Understanding The Concept of Insurable Interest

As a financial product that provides financial reimbursement guarantees for losses suffered by the insured, insurance has characteristics and requirements that serve to provide limits on what risks and losses can be accounted for or insured. If it does not meet existing characteristics and requirements, the coverage contract cannot be executed automatically.

          One of the characteristics of risk that can be insured or insured is that the party who insures a risk must have requirements as an insurable interest or the existence of an insured interest.  That is, every risk that if it occurs must cause financial losses for the insured party. An example is that fire insurance only applies to homes or places of business that are legally owned by the insured. Thus, the concept or principle of insurable interest becomes an essential and fundamental element of any contract or insurance agreement and becomes a principle.  Without meeting the principle of insurable interest, insurance agreements cannot be done.

The importance of this element of insurable interest is also contained in chapter 250 of Indonesian Commercial Law Book which reads: "If a person who has held a holding for a holding for himself, or a person for whom a liability has been held a liability, at the time of the coverage does not have that interest in the insured goods, then the insurer is not obliged to provide compensation.  loss".

          Referring to the paragraph, it is very clear that if it turns out that the truth is found that the object insured does not meet the element of insurable interest, then the insurer or insurance company can refuse the submission of claim payments.

          Basically insurable interest has a variety of definitions because it is generally kasuistic. But there is one definition that can be used to explain what is insurable interest, namely the legal right to insure arising out of a financial relationship, recognized at law between the insured and the subject-matter of insurance. The free translation of this definition is that the insured must have the legal right to insure a risk arising from a financial relationship. The relationship between the insured and the object of the insurance must be protected or recognized legally.  In addition, the right to these interests must be assessed by money (financial interest) to the subject-matter of insurance.  Which includes subject-matter of insurance, among others, goods (property), events that can legally cause losses (loss of a legal right), and legal liability (a legal liability).

          From the definition above, when parsed in detail, four important elements of insurable interest will be obtained, namely:

1.    There must be property, rights, interests, souls, limbs or potential responsibilities, which can be insured/insured.

2.    Property and others such as the above must be the object of coverage (the subject-matter of insurance).

3.    The insured must have a relationship with the object of coverage.  Through this relationship, the insured will benefit if nothing happens to the object of coverage that is his responsibility. Conversely, the insured will suffer financial losses if the coverage objek is damaged or if responsibility arises on his part.

4.    The relationship between the insured and the objek of coverage must be a relationship that is protected or recognized by law.

DR. Sri Rejeki Hartono, S.H in his book entitled "Insurance Law and Insurance Companies" first printed june 1992 defines the word "interest" or interest as an involvement of financial losses due to an uncertain event.  Meanwhile, Dorhout Mess defines the word "interest" as a purely economic factor so that it is difficult to be limited according to the law.

Thus, the subcontinent of interest in the concept of insurable interest can also be financial interest (pecuniary interest). For example, when a person insures his or her home, vehicle, goods, warehouse or potential responsibilities to others, it could be that the insured is not his fissile, but the insured's financial interests on potential property, property, or liability.  An example of an insurance product that uses this concept is protection insurance for third party liability (TPL) legal obligations/ responsibilities. This insurance product will provide protection benefits for loss claims experienced by third parties involved in an accident. The third party in question is anyone who is in the vehicle involved in an accident with the vehicle we are insured in.

In other words, fundamentally the thing insured in a policy is the interest (interest) of the insured attached to the subject-matter of insurance (objek coverage) and not the subject-matter on insurance is fisik or lahiriah.

     Furthermore, insurable interest in this insured may arise based on the enactment of the following:

a.   Based on Law (Common law)

Insurable interest can arise due to applicable legal provisions that make a person have an interest in the losses experienced by themselves and other parties. For example, the legal provisions in The Law of Tort in England.   In the law it is stated that everyone has a duty of care (obligation to maintain) so that people or others do not experience losses.  If  his duty of care is violated, for example he committed a negligence (negligence) that caused others to suffer losses, then he must be responsible for paying compensation to others.

In Indonesia, the provisions on duty of care are also contained in Article 1365 and Article 1366 of the Civil Code where everyone who commits unlawful acts is required to compensate for losses arising from their mistakes.

Thus common law creates insurable interest for people who have potential liability.

b.   Contract or Agreement (Contract)

A contract or agreement between two legally recognized parties can also create insurable interest.  For example, under a contract or agreement one of the parties entering into the contract and the agreement must be responsible for something if it does not meet what is promised in the contract.

For example, the tenant of an office building based on an agreement on the lease he made with the owner of the office building is responsible for the maintenance or repair of the office building he rents. In such a case, the contract or lease agreement gives the tenant an insurable interest that would not exist if there were no any contracts or agreements.  Therefore, the tenant can insure the risk of loss on the office building he rents.

c.    Law (Statue)