Section 5:
Insurance
,Introduction
Definition
Definition 1
Type of contract in terms of which
The insured agrees to pay a premium
o To the insurer
In return, the insurer
o Undertakes to pay out either
A sum of money
Its equivalent
o In the event of the happening of
A specified uncertain future event
Known as the risk
In which the insured has an interest
Definition 2
An arrangement under which
An insurer contracts to do something
o That is of value to the insured
o Upon the occurrence of
A specific harmful contingency
Components of an insurance agreement
The insured
The person who purchases insurance cover
o Does this with the payment of premiums
The insurer
The person who provides insurance cover
The event/risk/peril
The event covered by the insurance
,Basis of Insurance Law
Common law
Mainly English Law
Legislation
Long-term Insurance Act 1998 (LTA)
Short-term Insurance Act 1998 (STA)
Consumer Protection Act 2008 (effective May 2011)
Policyholder protection rules 2004
Electronic Communications and Transactions Act 25 of 2002
National Credit Act 34 of 2005
Previous SA cases
Barloworld Capital v Napier 2005 SA
Trade practice or custom
Requirements
Uniformly observed by the industry
Long established
Well known
Reasonable
Certain
Foreign laws
Mainly used as persuasive evidence.
,Important Distinctions
Insurance & Wagers
Insurance
Intention of the parties
To guard against a risk event
Nature of the risk
Risk is beyond the insured parties control
Enforceability
Legally enforceable
Interest
The insurer has an insurable interest
Wagers
Intention of the parties
The intention is to gain money or financial benefit
Nature of the risk
Risk is created by the parties themselves
Enforceability
Despite being able to enter into a verbal contract they are not legally
enforceable
Interest
Parties don’t have this
,Insurance & Suretyship
Insurance
Contract
The contract is the principal obligation
Bilateral Relationship
Bilateral
Both are performing
Benefit
Both parties benefit
Suretyship
Contract
Accessory obligation and contract
Unilateral Relationship
Unilateral
Only the surety has to render performance
Benefit
Only the holder of the principle contract benefits
,Types of Insurance
General
Virtually anything may be insured
Nature and extent of the cover depends on
o The terms of the policy
o Not necessarily on the label given by the insurer
Indemnity Insurance
General
Also known as
Property insurance
Short term insurance
Regulated by
The short term insurance act
How it works
Process
Insurer undertakes to compensate
o The insured
o For damage he may suffer
o Through the occurrence of the event insured against
What can be recovered
Insured recovers only his actual financial loss
How the loss is recovered
An insurer can either
o Make a cash payment
o Reinstate the insured object by either
This can be through the restoration or repair of the object
To the condition in which it was before it was
damaged
The replacement of a destroyed object by a similar object
,Types of indemnity insurance (2)
Property insurance
All risks policy
Comprehensive insurance of property
o That covers
Loss
Damage
Destruction
o From any cause
Unless the cause is specifically excluded
Fire policy
Insures against either
o Damage
o Destruction
Caused by
o Fire
o Lightning
o An explosion
Theft insurance
Insurance against theft
That involves entry to or exit from premises
o By forcible and violent means.
o Shoplifting therefore wouldn’t count
Comprehensive motor vehicle policy
Insurance that covers both
o Loss of or damage
To an insured vehicle
o Liability for damage to the property of a 3rd party
Where such damage arises from an accident
Involving the insured vehicle
, Pecuniary Insurance
General Rule
Only the amount lost can be claimed
Consequential loss insurance
Protect business persons against
o Loss of profit
o Where his business is interrupted
Interruption examples
o Fire
o Strike
Credit insurance
Safeguards a business person
Against losses he would incurred if
o A debtor
Who has received the goods
o Is unable to pay
Fidelity policy
Covers loss caused by either
o Fraud
o Dishonesty of an employee
Public liability policy
Provides liability
o To members of the public
o For claims arising out of
Contract
Delict
Insurance
,Introduction
Definition
Definition 1
Type of contract in terms of which
The insured agrees to pay a premium
o To the insurer
In return, the insurer
o Undertakes to pay out either
A sum of money
Its equivalent
o In the event of the happening of
A specified uncertain future event
Known as the risk
In which the insured has an interest
Definition 2
An arrangement under which
An insurer contracts to do something
o That is of value to the insured
o Upon the occurrence of
A specific harmful contingency
Components of an insurance agreement
The insured
The person who purchases insurance cover
o Does this with the payment of premiums
The insurer
The person who provides insurance cover
The event/risk/peril
The event covered by the insurance
,Basis of Insurance Law
Common law
Mainly English Law
Legislation
Long-term Insurance Act 1998 (LTA)
Short-term Insurance Act 1998 (STA)
Consumer Protection Act 2008 (effective May 2011)
Policyholder protection rules 2004
Electronic Communications and Transactions Act 25 of 2002
National Credit Act 34 of 2005
Previous SA cases
Barloworld Capital v Napier 2005 SA
Trade practice or custom
Requirements
Uniformly observed by the industry
Long established
Well known
Reasonable
Certain
Foreign laws
Mainly used as persuasive evidence.
,Important Distinctions
Insurance & Wagers
Insurance
Intention of the parties
To guard against a risk event
Nature of the risk
Risk is beyond the insured parties control
Enforceability
Legally enforceable
Interest
The insurer has an insurable interest
Wagers
Intention of the parties
The intention is to gain money or financial benefit
Nature of the risk
Risk is created by the parties themselves
Enforceability
Despite being able to enter into a verbal contract they are not legally
enforceable
Interest
Parties don’t have this
,Insurance & Suretyship
Insurance
Contract
The contract is the principal obligation
Bilateral Relationship
Bilateral
Both are performing
Benefit
Both parties benefit
Suretyship
Contract
Accessory obligation and contract
Unilateral Relationship
Unilateral
Only the surety has to render performance
Benefit
Only the holder of the principle contract benefits
,Types of Insurance
General
Virtually anything may be insured
Nature and extent of the cover depends on
o The terms of the policy
o Not necessarily on the label given by the insurer
Indemnity Insurance
General
Also known as
Property insurance
Short term insurance
Regulated by
The short term insurance act
How it works
Process
Insurer undertakes to compensate
o The insured
o For damage he may suffer
o Through the occurrence of the event insured against
What can be recovered
Insured recovers only his actual financial loss
How the loss is recovered
An insurer can either
o Make a cash payment
o Reinstate the insured object by either
This can be through the restoration or repair of the object
To the condition in which it was before it was
damaged
The replacement of a destroyed object by a similar object
,Types of indemnity insurance (2)
Property insurance
All risks policy
Comprehensive insurance of property
o That covers
Loss
Damage
Destruction
o From any cause
Unless the cause is specifically excluded
Fire policy
Insures against either
o Damage
o Destruction
Caused by
o Fire
o Lightning
o An explosion
Theft insurance
Insurance against theft
That involves entry to or exit from premises
o By forcible and violent means.
o Shoplifting therefore wouldn’t count
Comprehensive motor vehicle policy
Insurance that covers both
o Loss of or damage
To an insured vehicle
o Liability for damage to the property of a 3rd party
Where such damage arises from an accident
Involving the insured vehicle
, Pecuniary Insurance
General Rule
Only the amount lost can be claimed
Consequential loss insurance
Protect business persons against
o Loss of profit
o Where his business is interrupted
Interruption examples
o Fire
o Strike
Credit insurance
Safeguards a business person
Against losses he would incurred if
o A debtor
Who has received the goods
o Is unable to pay
Fidelity policy
Covers loss caused by either
o Fraud
o Dishonesty of an employee
Public liability policy
Provides liability
o To members of the public
o For claims arising out of
Contract
Delict
