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BANKING and INSURANCE
IMPORTANCE OF UTMOST GOOD FAITH IN INSUARANCE
Sanket PawaleSYBBA103
WHAT IS INSURANCE
A promise of
compensation for specific
potential future
losses in exchange for
a periodic payment
Utmost Good Faith
• In insurance disclosure of the true facts is necessary ,so Utmost good faith is expected from the insured and the insurer.• Good faith basically means that their should
exist trust and honesty between the parties.• Every facts related to the insurance contract
should be fully disclosed.
Utmost good faith• The liability of utmost good faith lies on both the parties i.e.
Insured and insurer.• The insured’s duty is to inform or disclose all the facts related
to the risk to be covered.• Similarly it’s the duty of the insurer to make the insured aware
of all the terms and conditions of the contract.
Facts
• Facts which are immaterial earlier but becomes material later on must be informed to the insurer because such facts may increase the risk.
• The facts which increases the risk of the insured (person or property) must be disclosed fully.• All the other policies or contract in existence with
other policies or contract.• The subject matter must be stated properly.• The insurable interest of the person for the
property should be disclosed
Life insurance
•It is duty to give fact material to risk ,weather asked or not. It is important in life insurance because in that the subject
matter is invisible.
Facts to be disclosed in life insurance
• The true age should be disclosed by the insured because less age results into less risk and less premium.• The person should disclose his true occupation
because working at chemical industries or coal
mines is risky so high premium is charged.
• Where the person resides i.e. residence (highway , near chemical industry or outskirt )
Facts to be disclosed in life insurance
• Insured should disclose his real income.
•Lifestyle – Habits of the person , wants of the person.
•Family history of the insured should be disclosed.
Facts to be disclosed voluntarily • The facts which diminishes the risk• The facts of common awareness.• The facts which are known to every
body or can be known in ordinary circumstances• Facts waved by the insurance
company.• Irrelevant information.
Violation Of Utmost Good faith• The breach of the utmost good faith occurs
when the trust is broken.• When the insurer comes to know that the hidden or non disclosed facts.
•Consequences• The insurance policy becomes void.• The insurer’s liability comes to an end.• The premium may increase.
Thank you