HISTORY OF INSURANCE

Owners of the company develop a system in which they could not lose the items in their vessels they
were carrying in high seas. Marine owners then agreed to share the risks and possible financial losses.
They came up with marine policies which were able to protect them from financial losses to occur.
Fire insurance policy was also developed as a result of the London fire of 1666; about 85% of the
houses were burnt to ashes. In 1681, the fire insurance policy was then established in England. With the
colonial development of England, the fire insurance spread around the world.

Life insurance made first appearance in England in 16th century. It also spread to USA-Africa.
Miscellaneous insurance also took place in the 1960's with industrial revolution in England.
Liability Insurance and accident insurance became very important.
Insurance can be divided into different categories:

From business point of view insurance can be;

• Life insurance
• General insurance
• Social insurance

Life Insurance
Life insurance is different from other insurance because of the subject matter of life of a human being.
The insured is meant to pay a fixed premium so that at the time of death or expiry of a certain period
he/she would be paid a certain amount.

Today's life insurance enjoys a larger scope because

• Life is the most important priority to the individual and society. Each person therefore requires
insurance. Insurance would provide protection to a family at immature death or give adequate
amount at an old age when earning capacity is loss/reduced.
• General insurance includes: property insurance, liability insurance and other forms of insurance.
Fire and marine are called property insurance.
• Social Insurance provides protection to the weaker section of the society who are unable to pay
premium for adequate insurance e.g. NHIF, NSSF are various forms of social insurance.
 • Insurance can be divided into property, liability from the risk point of views
• Property insurance from / under the insurance cover of the property of a person in the insurance
company seeks to compensate / absorb the loss to a property.
Risk include when there is fire, theft or damage.
Property insurance did cover the marine against the risk faced in ocean.
Fire insurance covers the risk of fire when property is burned. Fire insurance provide certain
consequential.
Liability insurance from the risk point of view refers to where the insured is liable to pay the damage of
a property or to compensate the loss due to a personal injury.

The insurance products are expanding rapidly. It is important to know the kinds of insurance.
i. Personal insurance
ii. Property insurance
iii. Liability insurance
iv. Fidelity insurance

Personal insurance, life insurance, personal accident insurance, health insurance

Property insurance, marine, fire, automotive insurance, machinery insurance, theft insurance.
Liability insurance, third party insurance policy, motor insurance, re-insurance.
Guarantee insurance covers loss arising due to dishonesty, disappearance or disloyalty of the employer.
The insurance organisations therefore are developed in different forms with the advancement of
insurance practices. Some include self-insurance, individual insurance, partnership insurance mutual
companies, state insurance, corporate insurance. e.t.c.

Purpose of insurance
• Insurance provides security and safety to individual
• Provides peace of mind to policy needs for individual
• Insurance eliminates dependency
• Insurance encourages saving
• Provides profitable investments
• Insurance fulfils need of a person.
For Business.
1) Insurance uncertainty of business losses
2) Business efficiency is increased
3) Indemnification
4) Enhancement of credit
5) Business continuation
6) Welfare of employees

For Society
• Societies wealth is protected
• Economic growth of the country
• reduction in inflation
• It helps to reduce possible destruction of property to society

Insurance and the Law

Insurance practice requires a good understanding of the law.
Insurance is defined as a contract between two parties whereby one party (insurer) undertakes in
exchange for a fixed amount of money on the happening of a certain event.
Insurance deals with the general elements of a contract as well as special contract relating to insurance.
Insurance contract therefore involves the two elements i.e. General contract and special contract.
Special contract of insurance involves principles which include insurable interest, utmost good faith,
indemnity, subrogation, warranties, proximate cause, assignment and nomination e.t.c.

E.g. Mark bought a house and needed some fire insurance. He went to the next broker who
recommended an appropriate insurance company, Mark bought a house hold insurance policy. Mark's
house was destroyed by fire and the insurance company paid the claim.

From the specific point of view;

How can you relate with the: - Law of agency
- Law of contract
- Law of proximate cause
1) The broker becomes an agent.
2) Mark agreed to pick a contract and thus the law of contract.
3) Before paying the claim, the insurance has to decide what was the proximate cause of the fire.

A general valid contract must have the following:

a) Agreement (offer and acceptance)
b) Legal consideration
c) Competent people who make the contract
d) Free consent
e) No mistake
f) No miss representation
g) No duress or undue influence.

Under the English law, a contract is an agreement between two or more participants which is legally
binding. It states that if a party is in a contract, thereafter, one of the parties breaks that agreement,
he/she may have to pay damages to other participants.

Under the insurance contract, offer and acceptance is very critical. The offer for entering into a contract
may generally come from the insured. The insurer may also propose to make a contract whether the
offer is from the insurer / insured, the main fact is acceptance. It is therefore critical for the insurance
contract to have clear terms of offer and the acceptance of contract.

In the contract of the insurance, the details such as price, period of cover and extent of cover must be
very specific.
A contract is only valid when the offer is has been unconditionally occupied.

An insurance contract must contain three layers of consideration;

The premium to pay a specific amount at a given time and give a clear valid consideration by the
payment of the premium. In absence of a premium there is no valid contract. Insurance companies will
only pay for the losses or to give protection against possible losses when there is a payment of
premium.
Legal capacity and competence to make a contract is impossible.
Every person is competent upon; -Age is acceptable
-Insurer is of a sound mind

A minor is not competent to a contract. It's void. A person is said to be of sound mind if that person is
able of understanding a contract and capable of forming rational judgement to the effort of the contract
in his interest.

A person of unsound mind but occasionally of sound mind may make a contract when he is of a sound
mind.