Page 268 - DMGT303_BANKING_AND_INSURANCE

Unit 13: General Insurance

typically comprises any insurance that is not determined to be life insurance. It is called property Notes
and casualty insurance in the U.S. and Non-Life Insurance in Continental Europe.
In the UK, General insurance is broadly divided into three areas: personal lines, commercial
lines and London market.

13.1 Non-Life Insurance/General Insurance

When the insured pays the premium and the insurer accepts the risk, the contract of insurance is
concluded. The policy issued by the insurer to the insured is the proof of the contract between
them.

We know that no contract is valid without a consideration. In case of insurance contracts premium
is the consideration from the side of the insured and the promise to indemnify is the consideration
from the insurer.
Both the parties should be competent to contract and must give the consent for the insurance
contract for covering the same risk for same peril in the same sense. Insurance contracts which
are against the public policy are not valid contracts. Care should be taken by both sides that
something which is illegal cannot be insured. If insurance is affected on say for example smuggled
goods, and the insurer comes to know after some time of signing the contract, he may avoid the
contract.
All insurance contracts are governed by the basic principles of insurable interest, indemnity,
utmost good faith, subrogation and proximate cause. These are discussed below one by one:

Insurable Interest

A person who wants to insure should have insurable interest in the property to be insured.
Insurable interest as discussed earlier is the interest of a person in a person or property such that
he/she will stand to lose if something goes wrong with the person or property.
Presence of an Insurable property is a must.
The insured should have a legal relation to this subject matter. This insurable interest can arise
in a number of ways like:
1. Ownership
2. Mortgage

3. Trustee
4. Bailer
5. Lessee
Now the question arises when should the insurable interest be present. Should it be there at time
of contract or at the time of claim or both? Lets study this in context of various kinds of general
insurance:

In fire and miscellaneous Insurance, the insurable interest must exist:
1. At the inception, i.e., while placing the property for insurance or we may say at time of
entering into the contract.

2. During the currency of the policy, i.e., the insurable interest should not end/alter during
the period of insurance.

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