From Rajiv Ranjan (AIMT) for MBA students

1. PRINCIPLES OF INSURANCE
PRESENTED BY:-
PAPPU KUMAR YADAW
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2. PRINCIPLES OF INSURANCE
The main objective of every insurance contract is to
give financial security and protection to the
insured from any future uncertainties. Insured
must never ever try to misuse this safe financial
cover.
Seeking profit opportunities by reporting false
occurrences violates the terms and conditions of
an insurance contract. This breaks trust, results in
breaching of a contract and invites legal penalties.
An insurer must always investigate any doubtable
insurance claims. It is also a duty of the insurer to
accept and approve all genuine insurance claims
made, as early as possible without any further
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delays and annoying hindrances 2

3. Seven Principles of Insurance
The seven principles of insurance are :-
1. Principle of Uberrimae fidei (Utmost Good
Faith),
2. Principle of Insurable Interest,
3. Principle of Indemnity,
4. Principle of Contribution,
5. Principle of Subrogation,
6. Principle of Loss Minimization, and
7. Principle of Causa Proxima (Nearest Cause).
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4. 1. Principle of Uberrimae fidei (Utmost
Good Faith)
1. Both the parties i.e. the insured and the
insurer should a good faith towards each
other.
2. The insurer must provide the insured
complete , correct and clear information
of subject matter.
3. The insurer must provide the insured
complete, correct and clear information
regarding terms and conditions of the
contract.
4. This principle is applicable to all
contracts of insurance i.e. life, fire, and
marine insurance.
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February 25, 2013

5. 2. Principle of Insurable Interest
• The insured must have insurable interest in the
subject matter of insurance.
• In Life insurance it refers to the insured.
• In marine insurance it is enough if the insurable
interest exists only at the time of occurrence of the
loss.
• In Fire and general insurance , it must be present at
the time of taking policy and also at the time of the
occurrence of the loss.
• The owner of the party is said to have insurable
interest as long as he is the owner of the it.
• It is applicable to all contract of insurance.
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6. 3. Principle of Indemnity
• Indemnity means a guarantee or assurance to
put the insured in the same position in which he
was immediately prior to the happening of the
uncertain event. The insurer undertakes to make
good the loss.
• It is applicable to fire, marine and other general
insurance.
• Under this the insurer agrees to compensate the
insured for the actual loss suffered.
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7. 4. Principle of Contribution
• The principle is a corollary of the principle
of indemnity.
• It is applicable to all contracts of
indemnity.
• Under this principle the insured can claim
the compensation only to the extent of
actual loss from any one insurer or all the
insurers.
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8. 5. Principle of Subrogation
a. As per the principle after the insured
is compensated for the loss due to
damage to property insured, then the
right of ownership of such property
passes on the insurer.
b. This principle is corollary of the
principle of indemnity and is
applicable to all contracts of
indemnity.
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9. 6. Principle of Loss Minimization
• Under this principle , it is the
duty of the insured to take all
possible steps to minimize the
loss to the insured property on
the happening of uncertain
event.
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10. 7. Principle of Causa Proxima
(Nearest Cause)
• The loss of insured property can be caused
by more than one cause in succession to
another.
• The property may be insured against some
causes and not against all causes.
• In such an instance, the proximate cause or
nearest cause of loss is to be found out.
• If the proximate cause is the one which is
insured against, the insurance company is
bound to pay the compensation and vice
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versa. 10

11. Thank you
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