principle of non-life insurance

8/12/2019 Principle of Non-Life Insurance

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Insurance is a contract, whereby one party, fora consideration, agrees to indemnify the otherparty, against loss, damage or liability arisingout of an unknown or contingent event.

1. two parties- the insurer and the insured 2. consideration-premium paid by the insured

to the insurer.

3. to indemnify-to shoulder for the losses of

the insured. 4. It is the transfer of risk from the insured to

the insurer.


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We need first to understand the risk. RISK?? - PANGANIB

- It is the possibility of something going

wrong.- It is uncertain when and where it will strike

but you know it can happen.

- PERIL- causes of loss- HAZARD- something that increases the

likelihood or severity of loss


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Ex. Your house has the risk of catching fire.Especially if it is made of wood

Ex. Your car has the risk of being bumped bythe another vehicle every time you drive it,especially if the car is ill-maintained.

Ex. Your cargo runs the risk of being lostalong with the vessel during bad weatherespecially if the vessel is old.


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1. Insurable Interest 2. Utmost Good Faith

3. Indemnity

4. Subrogation

5. Contribution

6. Proximate Cause


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Insurable interest is the legal right to insure

The legal relationship to the property

I NSURABLE INTEREST

A person has the insurable interest if he/she

stands to gain if the subject matter of the insurance

is preserved or if he/she stands to suffer to loss if it

is damaged or lost.


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All contracts of insurance must be negotiated with

utmost good faith that applies to the insurer and the

insured. The duty of disclosure has to be observed by both

parties through out the negotiation, during the currency of

the policy and the stage of renewal. The disclosure must be

material to the terms and conditions of the policy contract.

UTMOST GOOD FAITH

The contract of insurance is essentially built on TRUST.


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Example 1:

A property declared as

residential house.

Later on converted as

RTW factory
http://rds.yahoo.com/_ylt=A0S020p5.x9ITxIBNnyJzbkF;_ylu=X3oDMTBxY3ZkcmZnBHBvcwMyBHNlYwNzcgR2dGlkA0kwODFfMTAz/SIG=1da8feq46/EXP=1210141945/**http%3A//images.search.yahoo.com/images/view%3Fback=http%253A%252F%252Fimages.search.yahoo.com%252Fsearch%252Fimages%253Fp%253Dhouse%2526fr%253Dyfp-t-368%2526ei%253Dutf-8%2526js%253D1%2526x%253Dwrt%26w=360%26h=288%26imgurl=crestfieldhomes.com%252F_borders%252Fhouse_05.jpg%26rurl=http%253A%252F%252Fcrestfieldhomes.com%252F%26size=18.6kB%26name=house_05.jpg%26p=house%26type=JPG%26oid=a01cb27579ab0cce%26no=2&tt=33912011


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A Motor Car that isdeclared for Private Use

But is actually used for

hire

Example 2:


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Indemnity is payment made for a certain

loss or damage.

In insurance, the Principle of Indemnity is that

by which an insured is compensated for losses

sustained and placed as much as possible in the

same pecuniary position before the misfortune.


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2. Reinstatement - repair or restoration to theoriginal state as possible.

METHODS OF INDEMNITY

1. Monetary Payment payment of the cashequivalent of the property lost.
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CONTENTS

3. Replacementreplacing the lost article with a

similar or the same article.


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SUBROGATION

The Subrogation Principle arises from the principle ofIndemnity.

Subrogation is allowing the insured to collect the

claim from the insurance company where he/she is

insured. In effect, the insurance company is

responsible to recover all expenses paid to their

insured, or to the person responsible to the accident or

to his insurer.


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Example:

CGAC

Insured Vehicle Assured

1. An accident occurs and caused physical damages to both vehicles.

2. The assured files a claim to CGAC.3. CGAC indemnifies the assured for the damages.

4. CGAC will then recover from the other party for damaged parts etc..


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CONTRIBUTION

An insured may effect two or more insurance forthe same subject matter of insurance. But in the event

of loss, he can recover under each of these policies

but the amount recovered should be not more than the

actual value of the loss.


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Accidentally Mr. Lopez house was razed by fire and incurred a partialdamage of 5,000,000, the following companies will pay :

Malayan 500,000CCC 500,000Stronghold 1,000,000Plaridel 1,000,000

Centennial 2,000,000TOTAL 5,000,000


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PROXIMATE CAUSE

It is the cause which is most closely anddirectly connected with the loss, not necessarily

in time but in efficiency or effectiveness.

principle of non-life insurance

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