In an exciting collaboration between Minet Malawi, Britam, and The Daily Times - Malawi's leading newspaper - we are thrilled to introduce a groundbreaking initiative that will redefine your Wednesdays. Welcome to the Insurance Insights Column – a weekly rendezvous with the world of insurance and contemporary issues that matter. Every article aims to illuminate the intricate landscape of insurance products and relevant topics that impact us all. The articles will be educative at all levels, catering to both practitioners and non-practitioners.
As published in The Daily Times (Malawi) on May 22nd, 2024
Apart from drugs, liquor and arms, purchase of non-insurance products is open to everyone as long as one has effective demand vis-à-vis Kwacha terms. It is important to understand that purchase of insurance is not open to certain categories of people. Put it directly - not all of us have legal capacity to enforce an insurance policy, when required or challenged to do so. Insurers demand that buyers of insurance contract must, in the eyes of the law, have legal powers to bind themselves by the contract that they are proposing.
For a start, insurance sold to a minor, individuals who are under the influence of alcohol, chamba or any drugs, mentally disordered, certain professions and aliens in time of war, are inadmissible in time of dispute or when faced with a claim.
In Malawi, a minor is a person, who is under 18 years of age. According to laws of Malawi, a minor cannot exercise his or her right to vote in a general and or parliamentary elections - never mind whether this happens or not happens on the ground. It’s a story of another day.
Definition of minor varies from one jurisdiction to another. In insurance, it is not only unethical, but treacherous for an insurer to go into contract with someone who is under-aged. This is the reason pension administrators create minors trust account for under-aged beneficiaries.
If an insurer deliberately sells a policy to a minor, the contract is not invalid per se in the eyes of the law, such insurance policy is unenforceable by the insurer. Any breach of policy condition by the minor will not apply as far as the underlying insurance contract is concerned. As a matter of fact, a minor has an upper hand against an insurer, when it comes to enforcing provisions of an insurance policy.
Breach of policy condition invalidates a contract. An insurer has power to cancel your policy ab initio - from inception.
However, an insurer cannot apply this rule on a minor. Insurer’s hands are tied. For example, if a minor lodges a claim on a policy, whose premium has not been paid, the insurer is obliged to honor the claim in its entirety, notwithstanding breach of premium payment condition.
An insurance contract entered into by a lunatic or mentally disordered person or a person who is under the influence of alcohol or Nkhota-kota gold (chamba) is also invalid, in the eyes of the law. However, if the drunkard or the mentally disturbed person is able to prove that he knows what he is doing in that intoxicated state, the underlying insurance policy is binding. The contract will equally apply if the insurer is not aware that the person that they are dealing with is drunk or senile.
The question that quickly comes to mind is ‘how do insurers protect themselves from falling into the trap of selling policies to such people?’ In order to overcome this, insurers require that every prospective policyholder must complete a proposal form, where among other things, one is expected to sign a declaration, proving that the information provided to the insurer, in entering into the contract, is true and accurate to one’s best knowledge and belief at that material time. Insurers are shrewd - are they not? You would not expect someone who is mentally disturbed or under the influence of alcohol to make such a declaration. Would you?
Similarly, a trading corporate body, such as a public company, usually has an implied power to effect insurance cover on the life of its employees and assets. This has always been the tradition in commerce. By virtue of being one’s employer, has insurable interest in its staff and assets.
In insurance law, insurable interest is defined as a financial relationship that exists between an insured and a subject matter of insurance. The fact that an unforeseen circumstance, such as death or accidental injury to an employee or damage to property, makes an employer - corporate or individual - inconvenienced, gives it or him legal right to insure.
Depending on circumstances, insurance policies written to aliens are ineffective. The tradition has been that any life or personal accident policy taken by an enemy alien during state of war is rendered void.
In the same way, members of some professional bodies may be subjected to certain requirements before cover is provided.
Views from the top are that before proposing cover, it is important to mull over your status or circumstance in order to decipher insurance contractual capacity to avoid your policy being made unenforceable and void - especially when it matters most - in time of a claim. Talk to us. We are here to serve.
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