Insurance is a form contractual transaction and thus is governed by certain principles of contract. Generally the basic element for the formation every contracts are: offer, acceptance, consideration and intention to create legal obligation. These elements are important to determine the validity of a contract of insurance in Nigeria.
OFFER:
This form the basis of any contractual transaction. An offer is a definite undertaking or expression of intention by the offeror to the offeree to be legally bound upon acceptance to the transaction .An offer in insurance business is a precise and definite expression of intention which can be oral or written. Generally there is no such requirement that insurance policy must be in writing but it is advisable it is in writing in order to know the terms, their rights and obligation, binding the patties to the insurance policy.
The question is who is the offeror and the offeree? An offeror is a person making the offer while an offeree is the person to whom an offer is made to and would make acceptance or not. The General rule of law is that the prospective insured by filing the proposal form is the offeror of an insurance policy. In SALAKO V. LOMBARD INSURANCE COMPANY LTD, the court held that the prospective insured filling the proposal form is making an offer to the insurance company who is the offeree.

However there are exception to this general rule where the prospective insured would not be the offeror. One of such exception is in Life assurance. Under Life insurance when the prospective insured file the proposal from, the insurance is not yet complete until the insured obtain a medical report. Where the prospective insured does not submit a valid medical report, no offer is made yet. This was the position of the court in CUNNING V, FARQUHAR (1886)16 QBD 737.
Another exception is where the insurance company conduct itself in a manner which expressly indicate him making an offer to the prospective insured, then the insurer becomes the offeror.in ESEWE V. ASEIMO, the parties was negotiating on what should be the terms of the insurance policy if it’s created. The insurance company wrote to the insured that “based on our earlier discussion and negotiating, we accept your terms. You can now pay the premium we agreed to “The court held that the insurance company writing to the insured is making an offer to the insured who accepts upon making payment of the premium.
Another exception is where a person file an online insurance proposal form. This exception is a recent development in insurance business. This is where a person file an insurance proposal form online. Although there have no judicial pronouncement but Scholars has held that it is the insurance company that makes the offer and not the prospective insured.
ACCEPTANCE:
When an offer has been made, there must be an acceptance for a valid creation of a contract of insurance. Acceptance is an unqualified assent to the term of the contract. The acceptance must be clear and without any condition or qualification. If the acceptance is given subject to some condition, there is no acceptance. As a general rule, acceptance come from the insurance company. Base on the general rule and exception of offer, the party that makes the offer would determine who makes the acceptance.
There are different methods of acceptance.one popular and common method of acceptance is acceptance by payment of premium. Under common law, payment of premium is not a prerequite for the creation of a valid contract of insurance. However by virtue of Section 50 of the insurance law 2003,it has been established that NO PREMIUM ,NO COVER. Therefore where a person pays his premium and the insurance company collect it, there is a valid contract of insurance.
Another method of acceptance is issuance of the insurance policy. A policy is a documentary evidence of the terms of a contract of insurance. In PEARL INSURANCE V. JOHNSON, the court held that once the insurer has issue an insurance policy, he has been estopped from alleging there was no valid contract of insurance in the absence of vitiating factors such as false information or non-disclosure.
Another method is by formal acceptance. This can be through a letter formally accepting the offer for an insurance cover. This was applied in the case of ESEWE V. ASEIMO(supra).