Insurance Contracts CP - Law Reform Commission

and social provision be integrated with each other? The Commission has previously considered these
questions from the perspective of how to integrate considerations of legal principle with social justice and
social solidarity: see the Commission‘s 2002 Report on Section 2 of the Civil Liability (Amendment) Act
1964. 165 The Commission appreciates that our recommendation that an insurable interest is to vest in
cohabitants raises a number of issues that must be considered in broader socio-economic terms but that
such considerations go way beyond the ambit of this Consultation Paper.
2.95 The Law Commissions, in Issues Paper 4, also invited submissions on what should be done in
respect of other relationships, in particular:
―(1) should parents have an interest in the lives of their children under 18?
(2) should fiancé(e)s have interests in each other‘s lives?
(3) should siblings have interests in each other‘s lives?
(4) should grandparents and grandchildren have interests in each other‘s lives?‖ 166
2.96 The fact that these relationships have been separated from the position pertaining or proposed
by the Law Commissions in respect of spouses or civil partners, persons cared for and dependant on a
parent or guardian, parents and adult children, and cohabitees, tends towards an implicit assumption that
siblings, for example, are less likely to be in close or supportive relationships than a married couple.
While this may be so in many cases, it is just as foreseeable that two unmarried brothers may form a
dependant relationship that could render some insurance arrangement a prudent and socially desirable
step for them to take. Whether the moral hazard – the possibility that one family or blood relative might
take the life of another for financial gain – is stronger as between married persons than siblings is
presumably a matter of idle speculation but any actuarial information on this and other matters would be
welcome. 167
2.97 The Commission provisionally recommends that, in connection with life insurance, the following
should also be deemed to have an insurable interest in the life policy: (a) spouses in relation to each
other; (b) civil partners in relation to each other; (c) cohabitants in relation to each other; (d) a child in
relation to his or her parent or guardian; and (e) a dependant parent in relation to his or her adult child.
2.98 The Commission invites submissions as to whether, in connection with life insurance, the
following should also be deemed to have an insurable interest in the life policy: (a) a grandparent in
relation to his or her grandchild; and (b) siblings in relation to each other.
(2) Non Indemnity Insurance and the Insurable Interest
2.99 Non indemnity insurance, that is insurance which pays a fixed sum upon the risk materialising,
is generally associated with life policies but property insurance of many kinds is also effected on a non
indemnity basis. As Irish law does not currently contain an insurable interest requirement, the 1774 Act
not applying outside the area of life cover, an argument would have to be made for legislating for the
introduction of an insurable interest requirement to be introduced in non indemnity, non life insurance.
The only basis upon which such an argument can proceed revolves around either that of moral
hazard/deterrence, or public policy considerations that proscribe gambling. In the Commission‘s view,
neither of these considerations necessitate the introduction of an insurable interest requirement where it
does not currently exist.
(3) Moral hazard/deterrence
2.100 The argument that an insurance claim should only be honoured when the claimant can show
an insurable interest in order to deter fraud, or moral hazard, does not make very much sense. The
arsonist who has no interest in a property but who has an insurance policy in relation to that property
might fall under a greater degree of suspicion than any householder or property owner who has such an
165
166
167
Law Reform Commission Report on Section 2 of the Civil Liability (Amendment) Act 1964 (LRC 68-2002).
Issues Paper 4, para. 7.64.
The Law Commissions in their recently published Joint Consultation Paper 2011: Post Contractual Duties and
Other Issues, support broadening the categories of persons who may insure the life of another.
56