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PERG 6.5 General principles


The starting point for the identification of a contract of insurance is the case of Prudential v. Commissioners of Inland Revenue [1904] 2 KB 658, from which the description set out in PERG 6.3.4 G is drawn. Any contracts that fall outside that description are unlikely to be contracts of insurance.


The FCA will interpret and apply the description in PERG 6.3.4 G in the light of applicable legislation and common law, including case law.


In particular, if the common law is unclear as to whether or not a particular contract is a contract of insurance, the FCA will interpret and apply the common law in the context of and in a way that is consistent with the purpose of the Act as expressed in the FCA's statutory objectives.


The FCA will apply the following principles of construction to determine whether a contract is a contract of insurance.

  1. (1)

    In applying the description in PERG 6.3.4 G, more weight attaches to the substance of the contract, than to the form of the contract. The form of the contract is relevant (see PERG 6.6.8 G (3) and (4)) but not decisive of whether a contract is a contract of insurance: Fuji Finance Inc. v. Aetna Life Insurance Co. Ltd [1997] Ch. 173 (C.A.).

  2. (2)

    In particular, the substance of the provider's obligation determines the substance of the contract: In re Sentinel Securities [1996] 1 WLR 316. Accordingly, the FCA is unlikely to treat the provider's or the customer's intention or purpose in entering into a contract as relevant to its classification.

  3. (3)

    The contract must be characterised as a whole and not according to its 'dominant purpose' or the relative weight of its 'insurance content': Fuji Finance Inc. v. Aetna Life Insurance Co. Ltd [1997] Ch. 173 (C.A.).

  4. (4)

    Since only contracts of marine insurance and certain contracts of insurance effected without consideration are required to be in writing, a contract of insurance may be oral or may be expressed in a number of documents.