mutual trust and confidence
between the Insured and the Insurer.
- Case: Goh Chooi Leng v Public Life Assurance Co Ltd (1964)