Chapter 4 - Insurable Interest

Question 1

Insurable interest

Answer 1

Legal right to insure, arising from a financial relationship recognised by law between the insured and the subject-matter.
Features:
• Subject-matter of insurance – item or event insured
• Subject-matter of contract – financial interest in the subject-matter of insurance (defined in Castellain v. Preston (1883))
• Legal relationship
• Financial value
• Insurers’ insurable interest – they can reinsure due to having insurable interest

Question 2

Timing of insurable interest

Answer 2

Life insurance contracts – insurable interest must exist at inception but need not exist at time of loss .
Marine insurance contracts – insurable interest must exist at time of loss but need not exist at inception, provided that there is reasonable expectation of interest.
General insurance contracts – insurable interest must exist at inception and time of loss, though some connection at inception may be sufficient.

Question 3

Insurable interest bills

Answer 3

People used to have policies on another person’s life as a form of wager. Life Assurance Act (1774) made this illegal
Marine Insurance Act (1909) made holding a policy with no insurable interest a criminal offence
Gaming Act (1845) extended beyond life insurance and made all contracts of gambling or wagering null and void
Insurable Interest Bill (2016) reformed insurable interest by separating into:
•	Life-related – void unless proposer has insurable interest in the individual at inception
•	Non-life-related – void unless proposer has insurable interest or reasonable prospect of acquiring such interest of subject matter at inception