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In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.
Uberrima fides (sometimes seen in its genitive form uberrimae fidei) is a Latin phrase meaning "utmost good faith" (literally, "most abundant faith").It is the name of a legal doctrine which governs insurance contracts.
An insurance contract is a contract of the utmost good faith. The most important expression of that principle, under the doctrine as it has been interpreted in England, is that the prospective insured must accurately disclose to the insurer everything that he knows and that is or would be material to the reasonable insurer.
The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely, and premiums were varied with risks. [12] These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance.
His judgment in Carter v Boehm was an application of his general principle to the making of a contract of insurance. It was based upon the inequality of information as between the proposer and the underwriter and the character of insurance as a contract upon a "speculation". He equated non-disclosure to fraud. He said at p 1909:
Insurance is characterized as a business vested or affected with the public interest. [2] Thus, the business of insurance, although primarily a matter of private contract, is nevertheless of such concern to the public as a whole that it is subject to governmental regulation to protect the public’s interests. [1]
MECs differ from life insurance contracts because life insurance contracts don't penalize withdrawals if the policyholder is younger than 59.5. Conversely, MECs impose the penalty.
Risks that can be insured by private companies typically share seven common characteristics. [4]Large number of similar exposure units.Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses.