1. Insurance introduction Sources of Law Hard law 1. Singapore statute - Insurance Act Very regulatory. Does not cover alot of the common law rules Covers more of the business side of things. 2. Singapore common law cases - We use a common law regime. - For Marine Insurance specifically: Marine Insurance Act s91. The rules of the common law including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts of marine insurance. 3. English common law cases. - Especially commercial cases - In the past, insurers such as Lloyds were very powerful. Thus in the past, the law was heavily slanted in favour of the insurers. Big boys squelched the reform plans. They did mention they would apply “soft law” in terms of consumers, not to fully exercise their rights. - (AELA) Application of English Law Act See sections 3&4 —(1) The common law of England (including the principles and rules of equity), so far as it was part of the law of Singapore immediately before 12th November 1993, shall continue to be part of the law of Singapore. (2) The common law shall continue to be in force in Singapore, as provided in subsection (1), so far as it is applicable to the circumstances of Singapore and its inhabitants and subject to such modifications as those circumstances may require. 4.—(1) Subject to the provisions of this section and of any other written law, the following English enactments shall, with the necessary modifications, apply or continue to apply in Singapore: (a) the English enactments specified in the second and third columns of the First Schedule to the extent specified in the fourth column thereof; and (b) any other English enactment which applies to or is in force in Singapore by virtue of any written law. Specific statutes : Insurance Act, Motor Vehicles (Third Party Risks and Compensation) Act, Marine Insurance Act and Wok Injury Compensation Act 4. Other countries (take with pinch of salt as Singapore does not have a statutory regime) - Many other Common Law countries have gone ahead and reformed in certain areas. - Eg Australia in the 80s. New Zealand etc. Moved to statutory regime.
Industry self-regulation. (Not much of our concern in this course) Rules governing contract of insurance -
Commercial practice, largely common law based.
Motor Vehicles (third party risks and compensation) Act Work Injury Compensation Act (previously Workmen’s Compensation Act) Regulation of life insurance products selling : Financial Advisers Act Statutory regulation of business: Part II Insurance Act Aims Deposits; margins of solvency; detailed accounts; inspection Industry self-regulation: promulgates voluntary codes of practice Life Insurance Association General Insurance Association Complaints mechanism: FIDREC (Financial Insurance Disputes Resolution Centre) Subsumes the work of the previous IDRO [Insurance Disputes Resolution Organization] (previously Insurance Ombudsman) Decision binding on the insurance company, but NOT on consumer. They can still have recourse to the Courts. The criticism of this has been that there are now too many layers in the law.
Basic insurance concepts 1. Risk in commercial and personal activities 2. Pooling and Transfer of risks - Paying for a promise to pay. - Governed by probability theory Law of large numbers Spreading of risk as premiums are all small. Risk aversion also (definitely lose premium per month versus the chance of losing much more) 3. Encourages investment - People also thus do not have to set aside money for a rainy day elsewhere. Such funds are realised for other funds and investments. Security becomes a cost not something to be saved for. - A form also of enforced savings (for life policies)
Classifications and terms in insurance contracts Policy -
Ins Act first schedule 1: (1) “Policy” includes any contract of insurance Evidence that a contract exists, but the terms may not all be contained here. May also be in a proposal form.
Policy holder -
The contracting party. Person insured is usually the policy holder.
Application form. Depending on what policy it is, there may be questions and declarations to make. For example life, or property insurance. Cars etc. Comes with a declaration of truthfulness, sometimes stating that what is declared will be the basis of the contract. If a blank form is sent to you, probably an invitation to treat not an offer. When you hand this back completed, that is the offer.
First party insurance/ third party insurance -
If you insure yourself, your car, your house etc, that’s firsty party insurance Third party insurance insures you against liability incurred against third parties. Eg Professional Indemnity Insurance, Motor Vehicle Third Party Insurance etc
Indemnity/ contingency contract -
A life policy is a contingency contract. Most others (house, car etc) are indemnity policies. An indemnity policy is a policy where holder is compensated for what has been lost. Loss suffered is measured, for example the value of repairs to a car, or the cost of an equivalent condition one A contingency policy takes effect upon contingent even happening. Eg an accident or a death. Cannot measure the loss of life.
Insurance/ assurance -
Assurance more used in the life insurance context. Death is “assured”
Underwriters underwrite risks Assess and evaluate the risk and decide to assume it. Thus they have “underwritten” it. Term originates from marine insurance (a slip)
Personal/property/liability Life polices: -
Whole life, endowment, term (no savings) Investment –linked policies Capital investment bond Eg, see Fuji v Aetna  Ch 173 – benefits due upon death See Insurance Act First schedule cl6 : any policy which provides benefits calculated by reference to units, the value of which is related to the market value of the underlying assets
Fuji v Aetna  Ch 173
The plaintiff company took out a policy, described as a policy of life assurance or capital investment bond, with an insurance company whose business was shortly thereafter taken over by the defendants, the life assured being that of T., who was concerned in the management of the plaintiff. The policyholder had the option to switch units allocated to his policy between the funds. P took advantage of this. he defendants then altered the procedure for switching units so that the plaintiff was unable to continue to make profits as before. The plaintiff claimed that by altering the terms of the switching procedures the defendants had committed a repudiatory breach of contract and surrendered the policy. On the trial of preliminary issues whether the policy was a policy of life insurance within section 1 of the UK Life Assurance Act 1774 so as to be void because the plaintiff had no insurable interest in the life of T., or, if not, whether it was unenforceable under section 16 of the UK Insurance Companies Act The judge held that, since the same sum was payable on surrender of the policy as on the death of T., the policy was not a contract of insurance on the life of T. and was therefore not rendered void by section 1 of the Act of 1774, and that a policy issued in good faith, albeit in breach of section 16 of the Act of 1982, was not thereby rendered unlawful and unenforceable. Held: Appeal allowed The essence of life insurance was that the right to the benefits was related to life or death, e.g. where the benefit was payable on death or its notification; that events less obviously life- or death-related, such as survival
Long term versus renewable policies Categories Reinsurance -
Insuring the insurers. Insuring risk.
See ppt for history and process