Understanding Insurance Law

One of the key thing to understand insurance law as to compare with other laws will be what is the difference between INSURANCE and ORDINARY contract. This will sets a distinct understanding and for us to know better the content of what insurance law is all about.

In ordinary contract, the doctrine of utmost good faith (which we will have discussion on it later) is not applicable simply because other doctrine as mentioned earlier, remains dominance in the meaning. But in insurance law, the main key elements of it is DOCTRINE OF UTMOST GOOD FAITH. On the other hand, in ordinary contract, the INSURABLE INTEREST is not needed, while insurance contract, the insured must have insurable interest in the subject matter.

At some points, too many jargons are put on hold and you might not know what is it all about, like utmost good faith, insurable interest and etc. Here will be clarification part.

I will start with Insurable Interest! It is common that in everything we do, we could not get 100% guarantee or even warranty of everything. It is the same as risk, that not all of them can be insured by the insurance company but only the risks of an insurable interest. With that, the insurable interest stands in the meaning of interest (as with the things to be covered or wish to be taken care of, such as financially, the family n etc.) in the subject matter of a contract of insurance, and this gives the right to the insured to enforce the contract when things, unduly happened.

And let's put an example that S bought a life insurance from Company G. Apparently, one day, her house caught on fire due to someone accidentally flanked a cigarettes butt on her house garden. The whole house was destroyed nearly 50% of it, but S survived with minor injuries.
Let us speculate this situation that what is the insurable interest, with what can be and to be insured!
Answer: Insurable interest again, means the insurance are covering based on your interest of what to be cover. In this sense, as S bought only life insurance (which is her interest), she will be compensated based on things that incur to her life or health. But what about the destroyed house? Sorry to say is that, the house will no be insured, as that is not within her insurable interest. The minor injuries that she got will be insured but simply not the house, as she did not purchase the FireInsurance or etc.

But do not worry, as complicated as it sounds, Insurance Companies nowadays are thinking way ahead of us, not that they know that we will have those dangers, but their words are sweet to say 'it is a precautionary measure', or more proverb-ly sound, 'prevention is better than cure'. Companies nowadays, as mentioned in the previous post had many packages, which this will includes life, fire and some other elements, with our choice. For better or worse, we are more coward as compare to last time, we will buy the one with the highest probabilities.

Back to the topic is that, the amount of insurable interest is based on the pecuniary loss that was incurred. However, let's say you pay your car insurance yearly, and in the same year, you sold off your car, that transfer of ownership will mean that the insurable interest will no longer be valid. Let's speculate another scenario? As we know that Cyberjaya is popular with accidents, and second with renting cars. And let's say Abduh is a owner of many cars that he rents, and upon renting one of the car one day, someone who is racing and drifted his car into a ridge. The question is, will he be gaining his insurable interest?
Let's put some deeper thoughts on your mind, that Insurance Companies are not that stupid, as they will investigate the case that happen before releasing their payment to you, so how is it going to be?

Actually in this case, based on the Vehicle Insurance that Abduh possesed, with no transfer of ownership but just the matter of transfer of tenancy to the driver, he is entitled for the insurable interest. As according to Nanyang Insurance Co. Ltd. v. Salbiah, as long the ownership has not been transferred, Abduh still content for the insurable interest.
But it may be argued again that, that is Business or insurance for your business and it may not fit the category, and even worse, the business is not legal. Will he be insured?
At some point, based on Nanyang case, in fact, it is a different matter simply because this is for rental, and as far as business is concerned, without the legal rights, the insurer company can choose not to pay it. As again, speculate this issue!