Insurance Flashcards
What is a possible working definition of ‘insurance’?
“Insurance exists to protect against unforeseen loss or damage. It takes the form of a contract where one person or business (the insured) agrees to transfer the risk that a range of unforeseen events may happen to a business (an insurer). In return, the insured pays the insurer a fee (a premium). This is formalized in a legal contract (a policy).
If an unforeseen event covered by the policy causes loss or damage to the insured or their property, the insurer pays for that loss or damage.
You can insure yourself, your property, and your legal liabilities. ICANZ
What are the main types of insurance?
One of the criteria is the “object” of the risk:
(risk to the natural) person:
(risk to) life, or “life insurance”,
(risk to) health, or “health insurance”,
(risk to) property:
(risk to) property and similar (including proprietary
and non-proprietary interests), such as “house and
contents insurance”,
(risk of) liability, cover typical of “car insurance”,
What are the main sources of insurance law in New Zealand?
There are three main sources of insurance law in New Zealand:
statute;
case law; and
voluntary codes
There is also soft law (other than voluntary codes) that the inhouse lawyer should take into account
What statutes govern the ‘participants’ in insurance law?
Insurance Intermediaries Act 1994 (“IIA”);
Financial Advisers Act 2008 (“FAA”);
Insurance (Prudential Supervision) Act 2010 (“IPSA”);
Financial Markets Conduct Act 2013 (“FMCA”);
Financial Services Legislation Amendment Act 2019 (“FSLAA”)
What statutes govern the ‘products’ in the insurance industry?
Marine Insurance Act 1908 (“MIA”);
Life Insurance Act 1908 (“LIA”);
Law Reform Act 1936 (“LRA”);
Insurance Law Reform Act 1977 (“ILRA 77”);
Insurance Law Reform Act 1985 (“ILRA 85”);
Consumer Guarantees Act 1993 (“CGA”);
Contract and Commercial Law Act 2017 (“CCLA”)
What are the main ‘voluntary codes’ in New Zealand?
Financial Services Council (FSC) Code of Conduct, which applies to participants in the insurance industry generally, as participants in the broader financial-services industry;
Health Insurance Industry Code, which applies to health insurers;
Fair Insurance Code, which applies to property and liability insurers; and
The Insurance Brokers Association of New Zealand (IBANZ) Code of Professional Conduct, which applies to insurance brokers
What is a source of ‘soft law’ in New Zealand?
One source of soft law is the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (“ICPS”)
What does the ICPS do?
The ICPs are often more detailed than formal sources of law. Using the ICPs may help the insurer:
1) “directly” by minimizing or avoiding complaints and litigation; and
2) “indirectly” by: minimizing the resources that the insurer uses to manage complaints and litigation; and
preventing the authorities from intervening in the market
What section of IPSA gives us the definition of ‘insurance’?
IPSA, s 7:
How should we look at an insurance relationship?
The insurance relationship is a contract. Therefore, there is an insurance contract if and only if there is:
- capacity;*
- an offer to be:
- policyholder, made by the customer (who, in insurance practice, is ordinarily the one to make the offer); or
- insurer, made by the insurer;
- acceptance;
- consideration;
- intention to be bound (or “to create legal relations”); and
- certainty of subject matter
What is the 7th common law element of an insurance contract?
There is a common-law rule that there is an insurance contract if and only if there is a seventh element: an insurable interest (Prudential Insurance Co v Commissioners of Inland Revenue)
Do we need this common law element of an “insurable interest” in New Zealand for an insurance relationship to be considered a contract?
In New Zealand, there is statute law providing that generally, there is an insurance contract even if there is no insurable interest (ILRA 85, ss 6 and 7(1)). There is similar statute law in Australia (Insurance Contracts Act (Cth), ss 16 to 18)
Is this law (insurable interest) the same in other jurisdictions?
There is no such law in England or Canada, even in Quebec, whose private law belongs to the civil-law tradition (and whose public law, including criminal law, belongs to the common-law tradition). Therefore, in England and Canada, there is an insurance contract if and only if there is an insurable interest
What is a possible definition of an ‘insurable interest’?
1) an interest:
a) held by the customer in “the event upon which
the money is to be paid”;
b) arising because the event “shall primâ facie be
an adverse event” (Prudential Insurance Co v
Commissioners of Inland Revenue)
2) an interest in the object of the risk;
3) “an interest in the subject-matter of the [insurance] contract” (Insurance Contracts Act (Cth) 1984, s 16)
Why do we not need this common law element of an ‘insurable interest’ for an insurance relationship to be considered a contract?
Federal Australian Contracts Act: Insurance Contracts Bill 1984: Explanatory Memorandum (1984) (Cth) at [43]:
based on imprecise drafting and historical accident rather than on the implementation of any clear legislative policy. So far as contracts of indemnity are concerned, there is no good reason for its retention since the nature of the contract prevents recovery unless an actual loss has occurred. Where non-indemnity insurance is concerned, the amounts payable are, in fact, usually related, either directly or indirectly, to the insured’s loss. In consumer credit insurance, for example, the amount payable is related to the amount of the debt. Similarly, payments for disability under a personal accident policy are normally fixed at an amount to compensate the insured for his[/her] loss of income”
