Insurance Law PDF

INSURANCE LAW DR. HAMAD ALEISSAEE CONCEPT OF INSURANCE The world is full of uncertainties and risks that Such events are often impact individuals, unavoidable, insurance families, businesses, and products have been assets. These r...

INSURANCE LAW DR. HAMAD ALEISSAEE CONCEPT OF INSURANCE The world is full of uncertainties and risks that Such events are often impact individuals, unavoidable, insurance families, businesses, and products have been assets. These risks include developed to help mitigate potential losses related to these losses by offering life, health, property, and financial compensations. more. CONCEPT OF INSURANCE Insurance is a financial product designed to minimize or eliminate the financial impact of various risks. To protect individuals from loss and uncertainty, insurance has developed as a means of compensating for potential losses. It can be seen as a social tool aimed at reducing or removing the risk of loss to life and property. CONCEPT OF INSURANCE Insurance is designed to safeguard the economic value of assets. Asset owners assign a value to their property, as it provides them with benefits, either in the form of income or protection against potential loss, which could result in significant harm. For instance, while owning a car for personal use may not generate direct financial income, it offers comfort and pleasure to the owner. However, if the car were to be damaged, say, by waterlogging during heavy rains, it would be reduced to scrap value, highlighting the need for insurance coverage to protect against such unexpected events.  The concept of insurance dates back thousands of years, originating from the idea of "pooling risks." In earlier times, a common fund was established, often at the village or community level, where small contributions from many individuals were gathered. This fund would then EVOLUTION OF be used to compensate those who experienced INSURANCE losses. The amount each person contributed was determined based on the assumption that, although it was impossible to predict which individual would suffer a loss, past experience could help estimate the average number of people who might face losses.  For example: a village with 500 houses, each valued at AED 200,000, an average of 4 houses are damaged by fire annually, causing a total loss of AED 800,000. If all EVOLUTION 500 homeowners contribute AED 1,600 OF each, the collective funds will be enough to INSURANCE cover the risk of 4 houses being destroyed by fire. This way, the risk faced by 4 homeowners is spread across all 500 homeowners. EVOLUTION OF INSURANCE The first known written The principle of general insurance policy was on average is a maritime law Babylonian obelisk concept that requires all monument with the code of parties involved in a sea King Hammurabi. The venture to proportionally Hammurabi Code was one of share any losses incurred the first forms of written from a voluntary sacrifice of laws. The basic insurance part of the ship or cargo to gave the Babylonian traders preserve the entire vessel in protection against loss of an emergency situation. cargo. EVOLUTION OF INSURANCE The Great Fire of London In 1666, a fire began at a Once the fire was finally In response, fire insurance bakery on Pudding Lane and contained, many people companies emerged, initially rapidly spread throughout were left without homes as offering coverage to London. At the time, the city the city was rebuilt. This property owners. consisted mainly of timber- tragedy underscored two Recognizing that prevention framed buildings clustered crucial needs: the was key, these companies closely together, making establishment of a also established their own them highly vulnerable to professional fire service fire services to minimize the fire. for the city and the risk of fires breaking out in importance of insurance the first place. for homeowners and business owners in case of future disasters.  The business of insurance aims to protect the economic value of assets or life of a person. Through a contract of insurance the insurer PRINCIPLES OF agrees to make good any loss on the insured INSURANCE property or loss of life (as the case may be) that may occur in course of time in consideration for a small premium to be paid by the insured. PRINCIPLES OF INSURANCE 2. Principle 4. Principle 1. Principle 3. Principle of of of Utmost of Insurable Subrogatio good faith Indemnity interest n 5. Principle 6. Principle 7. Principle of of of Loss of Contributio Proximate Minimizati n cause on  PRINCIPLES OF INSURANCE 1- Principle of Utmost good faith Both the parties i.e. the insured and the insurer should have a good faith towards each other. The insurer must provide the insured complete, correct and clear information regarding terms and conditions of the contract. This principle is applicable to all contracts of insurance.  PRINCIPLES OF INSURANCE 1- Principle of Utmost good faith The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance. The insurer's liability gets void (i.e legally revoked or cancelled) if any facts, about the subject matter of insurance are either omitted, hidden, falsified or presented in a wrong manner by the insured.  2- Principle of Insurable interest The insured must have insurable interest in the subject matter of insurance. In life insurance it refers to the life insured. PRINCIPLES OF In marine insurance it is enough if the INSURANCE insurable interest exists only at the time of occurrence of the loss.  2- Principle of Insurable interest The principle of insurable interest states that the person getting insured must have insurable interest in the object of insurance. PRINCIPLES OF A person has an insurable interest when the INSURANCE physical existence of the insured object gives him some gain but its non-existence will give him a loss. The insured person must suffer some financial loss by the damage of the insured object.  PRINCIPLES OF INSURANCE 3. Principle of Indemnity Indemnity refers to a commitment or assurance to restore the insured to the position they were in immediately before the occurrence of an unforeseen event. The insurer agrees to compensate for the loss incurred. Indemnity refers to the security, protection, and compensation provided to cover damage, loss, or injury. Under the principle of indemnity, an insurance contract is established solely to protect against unforeseen financial losses resulting from future uncertainties. Its primary objective is not to generate profit but to offer compensation in the event of damage or loss.  PRINCIPLES OF INSURANCE 3. Principle of Indemnity In an insurance contract, the amount of compensations paid is in proportion to the incurred losses. The amount of compensations is limited to the amount assured or the actual losses, whichever is less. The compensation must not be less or more than the actual damage. Compensation is not paid if the specified loss does not happen due to a particular reason during a specific time period. Thus, insurance is only for giving protection against losses and not for making profit.  PRINCIPLES OF INSURANCE 4. Principle of Subrogation According to this principle, once the insured is compensated for the loss or damage to the insured property, the ownership rights of that property are transferred to the insurer. This principle, which is a corollary to the principle of indemnity, applies to all indemnity contracts.  PRINCIPLES OF INSURANCE 4. Principle of Subrogation Subrogation means substituting one creditor for another. Principle of Subrogation is an extension and another corollary of the principle of indemnity. It also applies to all contracts of indemnity. According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer. This principle is applicable only when the damaged property has any value after the event causing the damage. The insurer can benefit out of subrogation rights only to the extent of the amount he has paid to the insured as compensation.  PRINCIPLES OF INSURANCE 5.Principle of Contribution The principle is corollary of the principle of indemnity. It is applicable to all contracts of indemnity. Under this principle the insured can claim the compensation only to the extent of actual loss either from any one insurer or all the insurers.  PRINCIPLES OF INSURANCE 5.Principle of Contribution The Principle of Contribution is a corollary to the principle of indemnity and applies when the insured has multiple policies covering the same subject matter. According to this principle, the insured can recover compensation only up to the actual loss, either from all insurers collectively or from one insurer. If a single insurer pays the full compensation, that insurer has the right to seek a proportionate contribution from the other insurers.  PRINCIPLES OF INSURANCE 5.Principle of Proximate Cause Principle of Causa Proxima (a Latin phrase), or in simple English words, the Principle of Proximate (i.e Nearest) Cause, means when a loss is caused by more than one causes, the proximate or the nearest or the closest cause should be taken into consideration to decide the liability of the insurer. Also known as the most dominant and direct cause of the loss. The loss of insured property can be caused by more than one cause in succession to another. The property may be insured against some causes and not against all causes.  PRINCIPLES OF INSURANCE 5.Principle of Proximate Cause In such an instance, the proximate cause or nearest cause of loss is to be found out. If the proximate cause is the one which is insured against, the insurance company is bound to pay the compensation The principle states that to find out whether the insurer is liable for the loss or not, the proximate (closest) and not the remote (farest) must be looked into.  PRINCIPLES OF INSURANCE 6.Principle of Loss Minimisation Under this principle, the insured has an obligation to take all reasonable steps to minimize the loss to the insured property in the event of an uncertain occurrence. According to the Principle of Loss Minimization, the insured must make every effort to reduce the loss of their insured property when faced with unforeseen events, such as a fire, explosion, or similar incidents. The insured is expected to take all necessary actions to control and mitigate the losses in such situations. It is essential that the insured does not act negligently or irresponsibly simply because the property is covered by insurance. Therefore, it remains the insured's responsibility to protect the property and prevent further damage or loss.