Marine insurance is believed to have been the earliest form of insurance, although group self-insurance known as mutuality was also in practice prior to that. The origins of marine insurance can be traced back to Italian financiers from Lombardy and merchants associated with the Hanseatic League during the 12th and 13th centuries. This form of protection documented its recognition through Lombard Streest, and until 2005 all, common law jurisdictions require the insured to have an insurable interest in the subject matter of the insurance. An insurable interest is that legal or equitable relationship between the insured and the subject matter of the insurance, separate from the existence of the insurance relationship, by which the insured would be prejudiced by the occurrence of the event insured against, or conversely would take a benefit from its non-occurrence. Insurable interest was long held to be morally necessary in insurance contracts to distinguish them, as enforceable contracts, from unenforceable gambling agreements (binding “in honour” only) and to quell the practice, in the seventeenth and eighteenth centuries, of taking out life policies upon the lives of strangers. The requirement for insurable interest was removed in non-marine English law, possibly inadvertently, by the provisions of the Gambling Act 2005. [citation needed] It remains a requirement in marine insurance law and other common law systems, however; and few systems of law will allow an insured to recover in respect of an event that has not caused the insured a genuine loss, whether the insurable interest doctrine is relied upon, or whether, as in common law systems, the courts rely upon tt located within City Of London; it remains one of today’s oldest trading markets for insurances. In these early days, mercantilism played a pivotal role in shaping this industry by exploring new sources for precious goods like gold, silver spices or fur – including slavery exploitation across newly discovered territories worldwide. For those involved in maritime trade ventures, insuring against losses ensured they wouldn’t suffer undue repercussions individually if something went wrong with their cargo ships: “the loss lighteth rather easily upon many than upon few… whereby younger merchant adventurers are allured into venturing more willingly and freely.”
As English maritime trade grew, London became the hub of an insurance market that eventually emerged as the world’s largest by the 18th century. Underwriters would convene in pubs or trendy coffee shops like Edward Lloyd’s on Lombard Street to mull over proposed commercial “adventures.” They’d then signal their willingness to assume risks associated with these ventures by penning their distinctive mark – also called a “scratch” – onto paperwork presented for review.
During the 18th century, William Murray, also known as Lord Mansfield and a judge at the time, was instrumental in shaping insurance law. Thanks to his work on this subject matter drawing from “foreign authorities” along with inputs provided by knowledgeable merchants of that era – particularly related to commercial operations not meant for individual consumers – many concepts remain unaltered today within common-law jurisdictions.
The principles that were prevalent across the commercial world and deemed as common law of the sea, along with those governing merchants, became a reliable point of reference for any insurance-related queries. This explains why his judgments attained great renown and garnered wide respect even in foreign lands.
During the 19th century, membership of Lloyd’s underwent regulation. The corporation was officially established through the passing of the Lloyd’s Act in 1871 with its main purpose being to provide a marketplace for members, commonly referred to as “Names.” In addition, general insurance law was codified into one entity known as Marine Insurance Act 1906 at the beginning of the twentieth century. Since then, marine and non-marine insurance laws have diverged while still retaining their fundamental principles that were originally shared.
Insurance principles
Former British empire members including the United States, Canada, India, South Africa and Australia have legal systems originating from England and Wales referred to as common law jurisdictions. These differ from civil law counterparts due to their reliance on judge-made laws and adherence to stare decisis – courts being bound by prior rulings of higher or equivalent status. Pertaining specifically to insurance-related matters in early commercial judgments made by jurists like Mansfield,Lord Eldonand Buller were binding—or at minimum highly influential—for future judges who faced similar questions of law even beyond English borderlines.
In a commercial insurance contract under common law, the transfer of risk is negotiated between parties with similar bargaining power. Both parties are entitled to equal protection by courts. The advantage lies with the underwriter as they draft policy terms and define coverage boundaries precisely. On the other hand, prospective insured individuals have an equal opportunity to understand proposed risks in greater detail than what an underwriter could know. Therefore, English commercial insurance decisions hinge on linked principles where (1) Policy-makers must abode by their policies’ prescribed conditions; and (2)Risks should be accurately described so that nothing critical enough for decision-making has been misrepresented or concealed from them
In countries with civil law systems, the function of insurance is often seen as protecting vulnerable individuals rather than promoting entrepreneurship and risk-sharing. Compared to common law jurisdictions, civil law jurisdictions generally have more stringent regulations governing the contents of insurance agreements that favor insured parties. Common-law principles are typically applied in resolving commercial insurance disputes worldwide. This means insurers and insureds share an equal burden when it comes to economic risks associated with insuring against certain events. Until 2005, all common-law jurisdictions mandated that a person purchasing an insurance policy must demonstrate some form of insurable interest in their subject matter for coverage to be valid. An individual has “insurable interest” if they stand either benefit from or lose something due to any adverse occurrence related to what’s being covered by the policyholder. The requirement for demonstrating an insurable interest clause existed primarily within marine legal frameworks widely practiced at present but lost its relevance elsewhere over time—it was even removed involuntarily through provisions set forth by England’s Gambling Act 2005—this mandate remains unchanged only within specific areas governed under traditional maritime statutes globally . Few national legal structures allow payouts concerning unforeseen cover losses besides those incurred previously on account holders’ policies where actual damages can independently show financial loss without referring back solely towards compliance rules based upon obsolete doctrines like mandatory possession requirements used formerly carried out during uncertain market conditions prevalent till around sixteenth century Europe’.
What are the key principles of insurance?
Outlined below are the 7 essential principles of Insurance: [4]
