Question

Explain the principles of General Insurance.

Answer 1

As discussed the principle of insurance and its meaning in brief are as below

a) Principle of Utmost Good Faith—Any Insurance policy is issued by an Insurance Company based on this principle, meaning the statements made by the proposer/insured are relied upon by the insurance Company in Good faith at the time of issuing the policy. Any information which is found to be incorrect later gives the right to the insurance company to cancel the policy/ not pay any claim under this Principle. Same way the insurance Company should disclose the terms of the policy to the insured at the time of soliciting an insurance policy.

b) Principle of Insurable Interest- This principle implies that an insurance is sought and given to a person who has a right/interest in the subject matter of insurance. Meaning the said person should/may suffer a loss in case the subject matter insured is damaged. For e.g. the owner of a property has insurable interest in it

c) Principle of Indemnity- This principle implies that the insurance Company shall put the insured back to the position he was in prior to the loss. The insurance company will compensate for the actual amount of loss suffered by the insured and not any amount beyond that.

d) Principle of Proximate Cause- This Principle implies that whenever a claim is registered for a loss, the Insurance Company while settling the claim looks into the nearest/proximate cause of loss. If the proximate cause of loss is covered under the Policy, then only the Insurance company shall admit any claim.

e) Principle of Subrogation- This Principle implies that once a loss is settled by an insurance company, the right over that property passes over to the Insurance Company who may dealt with such property in any way as it deems fit.

f) Principle of Contribution- This Principle implies that if there are multiple insurers insuring the same loss, the insured can claim under the policy either from any one of the insurer or from all the insurer in proportion to the loss as a contribution. The insured shall not claim for the same amount from different insurers i.e. he cannot make profit out of the loss by making the same claim from different insurens.

Hope it will help you.

Answer 2

The seven principles of insurance are :-

Principle of Uberrimae fidei (Utmost Good Faith),

Principle of Insurable Interest,

Principle of Indemnity,

Principle of Contribution,

Principle of Subrogation,

Principle of Loss Minimization, and

Principle of Causa Proxima (Nearest Cause).