GIM1010 - Legal and economic basis of insurance: introduction
There is no statutory definition of insurance. This reflects the
antiquity of the concept and practice of insurance. General
insurance was in common use in international trade by the end of
the 14th century. In England an Act of 1601, setting up a tribunal
to settle insurance disputes, referred to the practice of insurance
as already having existed for “time out of mind”.
Templeman J in the case of Dept. of Trade and Industry v. St.
Christopher Motorists Association Ltd. (1974) (1 All ER 395)
commented on the difficulty of finding a definition:
‘...one looks first of all to the
statutes to see if they define insurance, and for reasons which are
understandable the result is a blank. There are various types of
insurance business on which the Acts concentrate, and no difficulty
has ever arisen in practice, and therefore there has been no all
embracing definition, and the probability is that it is undesirable
that there should be, because definitions tend sometimes to obscure
and occasionally to exclude that which ought to be
included.’
However, statute law refers to ‘contracts of
insurance’, and case law and economic theory provide
definitions of a number of the characteristics of insurance. In
summary, these characteristics are that:
- insurance requires a contract
- there should be an insurable interest
- there needs to be a degree of uncertainty about the event insured against i.e. a risk
- the contract should involve the transfer and sharing of the risk.
