Analysis of the Basic Principles of Insurance Under the Nigerian Law of Insurance
Chapter One
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.
CHAPTER TWO
NATURE AND DEFINITION OF INSURANCE
INTRODUCTION
The practices of insurance businesses as they exist today are relatively young in Nigeria commercial venture. It is axiom that the importance of modern commerce in insurance cannot be over-emphasized as insurance industry, among its numerous functions, is a major mobilizer or funds for economic development, as well as being a provider of financial security for individual and corporate bodies.
Insurance is a contract by which one of the parties charges himself with the risk of the fortuitous accident to which something is exposed and obliges himself to indemnify the other from the loss in which those accidents may occasion in case of their happenings in consideration of a sum of money which the other contracting party gives as a piece with which he is charged. Social and economic changes open up new areas in which insurers are called upon to provide insurance coverage. Apart from natural risks to life, the risks to life from coups, kidnapping and political assassinations have become real and common. Also, the weaves of armed robbery and terrorism to property like frequent car theft to motor insurance policy holder is part of the new areas where the services of insurers are needed.
Thus, insurance has become the champion to combat the risks insured against by the insured and the reward of the promoter of this champion is reimbursement which places the insured in the same position he stands immediately before the risks occur and thus it has been jointly said ‘verily verily I say unto you brethren, if you belong to the right caucus and take the best insurance covers, no weapon fashioned against you including the EFCC shall prosper’.
DEFINITION OF INSURANCE
It is still a valid statement that even lawyers cannot give a definition to end or that will end all definitions, as insurance laws do not provide a definition to explain the meaning of insurance. As to this, the best a writer can do is to describe what is insurance and not to define insurance, that is, since there is no definition, the available description suffices as the definition of insurance for when there is no alternative, the available becomes the alternative.
It is pertinent to point out here that a good definition must combine legal, economic and social view points of insurance as to bring out the functions, features and purposes of the same. Greene’s definition combines both legal and functional approaches as it states that:
Insurance is an institution which reduces risk by combining under one management a group of object so situated that the aggregate accidental losses to which the group is subject becomes predictable but narrow limits.
CHAPTER THREE
THE BASIC PRINCIPLE OF INSURANCE UNDER THE NIGERIAN
LAW OF INSURANCE
INTRODUCTION
Insurance companies are established to provide financial security to their policy holders through the pooling of premiums, out of which those who suffer unexpected losses are indemnified. The relationship between the insured and the insured is contractual. It is, however, a contract with unique characteristics in that all the material information and circumstances of the subject matter of the contract are almost invariably, within the knowledge of the consumer.
Since the answer is required to bear a risk, the nature and scope of which are unknown to him, he has to develop certain principles to guide the parties to the insurance contract.
Generally these principles are
- Insurable interest
- Utmost good faith
- Premium
- Proposal
- Subrogation
CHAPTER FOUR
INDEMNITY, SUBROGATION AND PROXIMATE CAUSE AS
OTHER PRINCIPAL OF INSURANCE
INTRODUCTION
Essentially, contracts of insurance are governed by the general principle of contract but account of their special nature, all contracts of insurance are in addition governed by special or fundamental principle. These basic principles as noted earlier includes: insurable interest, utmost good faith, disclosure and proposal, premium, indemnity, subrogation and proximate cause.
CHAPTER FIVE
GENERAL CONCLUSION
CONCLUSION
It is trite that whenever you open a discussion with an average Nigerian on the issue of insurance, you would be amazed at the level of ignorance exhibited on the subject matter. An average Nigerian does heap on himself the burden he should not ordinarily, by refusing to subscribe to insurance noting that in a situation of loss or misfortune, such an individual is compelled to shoulder the burden but which he sometimes transfer to his relations.
This work is aimed at educating the public on what insurance is all about and to also shed more light on the insured’s interest known as ‘insurable interest’. Insurance is however not about death or misfortune, it’s about the creation and protection of wealth. The practices of insurance can help create wealth for the individual through provision of financial assistance for setting up of business concerns either through direct loans, policies or target savings plan.
It is worthy of note, that a mere expectation of loss from the destruction of or damage to the property is not enough, whether or not the insured will be in jeopardy if the subject matter is damaged or destroyed, the question that certifies a contract, as an insurance contract is ‘what thing of real value, will the insured lose as oppose to moral, imagined or emotional values of the subject matter of the insurance?’.
Therefore, the fundamental principles of insurance are the backbone of a contract of insurance; it distinguishes a genuine transaction from gambling or wagering contract.
RECOMMENDATION
The world hates change, yet it is only thing that has brought progress.
The world we currently live in is one that is comfortable with the status quo ante bellum where everything remains constant and a desire to forge ahead is not envisaged. However, it is only a change that can move the society forward, this was underscored by professor (Mrs) Ndi-Onyuike Okereke while commenting on the recapitalization in the insurance industry that this is new era for the industry, the men have been separated from the boys.
A cursory look at the application of the principle shows that it is the insured that suffers in most cases. Saying this will certainly be stating the obvious, as stated by MR.
IFEDOLAPO BALOGUN, this is the most critical period for the industry, as such, positive reforms must be embarked upon especially in relation to the modus operandi of the fundamental principles of insurance.
In the light of the above, it is therefore posited that the government and insurance practitioner will do well to consider the following recommendations viz:
- The insurers should try to indemnify the insured even when there is non-disclosure had occurred in good faith, that is, without fraudulent motive. It is submitted that insurers should not insist on technicalities or the extremity of the law because extreme law is the greatest injury.
- Advertisement of claims to reassure the general public that insurance companies pay compensation for losses. Claims payment remains the central issue in insurance contracts that basically ensures compensation of the insured when losses occur.
- The proposal forms should contain a warning to the proposer as to his duty to disclose material facts and the answer thereon should be required to be completed only to the best of the knowledge and belief of the proposer after making reasonable inquiries. A copy of the proposal form and/or any other written information supplied to him when the contract is concluded.
- The poverty rate in this country is having adverse effect on insurance in Nigeria. The government is therefore enjoined in its quest to reform insurance business, to also address this fundamental issue which has over the years made insurance practice dormant. This can be done by providing employment opportunities for the people and furthermore, empowerment through education must be championed.
- A section should be provided for in the Act, so as to make the principle of Subrogation and Proximate Cause more effective and have statutory enforcement.
BIBLIOGRAPHY
BOOKS
- Adeyemi Funmi, Nigeria Insurance Law. Lagos, Dalson Ltd., 1992
- Birds J., Modern Insurance Law, (3rd Sweet & Maxwell) 1993
- Blacks Law Dictionary, (6th by Henry Campbell Black, M.A. St. Paul Minn. West Publishing Co.) 1979.
- Collvivaux R., Law of Insurance(6th by R. Merkin Sweet & Maxwell) 1997
- Irukwu, J.O., Accident and Motor Insurance in West Africa(Law and Practice Heinemann) 1991
- Irukwu, J.O., Insurance Law and Practice in Nigeria(Sweet & Maxwell, London) 1971.
- Ivamy E.R.H., General Principles of Insurance Law(6th Butterworth) 1986
- Lord Chorley & O.C. Giles, on Shipping Law(8th, London) 1987
- MacGillivary and Parkington, on Insurance Law(8th by M. Parkington & Ors London). 1988.
- Orojo, Commercial Law & Practice(Sweet & Maxwell London,) 1982
- Bolaji O.B, ‘Modus International Law & Business Quarterly’June, (1999) Vol. 4. P. 73.
- Wolonieski J. ‘Defence Counsel Journal’, Jan 2002 at P. 50.
- The Business of Lawyer, vol. 42, No 2, Feb 1987 at P. 409
