REFORMING INSURANCE LAW: - Law Commission

changing market, and the Court of Appeal in the most recent authority has considerably relaxed
the definition. 402
8.7 The Australian approach has been robust. 403 The Insurance Contracts Act 1984, s 16,
abolished the need for insurable interest at the date of the policy for non-life and non-marine
covers. The ALRC in its 1982 Report had recommended this step, 404 but the ALRC by a
majority recommended that the requirement be retained for life assurance. However, life
insurance was subsequently brought into line by the insertion of a revised version of s 18 of the
1984 Act 405 once it had become apparent that the anti-wagering laws served no useful purpose. 406
The author has been informed that the insurable interest sections have not given rise to any
difficulties in Australia, although Mann has commented that in the life market the existence or
otherwise of an insurable interest at the outset is now an underwriting matter. 407 The Australian
legislation has thus repealed the Marine Insurance Act 1788 and the Life Assurance Act 1774 so
far as they applied in that jurisdiction. Section 20 of the Insurance Contracts Act 1984 confirms
that the pre-existing technical requirement for the beneficiary to be named in the policy is no
longer part of the law.
8.8 The 1984 Act has also removed any argument that there is a need for insurable interest
strictly defined at the date of the loss. Section 17 provides that the assured is able to recover if he
has suffered a pecuniary or economic loss, and it is irrelevant that he does not possess a legal or
equitable interest – previously the manner in which insurable interest had been defined – in the
insured subject matter. The need for a definition of insurable interest is thus replaced by the
question of whether the assured has suffered any loss by the occurrence of the insured peril. 408
This section does not apply to life assurance, and it remains the case that there is no indemnity or
insurable interest requirement for a life policy.
8.9 The Australian Marine Insurance Act 1909 is unaffected by the 1984 changes. 409 The ALRC
in its investigation into marine insurance considered the question at length, and its 2001 Report
recommended wholesale changes to the legislation. A particular focus of its recommendations
was the decision in NSW Leather Co Pty Ltd v Vanguard Insurance Co Ltd 410 in which it was
held that the purchaser of goods on FOB terms had no insurable interest in goods stolen before
loading as at that time neither property nor risk had passed, although he was ultimately able to
recover on the ground that the goods had been insured on a “lost or not lost” basis and that the
402 Feasey v v Sun Life Assurance of Canada [2003] Lloyd’s Rep IR 637.
403 Sutton, chapter 6; Mann, paras 16.10 to 18.20.
404 ALRC 20, Chapter 5.
405 By the Life Insurance Act 1995 and the Life Insurance (Consequential Amendments and Repeals) Act 1995.
406 This had been the dissenting view of Kirby J in the ALRC Report. See paras 145-146.
407 Mann, para 18.20.
408 See ALRC 20, para 120 for this recommendation. The width of the test was noted in Advance (NSW) Insurance
Agencies Pty Ltd v Matthews (1998) 12 NSWLR 250. It is inherent in the section that the insurers will not be liable
to the assured and others for more than the full insured amount arising out of the same loss.
409 Galbraith “An Unmeritorious Defence – The Requirement of Insurable Interest in the Law of Marine Insurance
and Related Matters” (1993) 5(3) Ins LJ 177; Taylor “Is the Requirement of an Insurable Interest in the Marine
Insurance Act Still Valid?” (2000) 11 Ins LJ 147.
410 (1991) 25 NSWLR 699 (NSWCA).
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