Page 18 - Insurance Times December 2019

Amongst all the basic principles of insurance i.e. Uberrima these regulations shall mean all important, essential and
fides, Insurable Interest, Indemnity, Contribution, relevant information sought by insurer in the proposal form
Subrogation and Proximate Cause, the principle of and other connected documents to enable him to take
"uberrima fides" also called "utmost goodfaith" stands on informed decision in the context of underwriting the risk.
the highest footing. Uberrima fides in its genitive form
uberrimae fidei is a Latin phrase meaning "utmost good Now comes the real question. Are all disclosures required
faith". It requires the prospect to disclose all material to be furnished in a proposal forms or questionnaire(s)
information about the subject matter of insurance. Such preceding an insurance contract are material information
disclosure must in complete and accurate. Material per se or it is an open question to be determined by
information is normally collected by the insurer in proposal judiciary in a given case?
form which contains the very basic information for
assessment of risk. We will discuss this issue in later part of the article with
the help a few recent Supreme Court judgments.
The underlying philosophy is that it is only the insured who
has exclusive knowledge of this information and if he Utmost Goodfaith: Duty cast on
conceals some information or discloses inaccurate or
incomplete information the insurer interest will be seriously Proposer

prejudiced and the risk underwritten would be different Insurance contracts are based on the principle of utmost
from the risk intended to be covered. good faith because one party to the contract alone, namely
the proposer knows or ought to know all about the risk
What are Material Facts? proposed for insurance and the other party, that is the

The term "Material Fact" is not defined in the Insurance insurer has only to rely largely on the representations made
Act, 1938, and, therefore it has been understood and by the proposer. In other words, the information supplied
explained by the courts in general terms to mean any fact by the proposer in the proposal form or questionnaire as
that would influence the judgment of insurer in fixing the well as the other correspondence between the proposer
premium or determining whether he would like to accept and the insurer will have a bearing on the proposed
the risk. Any fact that goes to the root of the contract of contract of insurance to be effected.
insurance and had a bearing on the risk involved would be
"Material". Utmost Goodfaith: Duty cast on Insurer
The insurer is also under obligation to disclose all material
It is stated in Pollock and Mulla's Indian Contract and
information to the prospects which influences prospect's
Specific Relief Acts that "any fact the knowledge or
decision to take the insurance or not and at what premium.
ignorance of which would materially influence an insurer The insurer is under unbounded duty to make full and
in estimating the degree and character of risks in fixing the complete disclosure about the coverage, exclusion, terms
rate of premium is material fact."
and conditions etc. dispassionately, else it will be held liable
for mis-selling the product.
Protection of Policyholders' Interests Regulations, 2017,
Section 4 Sub-Section (8) defines the proposal form in the
following term: "Proposal form" means a form to be filled
in by the prospect in written or electronic or any other
format as approved by the Authority, for furnishing all
material information as required by the insurer in respect
of a risk, in order to enable the insurer to take informed
decision in the context of underwriting the risk, and in the
event of acceptance of the risk, to determine the rates,
advantages, terms and conditions of the cover to be
granted;

Explanation: "Material Information" for the purpose of

18 The Insurance Times, December 2019