(a) What is meant by the term insurable risk? (b) Explain any four circumstances when an insured may not be indemnified.

(a) Meaning of insurable risk

An insurable risk is a risk that can be accepted for insurance because it satisfies certain conditions: it is a pure risk (offering only the chance of loss, not gain), the loss is accidental and unintentional, it is measurable in money, the insured has an insurable interest in the subject matter, there are a large number of similar exposures so that the chance of loss can be calculated, and the loss is not against public policy. Examples are fire, theft, motor accident and death.

(b) Four circumstances when an insured may not be indemnified

• Absence of insurable interest: if the insured has no legal or financial interest in the subject matter at the time of loss, he cannot be paid.
• Non-disclosure or misrepresentation: where the insured fails to disclose or gives false material facts, breaching the principle of utmost good faith, the insurer can refuse the claim and treat the policy as void.
• Loss caused by an uninsured (excepted) peril: if the loss arises from a risk not covered by the policy, no indemnity is payable.
• Fraud or self-inflicted loss: where the insured deliberately causes the loss or makes a fraudulent claim, or the loss results from his own wilful act, he is not indemnified.

(Indemnity is also refused where the proximate cause of the loss is not the insured peril, or where a claim is made after the policy has lapsed for non-payment of premium.)