CHAPTER ONE

GENERAL INTRODUCTION

This chapter seeks to give an overview of the settlement of claims in insurance. It traces the background to the study, the research questions that necessitated the research, the objectives to be achieved and the methodology employed in realizing the dissertation. It also discusses the significance and justification for the study and the literature that underlies it among others.

1.1 BACKGROUND TO THE STUDY  

The word insurance comes from the Italian word “assicuratio” which signifies security by which the receiver buys a financial security[1]. 

A couple of definitions have been given to the word ‘’insurance’’ according to its legal or functional approaches. An economist sees insurance as a device for transferring economic risks from the insured to the insurer through a periodical payment of the premium, while a social scientist sees insurance as a device which provides financial assistance or compensation to a group of people in case of misfortunes.^[2] A sociologist would define insurance as a device by society aimed at providing financial compensation to the victims of the many social misfortunes that befall humanity.^[3]

On the legal points of view, we can point out the definition of two authors: E.R.H. Ivamy^[4] and J. Birds^[5]. The first has defined insurance as, “A contract whereby one person, called the ‘insured’, undertakes, in return for the agreed consideration, called the ‘premium’, to pay to another person, called the ‘assured’, a sum of money, or its equivalent, on the happening of a specified event”. The second definition which is not far from the first perceives insurance as ’’any contract whereby one person assumes the risk of an uncertain event, which is not within his control, happening at a future time, in which event the other party has an interest, and under which contract the first party is bound to pay money or provide its equivalent if the uncertain event occurs’’. These two definitions highlight the fact that insurance entails an uncertain risk which must be of adverse nature to the interest of the insured resulting in financial loss to him. 

The concept of risk itself which is the object of insurance is a key concept in Insurance Law as it is what helps to generally classify insurance into two broad categories: General Insurance and Life Insurance. While Life Insurance provides financial coverage against one’s life, a General Insurance policy indemnifies against any losses for a person non-life assets[6]. With General insurance, the insurer intends to cover within the limits of the contract damages caused to the insured properties (house, car, amongst others) by events like fire, theft, or even civil liability that the insured may encountered against third parties. Amongst General Insurance is motor vehicle insurance which is one of the most practiced type of insurance policy in the society. A motor insurance policy ensures that the vehicle has complete protection against physical damage from natural or artificial calamities and third-party liabilities arising from the insured vehicle.  Generally, a motor claim may be in respect of:

1. Accidental damage to insured’s vehicle
2. Theft of the insured’s vehicle,
3. Fire damage to the insured’s vehicle,
4. Third party liability arising either from damage to a third party property or death of or personal injury to a third party.^[7]

The use of motor vehicles causes enormous risks to individuals. Risk has been said to be a hazard or the chance of loss. In Cameroon, there has been an increase in the circulation of motor vehicles. This increase has led to the increase in the number of accidents on the high ways caused by the motor vehicles. It is almost impossible to have one week without hearing of a car accident in Cameroon[8]. According to the United Nations Economic Commission for Africa, there were 16,583 road accidents and 1,500 deaths in Cameroon in 2018. According to statistics from this UN institution, the risk of road deaths in the country is estimated at 26.7 people per 100,000 inhabitants, which is higher than that of neighboring countries in West Africa.[9] With this, one should be curious to know if the CIMA Code[10] which is the law that governs land insurance in Cameroon has put in place genuine means to ensure the settlement of claims that results from these accidents. Although measures have been taken by the administrative authorities to reduce the number and gravity of these accidents, the incidence and social repercussions of traffic accidents have been immense on victims and bereaved families.

1.2 STATEMENT OF THE PROBLEM

The high rate of road traffic accidents and their consequences on the socio-economic situation of victims have justified the institution of a compulsory insurance for owners of motor vehicle[11]. It is a compulsory guarantee of civil liability to cover the financial damages or consequences of the civil liability they may incur as a result of bodily injuries or property losses caused to third parties by their vehicles. 

In respect of these accidents, it seemed that most of the vehicles are not always insured and accordingly, in some accidents, numerous victims had no effective redress.^[12] This observation done more than thirty years ago has worsen nowadays as many victims of road traffic accident and their families still suffer to obtain justice even when the car responsible of the accident has a third party insurance policy.

Besides, if victims of bodily injuries have difficulties in obtaining compensation, those who suffer material losses caused by the use of someone‘s car find it more difficult to obtain any compensation. It seems there is more sympathy for those victim of bodily injuries as compare to those who face property damage. Such an observation naturally leads one to wonder whether the CIMA code is sufficiently armed to be able to fight the ills inherent in motor vehicle insurance as far as settlement of claims of third parties is concerned.

1.3 RESEARCH QUESTIONS

This work seeks to answer a series of research questions which are divided into main and specific research question

1.3.1 Main research question

• How effective are the mechanisms put in place to settle claims resulting from third party liability for motor vehicle insurance under the CIMA Code effective?

1.3.2 Specific research questions

• What is the scope of a motor vehicle insurance under the CIMA Code?
• In case the risks covered for third party liability for motor vehicle insurance occur, what is the basis of the civil liability to encounter?
•  What are the procedures to obtain compensation in case the risks covered for third party liability for motor vehicle insurance occur?
• What are the challenges in obtaining effective compensation in case the events insured against in a third-party liability motor vehicle insurance occur?
• What policy recommendations can be made to redress the situation?

1.4 RESEARCH OBJECTIVES

The work is based on the following research objectives

1.4.1 Main research objective

• To examine the effectiveness of the mechanisms put in place to settle claims in case the risks insured against under third party liability for motor vehicle insurance arise

1.4.2 Specific objectives

• To determine the scope of motor vehicle insurance under the CIMA Code;
• To examine the basis of civil liability in case the risks insured against under third party liability insurance occurs;
• To examine the procedures to obtain compensation for third party liability in motor vehicle insurance;
• To examine the challenges faced in obtaining effective compensation if the risks insured against in third party liability motor vehicle insurance occur;
• To propose policy recommendations that can be made to redress the situation.

1.5 RESEARCH METHODOLOGY

This research has adopted qualitative research method. Qualitative research takes an interpretative naturalistic approach base on the subject matter. This is by attempting to get the sense out of or interpret statements presented before them by people.^[13]  This method is content analysis of primary and secondary data. The primary sources include the law which in this study is the CIMA Code as it emanates from the legislator while secondary here include textbooks, journal, articles, reports, newspapers, thesis and websites.

The method of data analysis adopted is legal reasoning which include deductive reasoning, inductive reasoning and reasoning by analogy. Deductive reasoning constructs or evaluates deductive arguments. The pattern here involves moving from a general premise to a particular premise or from universal to individual and then to conclusion. Inductive reasoning on its part is a type of reasoning that involves moving from a set of specific facts to a general conclusion or from a particular instance to general rules.^[14] Analogical reasoning involves the process of transferring information from a particular subject which is the analogue or source to another particular subject known as the target. In this method, conclusions are arrived at by reasoning of resemblance or similarities of two things.^[15] Thus, an argument by analogy is an argument where the inference goes via an analogical relation, in contrast to inductive or deductive relations.^[16]

The researcher also made use of interviews with the help of the above mentioned methods. Unstructured interviews which are part of qualitative research method were used to obtain information to buttress points emanating from laws and secondary sources to evaluate the protection of Motor Vehicle insurance claims in Cameroon. Some Insurance Companies were interviewed.