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HMRC internal manual

General Insurance Manual

Legal and economic basis of insurance: introduction

There is no statutory definition of insurance. This reflects the antiquity of the concept and practice of insurance. General insurance was in common use in international trade by the end of the 14th century. In England an Act of 1601, setting up a tribunal to settle insurance disputes, referred to the practice of insurance as already having existed for “time out of mind”.

Templeman J in the case of Dept. of Trade and Industry v. St. Christopher Motorists Association Ltd. (1974) (1 All ER 395) commented on the difficulty of finding a definition:

‘…one looks first of all to the statutes to see if they define insurance, and for reasons which are understandable the result is a blank. There are various types of insurance business on which the Acts concentrate, and no difficulty has ever arisen in practice, and therefore there has been no all embracing definition, and the probability is that it is undesirable that there should be, because definitions tend sometimes to obscure and occasionally to exclude that which ought to be included.’

However, statute law refers to ‘contracts of insurance’, and case law and economic theory provide definitions of a number of the characteristics of insurance. In summary, these characteristics are that:

  • insurance requires a contract
  • there should be an insurable interest
  • there needs to be a degree of uncertainty about the event insured against i.e. a risk
  • the contract should involve the transfer and sharing of the risk.The Law Commission and Scottish Law Commission began a review of insurance contract law, issuing a scoping paper in January 2006. That paper proposed to look at a number of issues, including the need for a statutory definition of insurance (

GIM1020), and insurable interest (GIM1050).