LECTURE 9 INSURANCE LAW Flashcards

1
Q

ECONOMIC FUNCTION OF INSURANCE ​

A

The concept of risk is central to insurance.​

Risk is the possibility that a peril or danger may occur and cause harm to the person / property exposed.​

It is therefore necessary to make contingencies to mitigate such risk in the event that it occurs.​

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2
Q

NSURANCE:​

A

Insurance is a means of transferring risk by way of contract.​

The risk is transferred because the insurance contract stipulates that the insurer will indemnify or perform a benefit to an insured if a defined risk occurs.​

In exchange for the transfer of the risk, the insured must pay an amount (premium) to the insurer.​

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3
Q

BRANCHES OF INSURANCE LAW

A

Insurance contract law:​
Insurance policy is the basis of relationship between insurer and insured.​

The regulation of insurers:​
Insurers must be registered with supervisory body: The Financial Services Board & FAIS Act​

Intermediaries:​
Intermediaries ordinarily intercede between insurers and the insured (brokers).​
Distinction between representatives and independent intermediaries.​

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4
Q

DIFFERENT TYPES OF INSURANCE:

A

Interest protected​
Indemnity insurance​
Non-indemnity insurance​

Duration​
Long-term insurance​
Short-term insurance​

Peril, or event, insured against​
Fire, death, theft, political instability, motor vehicle accidents​

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5
Q

ESSENTIALS OF AN INSURANCE CONTRACT

A

Insurer must undertake to pay or perform some benefit…​

in exchange for an undertaking by the insured to pay a premium…​

on the happening of an uncertain or unplanned future event…​

which performance will indemnify the insured or make-up for the materialisation of the risk. ​

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6
Q

FORMATION OF AN INSURANCE CONTRACT:​

A

Agreement (Policy): ​
Insurance is a form of contract, therefore there must be an agreement.​

There must be consensus irrespective of whether agreement concluded by completing proposal forms or by direct marketing.​

The contract must not be illegal, void or unenforceable.​

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7
Q

INSURABLE INTEREST:​

A

Indemnity insurance:​
If he or she stands to lose something of appreciable commercial value if the object is harmed.​
(e.g. person insures a vehicle)​

Non-indemnity insurance:​
Interests protected does not have commercial value. Amount for which insurer will be liable is established by agreement.​
(e.g. life insurance

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8
Q

INSURANCE CLAIMS

A

To determine if insured has a claim – the following must be answered:​
Is the risk covered by the policy?​
Are there any limitations on the insurer’s liability?​
Is the insurer’s liability excluded?​
Does the risk fall within the dimensions of described risk?​
Was the particular peril, in respect of which insurance was ​
undertaken, the cause of the harm?

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9
Q

An insurance policy will usually state:

A

When and how the insurer should be notified of a claim.​

When and how a claim should be lodged & processed.​

If the claim is refused or repudiated, the time within which legal proceedings must be instituted.​

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10
Q

Rejection / Repudiation:

A

Refers to the case where the insurer declines an insured’s claim (fraud, fault, waiting period etc.) ​

Insurer rejects or disputes claim.​

Written notice to insured.​

Insured given at least 90 days to make representations.​

Insured to institute proceedings within time specified.​

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11
Q

SUBROGATION:​

A

The doctrine of subrogation allows an insurer to sue in the name of the insured. ​

The insurer obtains the right to make the same claim for damages as the insured could have made against the wrongdoer.​

Reasons - Insurer pays out insured & is thus entitled to recoup what’s been paid;​
- Prevent insured from receiving double satisfaction for loss.​

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12
Q

CESSION

A

Cession refers to the transfer of a right to performance by one party to another.​

Insurer entitled to take cession of the insured’s rights against a third party who caused the risk/loss.​

Insurer will thus be the creditor and will claim from 3rd party in its own name.​

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13
Q

CONTRIBUTION:

A

Occurs where there is a spreading of risk…​

The same risk is insured by more than one insurer (in proportion).​

Where risk materializes and loss occurs, each insurer has to contribute pro rata.​

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14
Q

FINANCIAL ADVISORY AND INTERMEDIARY SERVICES ACT 37 OF 2002 (FAIS ACT):​

A

FAIS Act regulates the rendering of financial advice & certain intermediary services to clients.​

Sec 8A: financial advisors to be fit & proper persons;​

Sec 18: financial service provider to keep record of advice provided (5yrs) which record must be furnished to client upon request;​

Sec 20 - 32: provide for the Ombud for Financial Services Providers (functions, powers, appointment, penalties); ​

Sec 36: offences (contravening Act) and penalties;​

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