Theory question 108
InsuranceCommerce 2 (answer five questions)
(a) What is meant by the term insurable risk?
(b) Explain any four circumstances when an insured may not be indemnified
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(a) An insurable risk is a risk whose chance of loss can be calculated from past statistics, so that an insurer can fix a premium for it (e.g. fire, theft, accident). Losses from speculative risks such as trade losses are not insurable.
(b) Any four, explained: the insured failed to disclose material facts (breach of utmost good faith); the insured has no insurable interest in the property; the loss was not proximately caused by the risk insured against; the loss was deliberately caused by the insured, or is fraudulent; the policy had lapsed or premium was not paid; the loss is excluded by an exemption clause; the insured tries to profit from the loss (indemnity/contribution limit the claim to the actual loss).
Link each circumstance to an insurance principle.