Insurance law

In those early days, insurance was intrinsically coupled with the expansion of mercantilism, and the exploration (and exploitation) of new sources of gold, silver, spices, furs, and other precious goods - including slaves - from the New World.

"[1] The expansion of English maritime trade made London the centre of an insurance market that, by the 18th century, was the largest in the world.

Underwriters sat in bars, or newly fashionable coffee-shops such as those run by Edward Lloyd on Lombard Street, considering the details of proposed mercantile "adventures" and indicating the extent to which they would share upon the risks entailed by writing their "scratch" or signature upon the documents shown to them.

At the same time, eighteenth-century judge William Murray, Lord Mansfield, was developing the substantive law of insurance to an extent where it has largely remained unchanged to the present day - at least insofar as concerns commercial, non-consumer business - in the common-law jurisdictions.

At common law, the defining concept of a contract of commercial insurance is of a transfer of risk freely negotiated between counterparties of similar bargaining power, equally deserving (or not) of the courts' protection.

The underwriter has the advantage, by dint of drafting the policy terms, of delineating the precise boundaries of cover.

In civil law countries, insurance has typically been more closely linked to the protection of the vulnerable, rather than as a device to encourage entrepreneurialism through the spreading of risk.

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.

In return, a reinsurer must appropriately investigate and reimburse an insurer's good faith claim payments, following the fortunes of the cedent.

Thus, this type of regulation governs capitalization, reserve policies, rates and various other "back office" processes.

The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated.

As a preliminary matter, insurance companies are generally required to follow all of the same laws and regulations as any other type of business.

[10] The agency then creates a group of administrative regulations to govern insurance companies that are domiciled in, or do business in the state.

In the United States and other relatively highly regulated jurisdictions, the scope of regulation extends beyond the prudential oversight of insurance companies and their capital adequacy, and include such matters as ensuring that the policy holder is protected against bad faith claims on the insurer's part, that premiums are not unduly high (or fixed), and that contracts and policies issued meet a minimum standard.

A notable example of this is where Zurich Financial Services[12] - along with several other insurers - inflated policy prices in an anti-competitive fashion.

In more severe cases, or if the party has had a series of complaints or rulings, the insurer's license may be revoked or suspended.