(1) PRINCIPLE OF CO-OPERATION:
The insurer collects premium from the
insured in a pool and pays their claims
out of the pool. Th insurers is an
associations of persons who pays the claims out fits of it's a pooled
money. Thus insurance is based on the principles of co-operations . According
to the Reigal and Miller,.
“Insurance” is pre-eminently social in nature. It represents and the highest degree of co-operations for and mutual
benefits, (2). PRINCIPLES OF PROBABILITY: The occurrence
of risk in each type of
insurance is a estimated
through of the theory of
probability for which the insurer
follows the theory of large numbers. The
insurers collect the data of the
previous happening taking a large number of years into
considerations and forms an idea about
the incidents in future. Life
insurance company prepare the mortality tables and calculate the premium accordingly. (3).
PRINCIPLE OF UTMOST GOOD
FAITH OR
UBERRIMAE FIDEI : insurance contractors are based upon mutual trust and confidence between the insurer and insured. Utmost good
faith requires each party to tell the
other “ the truth” the whole truth and nothing but them truth”. It means that
the parties to the contract must take a full disclosure of all the material facts and a
information relating to the contract.
Examples of material facts in various classes of insurance are:
Motor: Details of any young driver:.
Life: Details of Heart diseases. The obligations of
disclosing material facts ends when end
the contracts of insurance , is concluded
with the insurance of the cover
not the or a policy and such obligation again arises at the time of renewal of
policy. However in some one cases the insured is exempted from disclosing the following material facts and a as such principles of utmost good faith does not apply.(a) .
Facts of the common or public
knowledge. (b) . Facts which tend to the reduce the risk. ( C ). Facts embodies in the policy itself. (d). Facts which relate to the law of the
country. (e). Facts waived of by the
insurer. (f). facts which the insurer
fails to notice on a survey, and,. (g).
Facts known after the affecting of the insurance contractors, . The various circumstances
under which the parties may be guilty of breach of utmost good faith are
given below. (a). Non-disclosure -omission to disclose unintentionally. (b). Concealment intentional suppressions
of a fact. ( C ). Innocent
misrepresentation – Inaccurate statement without any fraudulent
intention and.,
(d). Fraudulent
Misrepresentation Inaccurate statement .
Where there is breach of the duty of the utmost good faith, the contract may be either void, or voidable at the
insurer’s potions,. If there is a
fraudulent misrepresentation, the contract is void., But in the case of the
innocent misrepresentation, the premium is returnable .
(4). PRINCIPLE OF INSURABLE INTEREST: For an insurance contract to be valid the insured should have be an insurable interest in the subject matter of insurance. The insurable interest is the pecuniary interest whereby the insured is benefitted by the existence of the subject matter and is prejudiced by the death or damage of the subject matter. The subject matter of insurance may be a property or life or legal liability. The insurable interest to be valid must be recognized as such under the law in operation in the country and must satisfy the following conditions: (a). There must be a physical object like life or property as the subject matter of insurance which is likely to be destroyed. (b). the person desiring to insure (insured) must lose of gain money if the subject matter is lost or saved from future events like death or fire etc., ( C ). The monetary relationship subject matter and the insured is recognized in law. (d). There must be possibility or chance of a loss due to uncertain future event. The insurance contracts without insurable interest have no sanctions of the law as they amount of the speculations. Generally the following persons have an insurable interest on the subject matter of insurance:. A child has an insurable interest in the life of his father;. A person has unlimited insurable interest in his own life. A husband has an insurable interest in the life of his wife. A wife has it in the life of her husband.
(4). PRINCIPLE OF INSURABLE INTEREST: For an insurance contract to be valid the insured should have be an insurable interest in the subject matter of insurance. The insurable interest is the pecuniary interest whereby the insured is benefitted by the existence of the subject matter and is prejudiced by the death or damage of the subject matter. The subject matter of insurance may be a property or life or legal liability. The insurable interest to be valid must be recognized as such under the law in operation in the country and must satisfy the following conditions: (a). There must be a physical object like life or property as the subject matter of insurance which is likely to be destroyed. (b). the person desiring to insure (insured) must lose of gain money if the subject matter is lost or saved from future events like death or fire etc., ( C ). The monetary relationship subject matter and the insured is recognized in law. (d). There must be possibility or chance of a loss due to uncertain future event. The insurance contracts without insurable interest have no sanctions of the law as they amount of the speculations. Generally the following persons have an insurable interest on the subject matter of insurance:. A child has an insurable interest in the life of his father;. A person has unlimited insurable interest in his own life. A husband has an insurable interest in the life of his wife. A wife has it in the life of her husband.
A creditor has an insurable interest. to the extent of
his debt, in the life of his debtor. A partner in business has an insurable interest in the life or
lives, of his co-partner or , co-partners. A company has an insurable interest in the
life of a senior officers whose death may seriously affect the profits of the
company. The time when insurable
interest should exist differs according to the nature of insurance. In life
assurance, the assured should ave
insurable interest at the time the contract was entered into. In marine
insurance, it is a should be present at the time of loss. But in the fire
insurance, insurable interest should be
present not only
at the time of the a taking a fire policy, but also at the
time of loss. (5). PRINCIPLES OF INDEMNITY: The term indemnity means making up the loss. Literally it means, “security against damage to then or
loss or compensations for loss’. All contractors of insurance
except life and personal accident and sickness insurance, are contract of
indemnity. According to this principle the insured should be placed in the same
financial positions as a far as possible
after a loss at the occupied immediately before its occurrence. The insured will neither gain nor loss. In order other
words, the insurer will pay only the actual loss suffered by the insured I, e,
the insurer will pay not pay the
assured amount but only the actual loss suffered by the insured. For example if a person has insured a cargo for Rs. 40,000 and if a part of the goods of Rs. 7,000 is destroyed the insurer will pay only
Rs. 7,000 and not Rs. 40,000., Thus this principles ensures are supposed to be satisfied in full for the
applications of the principles
indemnity.
(a). The insured has to prove that he will suffer
loss on the insured matter at the time of happening of the event and the loss
is actual monetary loss. (b). The amount
of compensations will be the amount of
the insurance. Indemnifications cannot
be more than the amount insured. (
C) If the insured gets more amount the than the actual loss, the insurers has right to get
the extra-amount back. (d). If the insured gets some amount from third party , after being fully
indemnified by insurers the insurer will
have right o receive the entire amount paid by the third party