In relation to the law of insurance, explain the term insurable interest

It is a must basic element in all insurance contract to have an insurable interest. The
general rule is that if a person do not have insurable interest, the insurance policy will
be unlawful, unenforceable and void. It is of wagering or gambling nature if an insurance
is without insurable interest. It would not consititute a binding agreement.For instance,
1

if a car owner meets with an accident, he will suffer monetary loss. It is said that all

wagering contracts are illegal according to Section 26 of the Civil Law Act 1956 .
According to Connecticut Mutual Life Insurance Company v Schaefer, before one
recover or claim on a policy insuring against damages to the property, he must have an
insurable interest on his property of subject matter. The insured is the person for whose
use,benefit or on whose account the policy is effected. The insured is said to have
insurable interest when subject matter or property that being destroyed or damaged in
an incident will cause a person to sustain financial or certain kind of losses. It could also
mean insured will obtain financial benefit by preserving or by having the continuance
existence of the subject matter. As Lawrence J in Lucena v Craufurd stated, to be
interested in the preservation of a thing is to be so circumstanced with respect to it as to
have benefited from its existence and prejudice from its destruction 2. In Rayner v
Preston,it is held that payment get is money if accident within the fire insurance policy
happens. Some policy at some point with some condition would be necessary to
rebuild the premises but that does not change the fact that paying money to the insured
is insurance companys only liability.
For instance, a house would suffer decreasing of value after being damaged by fire or
natural disaster3. It is obviously when the house is sold to another owner, the value that
can be obtained is lesser due to the damage by the fire to the house. Therefore the
1 Lee, M., & Samen, D. (1997). Commercial law in Malaysia. Kuala Lumpur: Malayan Law
Journal.
2 Poh, C. (2009). Chapter 5 : Insurable Interest. In General Insurance Law. Utopia Press Pte
3 Insurable Interest Definition | Investopedia. (2014, June 19). Retrieved April 9, 2015.

owner is forced to suffer a financial loss. Switching the scenario, one cannot own an
insurable interest over his neighbors house as he does not have ownership over the
house, therefore he cannot file a claim for any of the financial compensation stated in
the policy. Also, if a fire burn swallow ones neighbours house but does no harm to his
own house, he does not suffer any insurable loss.Generally in all insurance , an
insurable interest has to be present at both time when the policy is taken and when a
claim occurs. For example,if one had transferred his property to a new owner,without
transferring the homeowner insurance and he burn the house the day after transferring
the property , he will not be eligible to file a claim over the loss and damages on the
property. This is because he no longer has an insurable interest on the property, but on
the other side, the new owner owns it and has the right to file a claim over the loss the
fire cause onto the property. According to Macaura v Northen Assurance Co Ltd,
Macara who owned a tree plantation ,covered by an insurance policy sold the plantation
off but continue insure the plantation in his own name. 4 A fire destroyed the plantation
and he tried to file a claim on the policy but it was held his claim towards the destruction
of plantation in unsuccessful as he no longer own the plantation therefore he had no
insurable interest eventhough he own the policy and the new owner is the company
which he is one of the shareholder. By virtue of 5 Roslan bin Abdullah v New Zealand
Insurance Co Ltd, it is also said that the ownership of property canges , the policy
cover also lapses unless there is novation in the policy.It was held in this case that once
trucks ownership changed, the insurance policy lapsed unless there was novation of
the policy which was not alleged.As there was no insurance policy during the event
happened, thus the truck driver was not covered by the insurance policy.and therefore
the claim was unsuccessful.

4 Lee, M., & Detta, I. (2009). Insurance. In Business Law (5th ed., p. 277). Shah Alam,
Selangor: Oxford Fajar Sdn.Bhd
5 Wong, J. (1998). Marketing and commercial law in Malaysia: With a comparison to Australian law.
Kuala Lumpur: International Law Book Services.

Date of contract is an important element in forming an insurance policy because it

specifies when the risks commences and when is the date it stops. Also, date of
contract is important because the insurer is entitled to avoid the policy even after the
occurance of the event insured against if a material misrepresentation is made.
Normally , material time is the time proposal is formed. Things that might be true in the
proposal may have become not when the policy was contracted. The time of the risk
occur is one of the important element of insurable interest in a policy. It has to be proven
to the insurance company that the insured suffer damages, loss or injuries at the time of
loss or within the date of contract, not before nor after.Claim will not be awarded and
paid to the insurer if there is no insurable interest happen within the date of contract
or the time of loss. Claim will also not be paid if unfortunate incidents happen before or
after the time of loss. According to the case Looker v Law Union and Rock Insurance
Co Ltd, Looker stated that he was free from diseases in the life insurance proposal but
eventually he was suffering from pneumonia and died not long after insurance company
accepted his proposal. It was however held that the insurance company is not liable on
the policy Looker was under obligation to let the insurers of any material change
occurring before policy was contracted.
There is an exception for life policies compared to other insurance policies. Life policies
according to section 128 (3) (1) of Financial Services Act 2013 insures the life of
anyone other than the person effecting the insurance, or the life of a person mentioned
in subsection (2), shall be void unless the person effecting the insurance has an
insurable interest in that life at the time the insurance is effected. . According to section
128 (3)(3) of Financial Services Act 2013, a person shall be deemed to have insurable
interest in relation to another person if that other person is his or her spouse,child or
ward being below 18 years old at the time insurance is effected; his employee;or any
person who is dependent on him or her. A person who purchase themselves life
insurance meaning they have an insurable interest in their own lives. However, the
insurable interest only needs to exist at the time policy is purchased,but not necessarily
when the claim comes. According to Insurance Act 1963, if a woman bought and takes
her husband life insurance policy, and continues to pay the premium even after they

broke up.6 The woman is eligible to file a claim death benefits under the policy , but with
the condition, she must have paid for the premium even after their broke up. But after
amendments, Insurance Act 1996, after divorce there will not be any insurable interest
upon divorce and the policy money claim amount to nil . If one purchased life insurance
for his spouse or children, he is said to have the insurable interest of their lives.
According to section 128 (3)(4) of Financial Services Act 2013 ,Insuring life of a
person means insuring the payment of money on a persons death or on the happening
of any contingency dependent on the termination or continuance of his life and includes
granting an annuity to commence on his death or at a time referred to in the annuity.
There are times where someone is a policy owner but does not have insurable interest.
According to section 128 (11)(1) of Financial Services Act 2013 A licensed insurer
shall be liable to the person insured under a group policy if the group policy owner has
no insurable interest in the life of the person insured and if the person insured has paid
the premium to the group policy owner regardless that the licensed insurer has not
received the premium from the group policy owner. This can often been seen through
the employer-employee relationship where the employer insures a group of his his
employees lives. , The employer, who is the insurer or known as group policy owner is
liable for the the employees, the insured . If there is anything happen during work and
the insured is injuries or death, the claim is not paid by the the employer. The money
claimed will be paid to the insured through their employer according to Section128 (11)
(2) of Financial Services Act 2013.
As a conclusion, it is a must for every insurance contract to have insurable interest in
order to form a valid, lawful insurance policy. It is to protect the insurer and provide them
aid when they face unfortunate incidents that needs money aid. Without this element,
people would just be paying insurable premium for nothing in return.

6 Singh, B. (2002). Chapter 5 : Insurable Interest. In Insurance Law Manual. Kelana Jaya, Selangor:
Pelanduk Publications (M) Sdn.Bhd.

Find an original copy of insurance proposal form and insurance policy.

Analyse the insurance policy and identify the following:
(a) Insurer and insured
(b) Risk being insured
(c) Premium
An insurance policy is also called as a contract upon speculation because the special
facts,upon speculation because the special facts,upon which the contingent chance is to
computed lie most commonly in the knowledge of the insured An insurance is a
promise to protect the rights under the policy and compensate over specified potential
loss, damage, illness, or death in return for payment of a specified premium.as
promised in the contract. Most of the time, claimants would obtain moneytary
compensatory from the insurance company when the encounter unlucky accidents or
events that is covered in the insurance policy. People should consider having their
tailored made insurance policy suit to their needs if they wish to protect themselves from
financial hardship. There are plenty categories of insurance that is existing In market
nowadays and this may include, Life insurance, Fire insurance , Acccident insurance,
Motor Insurance,Business Insurance and etc. In this assignment, the insurance sample
provided is a Life Assurance which its product name is Zurich Flexilife
An insurer is the insurance company, sometimes also known as underwriter. It is the
company that sells insurance and provides the protection over the insurance policy

coverage on the insured. In some cases, where it has to be dealt with larger risk, there
might be a few companies combine to form one policy. The insurer are the ones who
enter into the insurance agreement with the insured that they agree to pay for the
compensation specified losses incurred by the client. According to the insurance
sample given, the insurer of the insurance policy is Zurich Insurance Malaysia Berhad.
An insured is someone that is covered under insurance policy. They are the ones who
enter into an insurance with the insurance company where certain of their rights is
protected and assured and will be provided with financial claim when they face
misfortunes that is covered by the insurance contract earlier. In the insurance policy
sample provided, the insured (assured) is Kiow Ai Ling, with IC number 991110-045112, whose Policy number is M141208746 (E140410874). The policy is applied by
her father, Kiow Chee Chong when his daughter was at the age of 15 on 12th of
November 2014. The assured is still currently a student. The insured was a completely
physically and mentally healthy during the formation of this insurance policy contract
and she does not smoke and does not have any habit of consuming drugs or alcohol.
Risk being insured contain in the insurance policy are the events happen that stated in
the insurance policy which allowed the assured to claim for their losses.
The insurance company compensate the assured by adjusting premiums according to
how great the risk is. The benefits and premiums that the insurer insured are investment
linked, vulture fund, critical illness super, flex medical plan 2 and improved total and
permanent disability benefit.
Firstly, vulture fund invests predominantly in Malaysian equities and equity-related
securities that are seen as undervalued for longer-term investment or have potential for
short-term trading opportunities. Besides, vulture fund may also invest a portion of
portfolio in cash and short-term money market instruments for capital preservation. 95%
are allocated for equities and equity-related securities, while another 5% are allocated
for cash and cash equivalents.
Secondly, while the critical illness super supplementary contract is in force, with the
receipt of due proof that the Life Assured is diagnosed to be suffering from Dread

Diseases, the insurer will in the event in Life Assured survives for at least thirty days
following definitive diagnosis and confirmation of Dread Disease(s), pay the amount of
insurance to the Life Assured. The diagnosis of Dread Disease(s) is to be done by a
registered medical practitioner and supported by acceptable clinical, radiological,
histological and laboratory evidence, to the insurers satisfaction.
In this case, the Dread Diseases that mentioned includes Alzheimers disease, which
also known as irreversible organic degenerative brain disorders, Aplastic Anaemia,
Bacterial Meningitis, Balloon Angioplasty, benign brain tumour, blindness and brain
surgery. Besides that, cancer, cardiomyopathy, chronic liver disease, chronic lung
disease, coma, coronary artery bypass surgery, encephalitis, full blown aids, fulminant
viral hepatitis, heart attack, heart valve replacement and HIV due to blood transfusion
are also included in the list of Dread Diseases that being insured. Additionally, others
Dread Diseases are kidney failure, laser treatment or invasive treatment for coronary
artery disease, loss of hearing, loss of speech, major burns, major organ transplant,
motor neurone disease, multiple sclerosis, muscular dystrophy, occupationally acquired
HIV infection, paralysis or paraplegia, Parkinsons disease, poliomyelitis, primary
pulmonary arterial hypertension, stroke, surgery to aorta and terminal illness.
However, this supplementary contract shall not cover pre-existing condition, specified
illnesses during the first 120 days of continuous cover, date of reinstatement which is
later, any injury or illness that directly or indirectly cause self inflicted injury, any injury or
illness that received during active participation in riot, strike or civil commotion,
insurrection, war or invasion or any act incidental thereto. Furthermore, it also excludes
any injury or illness that received during aviation, gliding aerial flight, motor racing,
horse racing or submarine operations, pregnancy of childbirth and congenital damages
for juvenile Life Assured.
Fourthly, as for flex medical supplementary contract, the risks that being insured can be
divided into two forms, which are hospital benefits and out-patient benefits. Hospital
benefits include daily hospital room and board intensive care unit, hospital supplies and
services, surgical fees, anaesthetist fees, operating theatre, ambulance fees, day
surgery, pre-hospital diagnostic tests, pre-hospital specialist consultation, in-hospital

physician visit and post-hospitalization treatment. On the other hand, out-patient kidney
dialysis treatment, out-patient cancer treatment, out-patient physiotherapy treatment
and emergency accidental out-patient treatment. Moreover, there are other benefits
which include daily cash allowance at government hospital, guardian benefit, medical
report fees, home nursing care and government service tax.
Lastly, improved total and permanent disability benefit involve with the advance
payment and waiver insurance charge. Disability resulting from accidental bodily injury
or disease which in the operation of a physician, there is no reason possibility of the
said Life Assured engaging in any business or occupation, and/or performing any work
for compensation or profit during Life Assureds lifetime. If the Life Assured is below 16
year-old as of the last birthday, the total and permanent disability requires constant care
and attention and the Life Assured is confined in home, hospital or similar institution
under medical supervision. If the Life Assured is unemployed or had permanent retired
or had engaged in any business or above 60 year-old but below 70 year-old as of the
last birthday, Life Assured is requires to be confined to his or her home, hospital or
similar institution resulting in loss of independent existence whereby Life Assured is at
least unable to perform three activities of daily living. Furthermore, a disability is total
and permanent if he or she has total and irrecoverable loss of sight in both eyes,
complete or severe loss of function at or above the wrist and ankle of two or more limbs,
or total and irrecoverable loss of sight of one eye and complete or severe loss of
function at or above the wrist or ankle of one limbs.
All the disability as defied above must continue uninterruptedly for a minimum period of
six months confirmed by a physician, and admitted as Total and Permanent Disability,
and the liability shall accrue from the date of commencement of Total and Permanent
Disability.
Insurance premium is a sum of money agreed in insurance contract to be payed by
insured to the insurer for covering insureds risk. It could be paid through installment
monthly or annumly too,depending on how the policy was contracted and the terms and
conditions stated. It is based on the degree of seriousness the situation represent that
determine different premium an insured have to pay. In some companies, the employer

will deduct from employees monthly salary inorder to help them pay for their insurance
premium. An insured has to pay their premium on time to keep their policy activated for
coverage, the policy would be canceled automatically by itself if an insurance premium
is not paid when due. In this life assurance policy, it is stated that the premium is
charged RM1,200.00 semi annually which means RM2,400 for total annual regular
premium by the assured to the insurer. The premium is payable on the policy date every
6 months . the basic sum assured by insurer is RM50,000.00 but the total sum assured
after additional rider premium worth RM125,000.00 for the term of 85 years coverage.
The basic sum assured is the minimum amount to be received upon death before age
100. However the total can be increased or decreased with or without changing the
regular premium.
All in all, these few elements are main elements to form a insurance policy and tell us a
brief idea and overview who is the one being protected and who (insurance company) is
the one who protects the insurer and how much one should pay per annum or half an
annum in order to protected.