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INSURANCE > Midterm insurance > Flashcards

Midterm insurance Flashcards

1
Q

what is insurance ?

A

A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another for loss, damage or liability arising from an unknown or contingent event

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2
Q

test of insurance

A

test is whenever the assumption of risk and the indemnification of loss is the principal object and purpose of the contract.

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3
Q

when is a suretyship an insurance?

A

 It shall be deemed to be an insurance contract only if made by a surety who or which, as such, is doing an insurance business.

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4
Q

what is a suretyship

A

 A contract of suretyship is an agreement whereby one binds himself solidarily with the principal debtor

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5
Q

HMO vs Insurance (risk)

A

HMOs tackle business risk, while insurance contracts have the risk of not getting the equivalent of investment (actuarial/pure).

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6
Q

HMO

A

HEATH MAINTENANCE ORGANIZATION , which is a juridical entity engaged in giving reduced medical fees for a specific period of time.

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7
Q

Doing an insurance business/transacting an insurance business (Sec. 2)

A
  1. Making or proposing to make, as insurer, any insurance contract;
  2. Making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;
  3. Doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of the Insurance Code; and
  4. Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of the Insurance Code.
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8
Q

Mutual Insurance Companies

A

 A company owned by policyholders designed to promote the welfare of its members and the money collected from among them is solely for their own protection

 Considered as doing insurance business

 Members are both insurers and insured

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9
Q

Are Mutual Insurance Companies “doing or transacting in insurance business”?

A

Yes. Under RA 10607, mutual insurance companies are now mandated as within the definition, and shall be converted to stock corporations.

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10
Q

Are HMOs insurance?

A

Principal object and purpose test:

HMOs are not in the insurance business. If the assumption or risk and indemnification of loss are the principal object of the organization, it is insurance business.

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11
Q

Characteristics of a contract of insurance

A

(AUPCUE)

  1. Aleatory- where one of the parties, or both reciprocally binds themselves to give or do something, in an uncertain time due to an uncertain event
  2. Unilateral- Payment of premium is not obligatory, but gives effect to the contract.
  3. Personal- Personal circumstances are considered prior to the acceptance
  4. Consensual- Contract is perfected by mere consent of the parties, without need of delivery or formality.
  5. Uberrimae Fidae- The contract is made with good faith, without any material concealment or misrepresentation
  6. Executory and Conditional- The insurer has to comply upon the happening of the condition
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12
Q

Insurance as a Risk Distributing Device

A

Insurance contracts serve to distribute the risk of economic loss, damage or liability among as many as possible of those who are subject to the same kind of risk

Hence, each member contributes to a small degree toward compensation for losses suffered by any member of the group.

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13
Q

Contract of Adhesion or Fine Print Rule

A

Insurance contracts are already presented to the insured in its printed form on a “take it or leave it” basis. The insured merely has to agree to its terms. Such contracts of adhesion are valid.

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14
Q

COMMUTATIVE?

A

COMMUTATIVE because what the insured paid for is the equivalent of what he got which is the promise of the insurer to indemnify the insured in case of loss

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15
Q

Every person has an insurable interest in the life and health:

A

“(a) Of himself, of his spouse and of his children;
“(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
“(c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and
“(d) Of any person upon whose life any estate or interest vested in him depends.

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16
Q

Are insurance contracts, contracts of indemnity in all cases?

A

No. Only property insurance is deemed contracts of indemnity, as actual damage is only the amount to be indemnified.

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17
Q

Requisites of Insurance

A
  1. Consent of the contracting parties – meeting of mind insurer and insured re: insurable interest
  2. Object certain which is the subject matter of the contract
    – assumption of risk
  3. Cause or consideration

Insurer: Consideration is the premium

Insured: Indemnification of loss

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18
Q

(Natural) Elements of an Insurance Contract

A
  1. The insured has an insurable interest
  2. The insured is subject to a risk of loss by the happening of the designated peril
  3. The insurer assumes the risk (assumption of risk)
  4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; (distribution of losses)
  5. In consideration of the insurer’s promise, the insured pays a premium
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19
Q

Pure Risk vs. Speculative Risk

A

Pure Risk – may be assumed; a situation where the possibility is either the person involved will suffer a loss or he will not suffer a loss; loss or no loss

Speculative Risk – may either result in gain or loss; example gambling

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20
Q

Requirements of Insurable Risk

A
  1. There must be a large number of HOMOGENEOUS exposure units;
  2. The ACCIDENT must be accidental and unintentional
  3. The loss must be determinable and MEASURABLE
  4. The loss should not be CATASTROPHIC
  5. The loss must be CALCULABLE
  6. The premium must be ECONOMICALLY feasible
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21
Q

Risk

A
  1. A contingent or unknown event whether past or future
  2. It must damnify the insured or create liability against him
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22
Q

Perfection

A

therefore perfected by mere consent.

Consent is manifested by the meeting of the offer and the acceptance upon the object or the cause which are to constitute the contract

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23
Q

Acceptance

A

acceptance when the insurer approves the application. The insurance contract becomes effective upon payment of first premium, provided there has been an approval of the application

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24
Q

Delay in Acceptance

A

does not constitute acceptance even though the insured has forwarded his first premium with his application

XPN: tort theory

insurance business is imbued with public interest, thus it is the duty of the insurer to act with reasonable promptness in acting on applications submitted to it

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25
Q

Delivery of Policy

A

The delivery can be a proof of the acceptance of the insurer of the offer of the insured.

It is not, however, a pre-requisite of a valid contract of insurance.

Actual manual delivery is not necessary for the validity of the contract. Constructive delivery may be sufficient.

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26
Q

Who are the contracting parties to an Insurance Contract?

A
  1. Insurer;
  2. Insured
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27
Q

Is the beneficiary a party to the Insurance Contract? Are there any exceptions?

A

No, the beneficiary is not a party to the contract

XPN: the beneficiary may be a party to the contract if the beneficiary and the insured is the same person.

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28
Q

INSURED (req)

A
  1. Capacity to contract;

2.Possess an insurable interest in the subject of the insurance;

  1. Must not be a public enemy
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29
Q

ASSURED

A

the person who took out an insurance on former’s life is called the assured.

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30
Q

CONSENT OF SPOUSE

A

 The consent of the spouse is not necessary for the validity of an insurance policy taken out by a married person on his or her life or that of his or her children

xpn: consent is needed if the money used for payment of premium came from the conjugal funds. Sec. 98 of the Family code provides that “neither spouse may donate any community property without the consent of the other.”

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31
Q

MINORS

A

An insurance contract entered into between the minor and an insurance company is voidable.

32
Q

MINORS

A

An insurance contract entered into between the minor and an insurance company is voidable.

33
Q

Effect of Death of owner

A

 Upon death of the original owner, all rights, title and interest in the policy is automatically vested upon the person insured (beneficiary)

34
Q

Who may be insurers?

A

 Partnerships

 Associations

 Corporations

 Professional reinsurer

 Mutual Insurance Companies

 Cooperatives

35
Q

Grounds for disapproval of application

A

 If the refusal will best promote the interest of the people of the Philippines

 If there is evidence that the applicant company is not qualified by the laws of the Philippines to transact business therein

 If the grant of such authority appears to be unjustified on the light of: Economic requirements; The direction, administration, integrity and responsibility of the organizers and administrators, the financial organization and the amount of capital, and Reasonable assurance of the safety of the interests of the policyholders and the public

 The name of the applicant belongs to any other known company transacting a similar business in the Philippines or its name is so similar as to be calculated to mislead the public

36
Q

Prohibited acts

A
  1. To transact in the Philippines BOTH in the business of life and non-life insurance concurrently unless specifically authorized to do so (Sec 193)
  2. To have an EQUITY in an adjustment company; neither shall an adjustment company have an equity in an insurance company
  3. To NEGOTIATE any contract of insurance other than is plainly expressed in the policy or other written contract issued to or to be issued as evidence thereof
  4. To directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employees of the insured, either as an inducement to the making of such insurance or after such insurance has been effected, any REBATE from the premium which is specified in thepolicy, or any special favor or advantage in the dividends or other benefits to accrue thereon
  5. To give or to offer any valuable consideration or INDUCEMENT of any kind, directly or indirectly, which is not specified in such policy or contract of insurance
  6. To make any DISCRIMINATION against any Filipino in the sense that he is given less advantageous rates, dividends or other policy conditions or privileges than are accorded to other nationals because of his race (Sec 370, I.C)
  7. To issue or circulate or case or permit to be issued or circulated any literature, illustration, circular or statement of any sort MISREPRESENTING the terms of any policy issued by any insurance company of the benefits or advantages promised thereby, or any misleading estimate of the dividends or share of surplus to be received thereon
  8. To use any NAME or title of any policy or class of policies misrepresenting the true nature thereof
  9. To make any misleading representation or incomplete comparison of policies to any person insured in such company for the purpose of inducing or tending to induce such person to LAPSE, forfeit, or surrender his said insurance (Sec 371, I.C)
  10. To commit UNSAFE business practices or acts (I.C, Circular Letter 2017-59)
37
Q

Beneficiary

A

No other party can recover the proceeds other than the beneficiary.

 The beneficiary may be a third person. Unless he is the insured himself, the beneficiary is not one of the contracting parties.

38
Q

A beneficiary may be:

A
  • A party to the contract of insurance,
  • third person who is not a contracting party
39
Q

What if there is no beneficiary?

A

the laws of succession are applicable and the proceeds shall form part of the estate of the deceased insured.

40
Q

OG owner and beneficiary DIE AT THE SAME TIME

A

rules of survivorship applies

  1. If they are heirs to each other (Article 43, NCC)
     whoever alleges the death of one prior to the other shall prove the same

 in the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other

  1. If they are NOT heirs to each other (Rule 131 Section 3(jj) ROC)
     Premise: it is not shown who died first, and there are no particular circumstances from which it can be inferred

1) If both were under the age of fifteen years, the older is deemed to have survived;

2) If both were above the age sixty, the younger is deemed to have survived;

3) If one is under fifteen and the other above sixty, the former is deemed to have survived;

4) If both be over fifteen and under sixty, and the sex be different, the male is deemed to have survived, if the sex be the same, the older;

5) If one be under fifteen or over sixty, and the other between those ages, the latter is deemed to have survived.

41
Q

DESIGNATION CHANGING ?

A

Section 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy. Notwithstanding the foregoing, in the event the insured does not change the beneficiary during his lifetime, the designation shall be deemed irrevocable.

42
Q

Is it required that the beneficiary has an interest in the life or property of the insured?

A

Insurable interest is NOT REQUIRED in case one insured his own life.

XPN:
 But if a person insured the life of another, payable to himself, insurable interest is REQUIRED.

43
Q

Q: Who are disqualified to be beneficiaries according to the Civil Code?

A

a) Adultery or concubinage; those made between persons guilty of; preponderance of evidence

b) Criminal offense; those made between persons guilty of; proof beyond reasonable doubt; and

c) Public officer, his wife, descendants, or ascendants; by reason of his office. (Art. 739, NCC in relation to Art. 2012, NCC)

44
Q

: In case the beneficiary is disqualified, what is the status of the contract?

A

The contract is still valid and binding.

 Only the designation is deemed void.

 In such case, the proceeds shall pass to:

a) Other beneficiaries;

b) In accordance with the policy contract, in the absence of other beneficiaries; or

c) The estate of the insured, in case of silence of the policy

45
Q

TIME :INSURABLE INTEREST IN LIFE

A

MUST EXIST inception of the insurance contract but need not exist thereafter or when the loss occurs

XPN

  1. Creditor’s insurance taken on the life of the debtor, insurable interest disappears once the debt has been paid
  2. company’s insurance taken on the life of an employee, insurable interest disappears once the employee leaves the company
46
Q

Mortgage Redemption Insurance

A

 Debtors may be insured into a group life insurance

  1. For the mortgagee (creditor), ensure payment of the mortgage debt in in the event of the unexpected demise of the mortgagor
  2. For the mortgagor (debtor), relieve his heirs of from paying the obligation
47
Q

Classes of Insurable Interest in Property Insurance

A

a) An existing interest;

b) An inchoate interest founded on an existing interest; or

c) An expectancy, coupled with an existing interest in that out of which the expectancy arises.”

48
Q

Classes of Insurable Interest in Life Insurance

A
  1. Insurable interest in the insured’s own life
  2. Insurable interest in the life of another
49
Q

Insurable Interest in
PROPERTY :DEETS

A

-As to extent, limited up to the value of the property

-Must exist as the time of
perfection of the contract and at the time of the loss

-Expectation of benefit must have legal basis

-Beneficiary must have insurable interest

50
Q

Insurable Interest in
LIFE/ HEALTHS : DEETS

A

-Unlimited except is secured by the creditor

-Must exist at the time of the perfection of the contract

-Expectation of benefit need not be based on legally enforceable obligation

-Insurable interest is not necessary if the insured took out the policy on his own life and designated another.

Beneficiary must have insurable interest if one who took out an insurance on the
life of another.

51
Q

Insurable Interest of Beneficiary in Property Insurance

A

The beneficiary must have insurable interest in the property that is the object of the insurance.

The contract is considered a wagering contract is the beneficiary will be allowed to recover even if he has no insurable interest on the subject property.

52
Q

Insurable Interest of Beneficiary in Life Insurance

A
  1. If the insured takes out an insurance on his own life, he can designate anybody whether or not the beneficiary has insurable interest over his life.
  2. If the insured takes out an insurance on the life of another designating himself or herself as beneficiary, insurable interest of the part of the insured is necessary.
  3. If one takes out an insurance on the life of another and designates a third person as the beneficiary, insurable interest of the part of the insured is necessary.
53
Q

TIME WHEN INSURABLE INTEREST MUST EXIST IN LIFE INSURANCE

A

 All that is required is that the insured has insurable interest over the life that is insured at the time the insurance takes effect.

54
Q

What is a policy?

A

the written instrument in which a contract of insurance is set forth.

55
Q

What is the purpose of a readable and understandable insurance policy?

A

It is important for the protection of the general public

56
Q

Is the presence of a policy necessary to perfect an insurance contract?

A

No, an insurance contract is a consensual contract. Hence, mere consent perfects the contract and no formality is necessary to perfect it.

However, such policy is mandated by law that it should be issued by the insurer.

57
Q

Is the Statute of Frauds, requiring a contract to be in writing in order for it to be enforceable, applicable to insurance contracts

A

No. While it is true that the contingent event may happen after the lapse of one (1) year, the adverse may also happen in which the contingent event may indeed happen within one
(1) year

58
Q

What is the required form of the policy as per the Insurance Code?

A

Sec. 50 of the ICP provides that the policy shall be in printed form.

under the “Guidelines on Electronic Commerce of Insurance Products” issued by the IC:

a) Electronic documents; the words “writing”, “certificate”, or any reference documents;

b) Electronic signature;
document be “signed”; and

c) Electronic communications; provisions for “delivery”, “notice”, or that the document be “mailed” or is “issued” or similar acts.

59
Q

Is a policy required to be approved by the IC?

A

YES. No policy, certificate, or contract of Insurance shall be issued or delivered within the Philippines unless in the form previously approved by the Commissioner,

60
Q

APPLICATION

A

Application is the offer of the person who seeks to procure the insurance policy.

It contains information and declarations which constitutes representations.

61
Q

BINDING RECEIPTS

A

Binding receipts is a provisional or temporary insurance contract issued by the insurer, but does not insure by itself. It is merely conditional does not insure outright

CONDITIONS:

a) Company shall be satisfied that the applicant was insurable on standard rates;

b) Company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise the deposit shall be refunded; and

c) Applicant is not able according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant.

62
Q

POLICY : GR/XPNS

A

GR : the insurer is free to stipulate as long as it is not contrary to law, morals,
customs, and public policy.

XPN
The IC may require issuance of standard policies:

a) Standard Fire Policy; and
b) Standard Life Insurance Policy

63
Q

The law requires mandatory provisions for the following policies

A

a) Individual Life;
b) Endowment Insurance;
c) Group Life; and
d) Industrial Life.

64
Q

What are the contents of the policy?

A

a) The parties between whom the contract is made;

b) The amount to be insured except in the cases of open or running policies;

c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;

d) The property or life insured;

e) The interest of the insured in property insured, if he is not the absolute owner thereof;

f) The risk insured against; and

g) The period during which the insurance is to continue.” (Sec. 51, ICP)

65
Q

What are the classifications of the provisions of the IC?

A

a) Declarations; the purpose is to give the insurer sufficient information to issue desired contract at proper price

b) Insuring Agreements; what the insurer promises to do and describe characteristic of event covered under the contract;

c) Exclusions; limits the coverage under the insuring agreements (e.g. peril, sources of liability, persons, losses, locations, and time periods); and

d) Conditions; prescribes conditions that must be complied with before insurer can be made liable and the basis for computing premiums.

66
Q

DECLARATIONS INCLUDE:

A

a) Identify the insured;

b) Describe the property, activity, or life insured;

c) Type of coverage purchased;

d) Policy limits;

e) Terms of coverage;

f) Premiums paid;

67
Q

Policy v. Marine Risk Notes

A

Policy is the written instrument in which a contract of insurance is set forth.

Marine Risk Notes is an acknowledgment or declaration confirming the specific shipment covered by its Marine Open Policy, the evaluation of the cargo, and the chargeable premium. Such note is not the policy itself.

68
Q

PREMIUIM

A

 An insurance premium is the agreed price for assuming and carrying the risk. It is the consideration paid to the insurer for undertaking to indemnify the insured against a designated peril. It is based on probability of loss and extent of liability

69
Q

Effect of non-payment of Premium w/ xpn

A

GENERAL RULE: No policy issued by an insurance company is valid and binding until actual payment of premium. Any agreement to the contrary is void. (Sec. 77)

 If the first premium has not been paid, the obligation of the insurer will not become valid and binding. If the subsequent premiums have not been paid, the policy issued will be deemed to have lapsed.

XPN
1. When the grace period applies in case of life and industrial insurance (Sec. 77)

  1. When there is an acknowledgement in the policy or receipt that the premium has been paid (Sec. 78)
  2. When there is an agreement that the premium shall be payable on installment and partial payment has been made at the time of the loss. (Makati Tuscany Condominium Corp.
    v. CA, 215 SCRA 462)
  3. When there is a credit extension/credit term has been agreed upon (UCPB vs. Masagana Telemart, 308 SCRA 259)
  4. When the equitable doctrine of estoppel applies/where the parties are barred by estoppel. (UCPB vs. Maagana Telemart, 356 SCRA 307)
70
Q

Instances when premiums are not recoverable:

A

i. When the risk has already attached and the risk is entire and indivisible.

ii. In life insurance.

iii. When the contract is rescindable or rendered void ab initio by the fraud of the insured.

iv. When the contract is illegal and the parties are in pari delicto.

71
Q

Cover Note

A

 May be issued to bind insurer temporarily pending the issuance of the policy.
 Permitted not exceeding 60 days unless they have approval of IC

72
Q

Rider

A

 Is an endorsement to a life insurance policy that modifies the clauses and provisions in the standard policies by adding special provisions thereto, including or excluding coverage.

73
Q

Non-waiver clause

A

 “No change in the policy is valid unless approved by an executive officer of the insurer, or unless the approval is endorsed on the policy or attached it, or both, and that no agent has authority to change the policy or waive any of its provisions.”

 Allowed in non-life insurance policy

74
Q

no notice of cancellation of insurer shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following

A

(a) Nonpayment of premium;

(b) Conviction of a crime arising out of acts increasing the hazard insured against;

(c) Discovery of fraud or material misrepresentation,

(d) Discovery of willful or reckless acts or omissions increasing the hazard insured against;

(e) Physical changes in the property insured which result in the property becoming uninsurable;

(f) Discovery of other insurance coverage that makes the total insurance in excess of the value of the property insured; or

(g) A determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

75
Q

Reformation of the policy

A

When what was agreed is different from what is written in the policy by reason of inadvertence, ignorance or mistake, the Courts would have the power to reform the contracts and give effect to them in the sense in which the parties intended to be bound.

76
Q

Return of premium : WHOLE

A
  1. Insured thing was never exposed to the risk
  2. Contact is voidable due to fraud or misrepresentation of insurer or agents
  3. Contract voidable coz of facts insured was arrogant w/o his fault
  4. When by any default of insured other than fraud, insurer never incurred liability
  5. When rescission is due to insurer’s breach of contract
77
Q

Return of premium : PRO RATA

A
  1. Insured surrenders policy b4 termination

XPN:

(a) policy not made for a definite period of time

(b) short period rate is agreed upon

(c) life insurance policy

  1. Over-insurance

INSURANCE (2 decks)

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