SINGAPORE Law and Practice Contributed by: Simon Goh and Wang Ying Shuang, Rajah & Tann Singapore LLP
ance products or coverage options are seamlessly integrated into a customer’s buying experience) also provide other popular channels of distribution. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer Insurance contracts are contracts uberrimae fidei – ie, they require the utmost good faith. This obligation to exercise the utmost good faith (imposed under com- mon law and also codified in the Marine Insurance Act 1906) has arisen frequently in connection with the insured’s duty to make a full and frank disclosure of all material facts to the insurer prior to the acceptance of the risk by the insurer. This is based on the assump- tion that the insured alone possesses the facts that would influence the mind of a prudent insurer in their computation of the risk, and there must be disclosure of such material facts in order to enable the insurer to assess the risk. The same legal principles with regards to disclosure apply to both consumer and commercial policies and reinsurance. The insured must therefore disclose to the insurer all facts material to an insurer’s appraisal of the risk that are known or deemed to be known by the insured but are neither known nor deemed to be known by the insurer. The onus is not on the insurer to proactively seek information. Information must be considered material in the eyes of a prudent and reasonable insur- er in order to be considered “material information”. An insurance law reform sub-committee (the “Com- mittee”) was formed by the Singapore Academy of Law’s Law Reform Committee in March 2017 to review the key areas of Singapore insurance contract law that are in likely need of reform. The main focus of the Committee’s work and review is on the duties of utmost good faith and disclosure, amongst other are- as. The “Report on Reforming Insurance Law in Singa- pore” was published by the Law Reform Committee in February 2020, with the proposed changes including different remedies for non-disclosure depending on whether non-disclosure was deliberate or reckless, and avoidance of policy only if the insurer would not have underwritten the risk if not for non-disclosure. In light of the Committee’s recommendations, there may
be changes to the law on material non-disclosure in the near future. 6.2 Failure to Comply With Obligations of an Insurance Contract If an insured fails to disclose material information that influences the insurer’s assessment of the risk, the insurer would be entitled to avoid the contract of insurance and repudiate liability for any claim that has arisen. 6.3 Intermediary Involvement in an Insurance Contract Typically, an insurance agent is deemed to be acting for and on behalf of the insurer, whereas an insurance broker is deemed to be acting for and on behalf of the insured. The law of agency would apply to insurance intermedi- aries, such that an agent acting within the parameters of their actual authority, whether express or implied, will bind the principal (whether it is the insurer or the insured). An insurance intermediary must act in the best interests of their principal, exercise reasonable skill and care, and act with reasonable speed. 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract Broadly speaking, there is no legal requirement for insurance contracts to be in a particular form, except for marine insurance (which must contain minimum particulars), life insurance and motor insurance, where it is necessary to have the policies in writing for enforcement purposes. Generally, the same legal principles apply to both consumer and commercial policies and reinsurance. Like any other type of contract, an insurance contract is only formed when there is an agreement on the material terms and a meeting of minds (consensus ad idem) between the insurer and the insured. The basic contract rule of “offer” and “acceptance” also applies to insurance agreements. What constitutes material terms would depend on the type of insurance con- tract, but typically material terms would comprise: • the subject matter of insurance; • the nature of the risks being insured against;
404 CHAMBERS.COM
Powered by FlippingBook