Insurance Legislation
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ABOUT INSURANCE .....
gives you a quick guide to the history, nature, legislation, functions and organisations of insurance in Malaysia
Insurance legislation

The Insurance Act was introduced in 1963 and it is the main set of rules and regulations governing the operation of life and general insurance business in Malaysia. The Insurance Act, 1963 and its subsequent amendments provide the Director-General of Insurance (DGI) with the process of general supervision and control of the insurance industry. The life and general insurance business, just as any other form of business, is subject to other statutory laws. Some of these are:-
  1. Companies Act, 1965
  2. Malaysian Income Tax Act, 1967
  3. Unclaimed Monies Act, 1965
  4. Civil Law Act 1972, and
  5. Estate Duty Enactment Act, 1941

Law of Contract

A contract is an agreement between 2 or more parties. The parties to an insurance contract are the insured and the insurer. However not all agreements are contracts. To constitute a contract the following elements are essential:-

  1. Offer and Acceptance - the proposer makes the offer to the insurer. If satisfied with the risk, the insurer accepts it.
  2. Consideration - the insured's consideration is the premium and the insurer's is the promise to provide indemnity in the event of a loss. If the insured fails to pay the premium, the contract is not valid and the insurer therefore will not be liable for any claim. However, Section 44A of the Insurance Act, 1963 has amended this position in respect of motor insurance contracts. The insured is required to pay the premium on the day he is afforded insurance cover. Once a cover note or a policy is issued, it is taken that the contract is valid. If the insurer failed to collect the premium, the insurer cannot subsequently repudiate liability on the grounds that consideration was not furnished.
  3. Consensus ad idem - both parties should agree to the same thing with the same mind.
  4. Capacity of the parties - minors and persons of unsound mind cannot enter into contracts. But the Insurance Act, 1963 provided legal capacity to anybody above 16 and on condition that the written consent of the parent/guardian is obtained for those above 10 but below 16.
  5. Legality of the contract - the subject matter of the contract must be legal. For example, stolen goods cannot be insured.

All contracts are governed by the general principle of the law of contract as specified in the Contracts Act, 1950.

Law of Agency

The law of agency is the law governing situations where one party, the principal, is represented by or acts through another, the agent, in a matter that may create a legal relation between the principal and a third party. In such an event, the principal may incur a liability to a third party whilst the agent is under no such liability. This is summed up by the legal maxim 'qui facit per alium facit per se' which means 'he who does something through another does it himself'.

 

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