The Doctrine Of Insurable Interest - Essay Example

The earliest references to insurable interest simply emphasised this characteristic of insurance. Since the insurer's contractual undertaking was to indemnify the insured for patrimonial loss, the latter had to prove that he had a financial interest upon the happening of the insured event because there could be no loss without an interest. In this very respect insurance was considered to differ from a wager because wagers did not contain an indemnity clause. The English common law was much to the same effect until 1774 when the Life Assurance Act3 was adopted.

This Act introduced some important changes. South Africa inherited the English doctrine of insurable interest. This was brought about by certain colonial legislation4 which adopted English insurance law in the then Cape Colony and the Orange Free State. For this reason English law must be considered. In the recent case of Feasey v Sun Life Insurance Corp of Canada the Court confirmed that the interest necessary for life assurance must sound in money. At the same time it acknowledged the differences between indemnity and non-indemnity insurance.

Special emphasis is put on the question of precisely what interest the parties intended to insure. It is clear that English law has not made much progre. It has even been suggested that insurable interest in life assurance in many respects is clearly out of touch with reality and that reform is necessary.Some important aspects of the English rules on insurable interest have indeed become firmly entrenched by trade usage and no turn-around seems possible, e.g. the rule that a person may insure his or her own life and that of his or her spouse for any amount he or she deems appropriate.

On the other hand, some important matters must after the repeal of the provincial ordinances be considered as being open. Thus the question may be asked whether the existence of an actual insurable interest at the time of contracting is a separate requirement in law for the validity of a true contract of insurance. May a future interest for instance be insured on condition that the interest materialises before occurrence of the insured event (http://www.ombud.co.za/res/pdf/INSURABLE%20INTEREST%20IN%20THE%20CONTEXT%20OF%20LONG.pdf)Here there are in effect two questions.

The issue raised most commonly is whether the definition of insurable interest is too narrow. Should unmarried cohabitants not be able to insure each other's life even in the absence of financial dependency Should the requirement of a proprietary interest be retainedThe more fundamental issue is whether it is obligatory to keep hold of the doctrine of insurable interest at all. In United Kingdom it seems to have been eliminated for definite types of business.1 The problem will have to be measured in the light of apprehensions about moral risks and, at a lawful level, the probable result of the Gambling Act 2005, which makes gambling contracts enforceable.

Although the 2005 Act has not