Analysis of the Basic Principles of Insurance Under the Nigerian Law of Insurance
Chapter One of Analysis of the Basic Principles of Insurance Under the Nigerian Law of Insurance
INTRODUCTION
Due to the high level of illiteracy in the Nigerian society, many people are unaware of insurance policies. However, with the enactment of Insurance Decree[1], the awareness of insurance policies was enhanced. Thus, more people took steps to insure their properties or lives. Unfortunately, however, much as the high percentage of them normally end up unable to have their claims indemnified, either as a result of a breach of one insurance principle or another. These principles are numerous and they are the basis upon which insurance contracts are based. Failure to adhere to any of the principles may render an insurance contract void. The need to understand as well as having a second knowledge of the basic principles of insurance cannot be over emphasized.
These principles of insurance which are i) Insurable interest; ii) Utmost good faith/Duty of disclose; iii) Subrogation; iv) proximate cause; v) Indemnity; vi) ‘No Premium, No Policy’, are the bedrock of insurance contract, the absence of any of which the purpose of insurance will be defeated.
The purpose of insurance cannot be farfetched. This can easily be seen from the various definitions of insurance. Insurance contract has been defined in the case of PRUDENTIAL INSURANCE COMPANY V INLAND REVENUE COMMISSIONER[2], as
a contract whereby a person called the ‘insurer’ undertakes in return for the consideration called the premium to pay another person called the ‘assured’ a sum of money or its equivalent on the happening of a specified event
Insurance is an intricate economic and social device for the handling of risks to life and property. It is social in nature because it represents the various co-operations of various individuals for mutual benefits by combining together funds to reduce the consequence of similar risk.
Simply put, insurance is the placing back of a person who has suffered a loss in the same position he was before loss occurred. It aims to eradicate the consequence of a loss by not allowing the insured to suffer the consequential loss. However, as earlier stated, unless one meets the requirements of all the basic principles of insurance, he will be estopped from claiming under an insurance contract.
BACKGROUND TO THE STUDY
Insurance law is reputed for its general principles, and the principles of indemnity is one of them, others are insurable interest, utmost good faith, subrogation, contribution and proximate cause. A principle denotes a general guiding rule, which does not include specific directions, which vary according to the subject matter.
The basic principles applicable to insurance law flow from the nature of insurance contract as conceived, many years ago, by Law Merchants and taken over by the Common Law. The principles are common to all classes of insurance, both life and nonlife and both marine and non-marine. By its nature, insurance contract postulates that a sum of money will be paid on the happening of the insured event by the insurers; however, the event must be uncertain. The uncertainty related to whether the event will ever happen as in fire or accident insurance or as in life insurance where death is a necessary end to all human life, but the time of death is uncertain. In comparison with other areas of the law, there is no other law, which attracts the number of general principle s with deep-rooted effect as insurance.
AIMS AND OBJECTIVES OF STUDY
The aim of this topic is to enlighten the general public about this area of insurance, which though seem insignificant yet is the basis of the insurance contract. This topic therefore aims to consider the position of the insurer as well as the insured. Also, the aims and objectives of this study is to eliminate or at least to minimize such misunderstandings by stating the ‘rules of the game’ for the benefit of the parties taking part in the insurance contract or transaction.