Right, let’s peel back the curtain and look at the history of two heavyweight concepts that keep your cover honest: Insurable Interest and Indemnity.
Forget bedtime stories; this is the true, dramatic foundation of modern risk-taking, born out of high-stakes sea voyages and a healthy dose of human greed.
The Drama: When Insurance Became Secret Betting
Your modern short-term cover was laid on the high seas in the 17th and 18th centuries. Merchants were sending fortunes across oceans, facing colossal risks: storms, pirates, the lot.
The problem wasn’t just losing the cargo; it was the rise of moral hazard.
Guys, seeing the chance to profit, started taking out policies on ships they didn’t even own. Imagine secretly insuring your rival’s vessel and then rooting for a hurricane! This turned insurance into a shady gamble where you stood to gain from someone else’s disaster. The system was being exploited.
Parliament had to step in and shut down the betting parlour.
Insurable Interest: Get Your Own Skin in the Game
The principle of Insurable Interest officially killed the “wagering policy.” It said, simply:
“You can only insure something if you have a genuine, established financial stake in it.”
If the item is lost, you must suffer a real financial hit. This transformed insurance into a legitimate means of protection. No random guy could gamble on a ship’s fate; only the owner, the cargo holder, or the creditor could insure it.
In today’s terms? You can’t insure your neighbour’s bakkie just because you like the colour. The loss has to hurt your wallet.
Indemnity: No Payouts for Profit
Hand-in-hand with that was Indemnity. If you had a valid interest, what was the payout? If a merchant’s cargo was worth R50,000 but he insured it for R500,000, he’d be rich if it sank. That’s a massive loophole.
The law decided that the insurer must only restore the claimant to the exact same financial position they were in before the loss—no better, no worse. If the cargo was worth R50,000, the payout is R50,000.
This means we give you a reset button, not an upgrade button. It eliminated the profit motive from disaster and made sure insurance remained honest.
👉 Stay covered. Stay confident: www.First4Men.co.za