a. Concept of Insurable Interest in Life Insurance (5 Marks)

Insurable interest is a legal requirement that the policyholder must have a financial or pecuniary interest in the insured’s life, ensuring the policy is not a wager. Under common law (persuasive in Ghana) and the Insurance Act, 2006 (Act 724), it must exist at policy inception but not necessarily at maturity.

Examples:

• Spousal Interest: A wife insures her husband’s life due to financial dependency; loss would cause hardship.
• Business Key Person: A company insures a key employee (e.g., CEO) whose death impacts profits, as in keyman insurance common in Ghanaian firms like MTN Ghana.
• Creditor-Debtor: A lender insures a borrower’s life up to the debt amount, protecting repayment.

Without it, the policy is void, preventing moral hazards like inducement to harm.

b. i. Effective Assignment of the Life Policy (10 Marks)

To perfect security over the 20-year endowment policy (which pays on maturity or death), Gloryland Bank must follow legal processes under common law and Act 724:

1. Obtain Written Assignment: Execute a deed of assignment where Sugarcandy transfers rights to the bank, specifying it as absolute or conditional (collateral). Include policy details, loan amount, and reassignment clause on repayment.
2. Give Notice to Insurer: Serve written notice on the insurer (Section 54 of Act 724 requires notice for priority). This binds the insurer, preventing payouts without bank consent. In Dalby v India and London Life Assurance Co (1854), notice ensured enforceability.
3. Endorse Policy Document: Insurer endorses the assignment on the policy.
4. Stamp the Deed: Pay stamp duty under Stamp Duty Act, 2005 (Act 689) to make it admissible in court.
5. Register if Required: For corporate assignors, note under Companies Act, 2019 (Act 992) if it affects charges.
6. Verify Insurable Interest: Confirm Sugarcandy’s interest in John Gawaka as key officer.
7. Secure Policy Document: Bank holds the original policy.
8. Monitor Premiums: Ensure Sugarcandy pays premiums; bank may pay if default.

In practice, at banks like Access Bank Ghana, this secures advances, with realization via surrender or claim on event.

b. ii. Validity if John Gawaka Resigns (5 Marks)

Yes, the policy remains valid. Insurable interest is required only at inception, not continuance, per Dalby v India and London Life Assurance Co, where the policy survived interest cessation. As an endowment policy, it continues if premiums are paid, though Sugarcandy’s interest ends on resignation, but the contract persists. The bank can enforce as assignee, but reassess security value post-resignation, as keyman rationale diminishes. In Ghana, Act 724 supports this, allowing continuation or surrender.