Policies and Perceptions of Insurance: An Introduction to Insurance Law
Book by Clarendon Press, 1997
Preface
The book is an introduction to insurance contract law in the United Kingdom today. As such, however, it contains not only summaries of settled and satisfactory legal rules but also discussion of more controversial matters, with an attempt to flag which is which. On these matters, it is less an insider's invitation to come in and look round than a view from the outside, the view of an academic of an industry which in the past has not exhibited a conspicuous regard for academe. It is said, and not only by insurers, that academics sit in silicone towers and suffer ivory illusions. Be that as it may, from some towers on a good day one can see a long way. Whether this book was written from the right tower on a good day is for the reader to decide. I have been helped in various ways and various degrees by many people, among them Derek Cole, Gordon Cornish, Martin Davies, Valerie Fogleman, Lis Frost, Charles Goldie, Marit Halvorsen, Brian Haynes, Bob Hepple, Martin Hoskins, Gareth Jones, Ben Jupp, Martin Kemp, Keith Loney, Robert McCorquodale, Tony Paish, Laurie Slade, John Spencer, Peter Stein, Lloyd Watkins, and Gunther Wiese. I am most grateful to all of them. Above all, however, I have had the scholarly support of Peter Cane and Jane Stapleton. It has been a great good fortune to work with them, not only because of their devotion as editors but also by reason of their expertise in some of the areas touched on in the book. Finally, I hope that readers from other parts of the United Kingdom will forgive the author, who was born in Wales, for referring to what is their law too as English law. The Insured
Risk
To the actuary, risk is the 'probability that a particular adverse event occurs during a stated period of time or results from a particular challenge' where 'an adverse event is an occurrence producing harm'. This was the conclusion of a report of the Royal Society, 1 which was not confined to insured activity but at a broad spectrum of activity. To insurers, probability matters in order to rate the risk and calculate premium: see 38 below. To insurers, the risk is the chance of loss of the kind insured. Loss means both loss in the literal sense of deprivation (e.g. robbery) and financial loss -- the impact of events (e.g storm damage) on the economic well-being of the insured. Insurers are concerned not only with whether the loss will occur (e.g. fire) but also, in cases in which loss is more or less bound to occur, with when it will occur (e.g. death) or the extent of loss (e.g. the damage to a London taxi in the course of the period insured).
To the insured, as conceived by the insurance economist, the 'concept of risk comprises two components -- a detriment aspect and an uncertainty aspect'. 2 As regards the detriment, by taking insurance, the financial element in the detriment, although no longer a risk but a certainty, is reduced to the level of the premium; and the inconvenience element is curtailed to the time it takes to find insurance and, if the risk strikes, to obtain indemnity. As for the uncertainty and whether the risk will strike, that is not reduced objectively. Subjectively, however, just as some people say that as long as they take an umbrella it never rains, some people feel that insurance serves as a 'charm' which wards off the danger. Uncertainty is reduced objectively, however, as to the extent of the detriment, notably the...
