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V Insurance is a contract between two parties

whereby one party called insurer undertakes
in exchange for a fixed sum called premium,
to pay the other party in case of happening of
a certain event.
V itmost good faith
V Proximate cause
V Insurable interest
V Indemnity
V Contribution
V Subrogation
V
very contract of insurance is a contract
Dz



À, one which requires atmost
good faith on the part of both the insurer &
insured.

V ood faith Ȃ 3





V ood faith Ȃ Declaration, Concealment &

warranty.
Duty of disclosure operates at

V Inception - until the date cover is confirmed

by the Insurers.
V Renewal - up to the renewal date
V Mid term alterations - until the Insurer
confirm cover in respect of the alterations

g: Age of a person, health details, status of a

building.
V ›on disclosure or concealment
V Innocent misrepresentation
V Intentional misrepresentation

Any one of the above allows for declaration

of the contract void.

g: The Highlands insurance Vs Continental co.

V An insurer will only be liable to pay a claim
under an insurance contract if the loss that
gives rise to the claim was proximately
caused by an insured peril .
V This means that the loss must be directly
attributed to an insured peril without any
break in the chain of causation.
V Compensation will only be paid, if the risk
that is covered in the policy occurs.
V
xample 1: if the insurance policy states that
the house is covered for fire and theft and it is
totally or partially destroyed by a flood no
compensation will be paid.

xample 2:
V An insured sustained an accident while hunting.
Due to shock and weakness, he was unable to
walk and whilst lying on wet ground, he
contracted cold which developed into
pneumonia causing death ultimately.
V The proximate cause was considered to be the
accident and not the pneumonia, the disease,
which was only a remote cause. The claim was
payable under personal accident policy.
V Insurable interest exists when an insured person derives
a financial or other kind of benefit from the continuous
existence of the insured object.

V A person has an insurable interest in something when

loss-of or damage-to that thing would cause the person
to suffer a financial loss or other kind of loss.

V Basic requirement for all type of insurance is the person

who buys the policy must have an insurable interest in
the subject of the insurance.
V
xample : fire damage of house.
V undamental principle of insurance.
V The principle of Indemnity states that under
the policy of insurance, the insured has to be
placed after the loss in the same financial
position in which he was immediately before
the loss.
V Signifies that insured who suffers a loss must
be paid to the extend of his loss and not to be
allowed to make profit or loss out of it.
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V Claim cant exceed the actual loss
V Insurer has the leverage in choosing the
method of reimbursement.
V
xample :If you have a four year old car and it
is stolen, the insurance company will only
give you the current value of the car and not
the cost of the car when it was new.

V
qual ownership of a property.
V The principle of contribution allows the
insured to make a claim against one insurer
who then has the right to call on any other
insurers liable for the loss to share the claim
payment.
V ›ormally the insurers seek to control
additional insurances at the proposal stage
itself.
V Does not apply to personal accident policies
V
xample:
ire insurance on a building for $1million from
two different carriers.
V Subrogation means the insurance company
has the legal right to claim compensation
from any other party that caused the
accident.
V Subrogation is the substitution
V Does not apply to personal insurance.
V If the assured got certain compensation from
third party before being fully indemnified by
the insurer can pay only the balance of the
loss.
V
xample: A client makes a claim under his/her own
comprehensive policy for damage done to his
vehicle by another person. His/her insurance
company pay the claim but persue the negligent
third party for the cost of the claim they have paid.
V These are the basic principles of insurance.

V It is common for both general insurance and

life insurance.

V Any insurance contract is based on these

principles only.