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Insurable Interest

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The party purchasing the insurance must have an “insurable interest” in the insured item/person. Otherwise, the purchaser or other interested party will not be able to enforce a claim under the insurance policy.

The Insurance Claims Complaints Bureau has provided a simple definition of insurable interest for our reference. “A person is regarded as having an insurable interest in something when the loss or damage to the item concerned would cause that person to suffer a financial loss and/or other kinds of loss.”

A mere expectation of acquiring an interest in a particular thing will not give rise to an insurable interest. However, provided that interest is confirmed. So that person would have an insurable interest in the subject goods even if he/she has no present enjoyment or possession of the goods.

Examples

In life insurance, the party wishing to purchase the insurance covering another person’s life must suffer a loss if the insured person dies. As regards emotional loss. So the loss must arise from marriage or the love and affection between a close blood relationship or such other close relationship. It could reasonably give rise to love and affection.

If there is no requirement for “insurable interest”. Then insured could simply be making a wager on the life of an insured person who does not have any relationship with the insured. In property insurance, the subject item of insurance is a physical object exposed to the risks of loss or damage. The insurable interest arises from the connection between the insured and the subject item. The insured stands to suffer a loss if the subject item is lost or damaged.

Insurable Interest as a Requirement for Insurance Contracts

Introduction

This was developed from the lex mercatoria of the Middle Ages. And also eventually accepted in South African law through the adoption of English insurance law and the principles in the Life Insurance Act 1774. Originally it served a descriptive purpose only as of the object of insurance. However, as time progressed the concept was seen not merely as the object of insurance. But as a characteristic feature of an insurance contract. The concept became a fundamental requirement for the validity of an insurance contract.

Criticism Against Adoption

Reinecke criticises the acceptance of the concept in South African law. He argues that the introduction thereof in English law was due to the unique position of the English common law. And also, certain wagering contracts had until that point been accepted as valid by English common law. He mentioned that legitimate insurance contracts can hardly be described as the ‘mischievous kind of gaming’. Reinecke further argues that the wagering contracts that the LAA intended to put an end to have in any event been regulated by South African common law well before 1774. And also that the concept of an insurable interest is foreign to both South African common law and the legislature. He concludes that the LAA was never applicable to the South African legal system.

It is clear that the insurable interest concept has created extensive legal uncertainty within the insurance sphere. The requirement of an insurable interest has repeatedly been used as a means for insurers to attempt to repudiate liability. Owing to the often unfair results from the rigid application of the concept, the courts have attempted to come to the aid of the insured.

The difficulties faced with regard to the doctrine of an insurable interest are not, however, unique to South Africa. Furthermore, each one of these countries has had their own unique approach to solving the problems experienced with regard to the doctrine. The subsequent paragraphs, therefore, focus on the British and Australian experience with regard to the doctrine.
So, this is the main requirement when considering insurance policy. No one can purchase an insurance policy without insurable interest. So get a clear idea about it is very important. you can get more details from https://www.valuepenguin.com/insurable-interest-life-insurance and https://insurancesourcegroup.com/

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