Page 19 - The Insurance Times January 2025

most sought-after virtue because the insurance business is of trust. It is viewed as an 'institutional economizer' that
woven around trust. removes all barriers of suspicion, allowing unhindered busi-
Onora O'Neill believes that one can inspire trust by enact- ness activities based on mutual trust, thereby cutting trans-
ing two things, i.e. more accountability and transparency. action costs.
However, both elements that constitute trust are in short
supply; as a result, there is a crisis of trust. The lack of trust The digitalization has changed the trust landscape consid-
affects business transactions and many things in society. erably. Most consumers look for a trusted digital platform.
The inbuilt trust in the digital platform inspires great confi-
The insurance contract thrives on trust and is fiduciary in dence among buyers and sellers. The presence of cyber
nature. Section 17 of the Marine Insurance Act 1906 casts fraud, however, dilutes trust in digital platforms. Most
the duty of good faith on the insurer and the insured. The people, particularly senior citizens, are very chary of the
duty of Good faith requires that Insurance contracts are of digital platforms owing to rampant digital frauds.
utmost good faith, which means both the insurer and the
insured must deal honestly and transparently during their Education and insurance awareness must address the three
contractual relationship. pillars of trust: accountability, transparency, and regulation.
Accountability fosters trust as parties involved in transac-
This duty of good faith also extended to the insured's pre- tions perceive that promises made will be honoured. In in-
contractual information duty. Any breach of this meant the surance, buyers pay a premium upfront, hoping to be pro-
avoidance of the contract itself. The pre-contractual infor- vided with services during financial stress. Similarly, the seller
mation duty has changed in the Consumer Insurance (Dis- of the insurance policy takes a calculated risk with the hope
closure and Representations) Act 2012 ('2012 Act') in con- that there will be no aggravation of the risk by the insured.
sumer insurance and the Insurance Act 2015 (IA 2015) in
non-consumer insurance. Simply put, the nature and the texture of the risk under-
taken by the insurer should remain more or less the same.
The 2012 Act abolished the pre-contractual duty of disclo- As customers, the premium they pay depends on the trust
sure for consumers and substituted this with the duty to take transferred to them. It is the cost of the trust. The trust
reasonable care not to make a misrepresentation. sought by the customer is not merely the timely and ad-
equate payment of claims but also, in the digital world, the
Similarly, The IA 2015 (UK), applied to non-consumers, swaps privacy of the personal data shared by him. The contingent
the insured's pre-contractual information duty with the duty promise to pay - reflected in terms of distant future or
of fair presentation of the risk. The change, in turn, imposes unspecified time of the occurrence of events makes an in-
two duties on the parties to the contract: a duty not to surance contract very uncertain.
misrepresent any matter relating to the insurance - i.e. a
duty to tell the truth; and a duty to disclose all material facts The level of trust balances this uncertainty and inspires con-
relating to the contract - i.e. a duty not to conceal anything fidence among prospective buyers. Therefore, trust is the
relevant. The essence of trust remains the soul of the insur- soul of an insurance contract. Transparency also plays a vi-
ance contract. Both recent changes have modernized the tal role in building trust. This author firmly believes that the
laws that existed before the enactment of these acts, keep- policy wording should be framed in simple, unambiguous
ing the people's changing aspirations in mind and inspiring language that ordinary people could understand. The policy
more confidence and trust. The concept of trust is, there- wording should be straight and incapable of different inter-
fore, dynamic. pretations. Most insurance purchasers find the policy word-
ing very cumbersome and are dissuaded from reading it
The changes succinctly highlight the importance of trustwor- correctly. Laws and regulations should be drafted with a
thiness in insurance transactions. There is a positive corre- customer-centric mindset. Treating customers fairly should
lation between trust and purchase of insurance. The higher be the spirit behind all regulations. The example cited above
the trust, the higher the probability of more purchase of manifests how rules and regulations are being modernized
insurance policies. to keep abreast with the changing dynamics.

The Geneva report came out with the economic definitions Insurance education is the need of the hour. The ever-in-

The Insurance Times January 2025 17