The SIX Principles of Insurance

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The SIX Principles of Insurance This six core principles that have been established over time and been upheld by the courts to respond to highly complex and sophisticated risks of our era. 1) Insurable Interest; The interest that a person has in something such as a particular property or another individual, which means that the person would suffer a loss should that property or individual be harmed. In insurance law, you can only buy insurance for something or someone in which you have an insurable interest. This principle helps to prevent moral hazard, in which a policyholder would have a financial incentive to allow or even cause a loss. 2) Utmost Good Faith; Uberrima fides is a Latin phrase meaning "utmost good faith". It is the name of a legal doctrine which governs insurance contracts. This means that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal. Therefore parties must disclose all the essential information required before signing up for an insurance policy. 3) Proximate Cause (proximal cause); Something that is considered to be the direct cause of damage, loss, or injury: The proximate cause of the disaster was a piece of metal lying on the runway. It is proven by drawing a line between the negligence of the defendant and the harm of the plaintiff. For example, if a truck driver swerves and hits a car, the driver is the actual cause of the accident. 4) Indemnity; This principle states an insurance company can compensates you for any damage, loss or injury caused only to the extent to the loss incurred. Therefore you can not make a profit in the event of a loss. 5) Subrogation (transfer of rights or guardianship); Subrogation refers to the practice of substituting one party for another in a legal setting. Essentially, subrogation provides a legal right to a third party to collect a debt or damages on behalf of another party. A successful subrogation means a refund for you and your insurer. The basic idea behind subrogation is that insurers have a right to receive payment for bills that they have paid on behalf of their insureds. 6) Contribution; This principle holds that two or more insurers each liable for a covered loss should participate in the payment of that loss. You took a health insurance from company A and B are as follows: A. $5 B. $5 Now suppose you get admitted and the total claim is $2. You decides to use the policy from insurance A and got indemnified $2. Now company A has the right to claim $1 from Company B. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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