SINGAPORE Law and Practice Contributed by: Simon Goh and Wang Ying Shuang, Rajah & Tann Singapore LLP
6.5 Multiple Insured or Potential Beneficiaries The common law doctrine of privity of contract applies to contracts of insurance. However, legislation has intervened and this position is modified by the Con- tracts (Rights of Third Parties) Act 2001, by virtue of which a third party to an insurance policy may be able to enforce the terms of the policy if it is found that: • the policy expressly provides that they may do so; or • the terms of the policy purport to confer a benefit on them. It is therefore not surprising that most insurance poli- cies contain express wording that excludes the appli- cability of the Contracts (Rights of Third Parties) Act 2001. There are also other statutory exceptions to the doc- trine of privity of contract for insurance contracts, including: • certain provisions under the Conveyancing and Law of Property Act 1886; • the Third Parties (Rights Against Insurers) Act 1930; and • the Motor Vehicles (Third Party Risks and Compen- sation) Act 1960. 6.6 Consumer Contracts or Reinsurance Contracts The position does not differ with regard to consumer contracts or reinsurance contracts. Whether ART transactions, such as industry loss war- ranty contracts and insurance-linked securities (ILS), are considered to be insurance products depends on how the underlying risks are structured for effective risk transfer. As mentioned in 2.2 Writing of Insur- ance and Reinsurance , the Insurance Act currently only recognises two traditional types of insurance business: general and life business. The Insurance Act also does not contain any express definition of what constitutes a (re)insurance contract. 7. Alternative Risk Transfer (ART) 7.1 ART Transactions
• the period of insurance; and • the rate of premium (although not necessarily the exact amount of premium to be charged). Apart from the above, an essential ingredient of insur- ance contracts is the requirement of “insurable inter- est”. Section 146 (1) of the Insurance Act provides that a life policy insuring the life of a person is void unless the person effecting the insurance has an insurable interest in the life that is insured at the time when the insurance is effected. Similarly, Section 151 (1) of the Insurance Act – which was imported from the UK Life Assurance Act 1774 and applies to all insurance con- tracts with the exception of insurance cover on ships or goods or contracts of indemnity against loss by fire or loss by other events – provides that “No insurance shall be made by any person on any event wherein the person for whose use or benefit or on whose account the policy is made has no interest, or by way of gam- ing or wagering; and every assurance made contrary to this subsection shall be void”. Furthermore, Section 5 (1) of the Civil Law Act 1909 dictates that all con- tracts or agreements by way of gaming or wagering shall be null and void. Whilst Section 151 of the Insur- ance Act does not apply to marine insurance poli- cies, the requirement for insurable interest in marine insurance contracts is already provided for under the Marine Insurance Act 1906. Another unique feature of insurance contracts is that they require utmost good faith. As mentioned in 6.1 Obligations of the Insured and Insurer , the principle of utmost good faith most frequently manifests itself in an insured’s duty to make full and frank disclosure of all material facts to the insurer. The general rule on material non-disclosure is that, with certain excep- tions, an insured must 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. A fact is considered material if a prudent insurer would take it into account in fixing the premium or in deter- mining whether they would accept the risk (at all or on certain terms). A breach of this duty of disclosure by the insured entitles the insurer to avoid the contract of insurance; to do so, the insurer must show that the non-disclosure induced the making of the contract on the relevant terms or at all.
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