Circumstances affecting the Risk in Life Insurance
Risk in life insurance is the risk of death
at an early date due to disease or distinguished from accident
In. Thomson vs. Weems 1884 9 AC 671,681
Lord
Blackburn observed
“Those whose business is to insure lives
calculate on the average rate of mortality and charge a premium which on that
average will prevent their being loses.
a.
Age of the proponent.
b.
His family history.
c.
Personal health
d.
Moral history including habits
of life past and present.
e.
Geographical position &
occupation
Age
is an important material fact in life insurance as the rate of premium depends
on theage of the assured.
Case law:-Alliance and strutgarter Vs. Hemantha Kumar AIR 1938 Cal 641
Once it is written
Then it is admitted
In case of M.K. Shah V. Yorkshire Insurance Co. AIR 1938 Bom 161
Once the age is admitted by the insurer
then correctness of the age cannot be questioned unless the insurer can prove
that his admission was procured by the fraud of the assured.
{Section 45 of the Insurance Act 1938 says
After 2 years company have no right to reopen the things.}
The section generally provides that the
correctness of a representation shall not be questioned by an insurer after two
years but the proviso specifically makes an exception with reference to the
representation of the age in a proposal form.
·
According to this the insurer
is entitled to call for proof of the age from the assured at any time if the
same had not been proved and admitted as true by an endorsement on the policy
notwithstanding the fact that the requisition of the proof has been made by
insurer after two years.
·
When once a date is given as
date of birth and on subsequesnt verification after the issue of the policy the
date is found to be wrong it may result in either
Overstatement of Age :---------- Overage
Understatement of Age:---------Underage
In either case the original representation
becomes a misrepresentation, but effect on the validity of the policy is
different.
Ø If it is overstatement:- it is considered to be an innocent
misrepresentation as it will be against the interest of the maker and so in
such cases the validity of the policy is not affected. In such cases if the
insurer accepts the proof of age, he can be compelled to refund the excess payment towards the premium and to adjust the
rate for future payment according to the proved age.
Ø But when it turns out to be an understatement of age, if is proved
gross understatement or is proved to have been made willfully, it amounts to
fraud and the policy become voidable.
1.
The sum assured may be reduced
to such amount
2.
The assured may be required if
he wants to continue the policy for the entire insured amount to pay the
difference of premium with interest.
Hemmin’s v/s Scetore (1905) ch 365
Misstated age as 41 years through in fact
she was at that time forty-four years, of age. This fact was brought to notice of the insurers in 1997 and inspite
of that the insurers accepted the premiums for two subsequent year later they
demanded form the assignee a highter rate of premium ande also the difference
of premiums accumulate to date at the revised rate premium and the insurers
refused to receive the same.
If
after becoming acquainted with a breach of warranty the office continue to
treat the policy as valid it will be held to have waived the breach.
Family History
The
risk in life policies the assured and heredity throws sufficient light and play
an important role in the determination or the probable longevity of a person.
In
Asia
Assurance Company V/s Kartiya Devi 1936 Cal 437 The total numbers of
bothers and sisters had to be filled in one column and the actual number alive
in another column. The assured filled the first column but left the other b
lank. It was helf that answer amounted to suppression of truth and hence
amounted to misrepresentation and the policy was void.
Personal Health and Moral History
The
habits of life, past and present and which tend to shorten the life must be
disclosed ,e.g. the use of opium, tobacco or alcohol.
·
The present state of health is
important.
·
The past illness also become
important
·
Regulat habits regarding food,
sleep etc. tend to increase the longevity.
Geographical Position
The place where the applicant lives is
important as climate and environment have an appreciable effect on one’s
health. Unhealthy surrounding have a
tendency to shorten the life.
Further, the particular, place may be subject to earthquake, volcanoes
and floods.
Huguenin v/s Rayley Where the
assured gave his residential address but actually he was not there at that
time. It was held that the omission of this fact was fatal to the policy and
the insurance company was not liable.
Occupation
If it is a
dangerous occupation like a soldier, sailor, airman or workman in an ammunition
factory the insurers charge a higher rate of premium.
