A Critical Analysis Of The Requirements Of Insurable Interest Under The Nigeria Law Of Insurance

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A Critical Analysis Of The Requirements Of Insurable Interest Under The Nigeria Law Of Insurance

Chapter One

Nature And Definition Of Insurance

1.0 Introduction

Risk and uncertainty are incidental to life. Man may meet untimely death. He may suffer from accident, destruction of property, fire, floods, earthquakes and other natural calamities. Whenever there is uncertainty, there is risk as well as insecurity. People always want to avoid the financial consequences of these risks e.g replacing personal property that is lost or damaged. Insurance exists because risk exists. Insurance cannot remove the risk or the likelihood that one might become a victim of risks, but it ensures the transfer of all or some of the financial impact.

Insurance is a contract between two parties (insurance company (A) and the insured or policyholder (B) in which the risk is transferred to the insurance company in exchange for the payment (in advance) of a token called Premium with the insurance company agreeing to make good the loss to the policy holder whenever he suffers any loss. 1

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.

Insurance is a form of risk management; a risk- transfer mechanism. It is a method of coping with risk. Its primary function is to substitute certainty for uncertainty as regards the economic cost of loss-producing events and the aim is to compensate the owner against the losses arising from a variety of risks which he anticipates to his life, property and business. It is a means of pooling of risks, under which a group of people who are subject to an insurable risk contribute regularly to a fund. The fund so created is utilized to compensate those members of the group who actually suffer a loss due to some unexpected calamity. Thus the loss of a few is shared by all the members on an equitable basis. The practices of insurance businesses as they exist today are relatively young in theft to motor insurance policy holder is part of the new areas where the services of insurers are needed.2

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’.3

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