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Insurance Law

Insurance:
(i) An undertaking of one person; (ii) to indemnify another person; (iii) to pay a sum of money or other thing of value; (iv) from loss or liability in respect of an event; (v) the happening of which is uncertain.

Insurance is one means of dealing with risk. The fundamental principle of insurance is a pooling of risks.

In the absence of insurance, three possible individuals bear the burden of an economic loss:

  • the individual suffering the loss;
  • the individual causing the loss via negligence or unlawful conduct; or lastly,
  • a particular party who has been allocated the burden by the legislature, such as employers under Workmen's Compensation statutes.
  • While types of insurance vary widely, their primary goal is to allocate the risks of a loss from the individual to a great number of people. Each individual pays a "premium" into a pool, from which losses are paid out. Regardless of whether the particular individual suffers the loss or not the premium is not returnable. Therefore, for example, when a building burns down, the loss is spread to the people contributing to the pool.

    Insurance companies are the safe keepers of the premiums. Because of its importance in maintaining economic stability, the government and the courts are very strict in ensuring these companies are regulated and fair to the consumer.

    References

    Insurance Canada

    The Financial Services Commission of Ontario

    Canadian Insurance & Finance Research Station

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