Insurance & its Concepts

The PRINCIPLES of Insurance include,

1. UGF – Utmost Good Faith: A duty to disclose accurately & fully ALL material facts whether requested or not. It is a Reciprocal Duty;

2. II – Insurable Interest arises out of LEGAL/FINANCIAL relationship; The striking feature being,

- BENEFIT (from existence) from safety, well being, freedom from liability;

- PREJUDICED (by loss) by damage or existence of liability;

LI: Uberrima Fidei i.e., Utmost Good Faith & Insurable Interest;

GI: UGF + II + Indemnity & Proximate clause.

TIME WHEN INSURABLE INTEREST SHOULD BE PRESENT:

I. FIRE & MISCELLANEOUS INSURANCE: EXIST @ the time of taking policy; CONTINUE during the currency (period) of policy; EXIST @ the time of loss for a valid claim;

II. MARINE CARGO INSURANCE: ONLY @ the time of loss.

III. MARINE HULL & MOTOR INSURANCE: EXIST @ the time of taking policy; EXIST @ time of loss.

INDEMNITY: To place the insured after a loss in the Same Financial Position as far as possible as he occupied immediately before loss, Neither better Nor worse. The measurement of Indemnity based on Intrinsic Market Value of property @ the time & place of damage/loss;

SUBROGATION – Corollary to Indemnity: "The transfer of rights & remedies of insured to insurer who has indemnified the insured in respect of loss". Insured does not receive more than actual amount of loss & any recovery effected from III-party goes to insurer.

CONTRIBUTION – Corollary to Indemnity: NOT for personal/accident insurance. Using "several insurance", to make profit out of loss. It is the right of insurers who have paid a loss under a policy, to recover a proportionate amount from other insurers, who are liable for the same loss. The pre-requisites include,

1. Common Peril (all policies) 2. Common interest & insured

3. Policy in force 4. Policy is legally enforceable.

PROXIMATE CAUSE: To provide indemnity for such losses as are caused by insured perils. The loss may be the result of two or more causes acting simultaneously or one after other; the most important, the most effective, the most powerful cause that has brought the loss. Otherwise, it will be a remote cause

POLICY CONTRACT:

A Policy Document as an evidence of contract. The policy document has,

1. Preamble: Proposal & declaration form part of policy.

WARRANTY = Truth of Statement.

2. Operative Clause: Mutual Obligation; Pay Premium & Pay Benefits.

3. Provisio: Subject to conditions (printed on back of the policy).

4. Schedule: Identifies the proposal referred in Preamble. Have contents like FPR.

5. Attestation: @ the end of first page – the signature & date.

6. Condition & Privileges: Explanatory/Restrictive/Privileges/Benefits.

RIDERS – Additional Covers: Helps to increase the clarity of policy; It defines the fate of policy in case of certain defined circumstance.

NOMINATION: (advisable)

1. Nominee does derive a right to sue only after Policy Proceeds become payable.

2. One can change nominee without consulting previous nominee/insurer.

3. Liable to legal heirs of deceased having proof of right to claim.

GUARANTEES:

1. Guarantee additions: Sum Assured get enhanced each year.
2. Guaranteed Surrender Value (SV): On payment of premium for 3 full years, Minimum SV = 30%[Premium paid (-) 1 ^st year Premium (+) Bonus additions].

ASSIGNMENT = Legal Transference – "passing interest in policy": Assignment cannot be altered; Assignee has the right to sue only after giving Notice to Insurer & receiving acknowledgement. It may be,

1. By endorsing Policy Document which is exempt from Stamp duty;
2. By separate Assignment Deed which is liable to be stamped.

ASSIGNMENT OF,

SNO.	ASSIGNMENT OF	CONDITION
1.	Fire & Marine Insurance	ONLY with the consent of Insurer & subject to conditions.
2.	Marine Cargo	Freely assignable.
3.	Marine Hill or Motor Policy	With the Consent of Insurers.

I think this will help Company Secretary, CS Final, friends when preparing for their Banking & Insurance paper (BILP).