The document discusses several key principles of general insurance: 1) Contra proferentem states that ambiguities in an insurance policy will be interpreted against the insurer through a three-step process. 2) Insurable interest means one can only insure against financial loss, such as in one's own life, family, or owned property/cargo. 3) Utmost good faith requires full disclosure of all material information, with non-disclosure potentially voiding the contract. 4) Indemnity provides compensation to return the insured to the same financial position prior to the loss.

1. PRINCIPLES OF INSURANCE
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2. Principles of General Insurance
Contra Proferentum : A universally applied rule that ambiguities in an insurance policy will be strictly interpreted against the insurer. Application of this rule is a three-step process: (1) The court examines the
policy language to determine whether it is ambiguous. (2) If the language is unclear, the court will admit extrinsic evidence to clarify the policy and determine the parties' intent at the time they entered into the
contract; if the extrinsic evidence dispels the ambiguity, the contract is applied in accordance with its true meaning as ascertained by the extrinsic evidence. (3) If the extrinsic evidence does not clarify the
ambiguities, the contra proferentem rule is applied, and the ambiguous language is construed in favor of the insured and against the insurer.

3. Insurable Interest
One can effect insurance only if he is likely to suffer a financial loss
in the event of an asset being lost or damaged. Such likelihood gives
him a legal right to insure against the probable loss. This ‘legal right
to insure’ is termed as ‘insurable interest’.
Any individual has insurable interest in own life as well as in the life
of spouse, children and parents.
Cargo owners have insurable interest in the goods being shipped.

4. Utmost Good Faith
Principle of ‘Utmost Good Faith’ (Uberrima Fides) imposes on parties to
the contract a legal duty of disclosing all material information.
The key term ‘material information’ means an information which would
influence the insurer’s process of deciding upon the case before granting
insurance.
Non-disclosure or wrongful disclosure with fraudulent intention results
into the insurance contract becoming ‘void’. A void contract has no legal
effect or validity.

5. Facts which need not be disclosed
Facts of common knowledge e.g. riots in the city.
Facts known to the insurer e.g. when the premises are inspected by
the insurers
Facts which diminish the risk e.g. installation of fire fighting
appliances.
Facts for which the insurer dispenses with the information. For e.g.
the proposer writes in the proposal form about an accident which
took place two years before. In such a case, the insurer does not ask
for further information

6. Indemnity
The object of the principle of indemnity is to place the insured after
a loss in the same financial position, as far as possible, as he
occupied immediately before the loss. The effect of the principle is
to prevent the insured from making a profit out of his loss.
For example: Mr. Ravi has insured his buffalo for Rs.50,000 and
buffalo dies in an accident. The market value of the buffalo is
Rs.30,000. Insurance company will pay him Rs.30,000 and not
Rs.50,000 though he may have paid an insurance premium for
Rs.50,000.

7. Contribution
The principle of contribution is defined as the right of insurers who have paid a
loss under a policy to recover a proportionate amount from other insurers who
are liable for the same loss.
The principle of contribution arises when the insured has taken many policies
for the same property.
For example- Soumiya has insured her farm house worth Rs. 1 lac with ABC
Insurance Company for Rs.1 lac and XYZ Insurance Company for Rs.1 lac. In the
event of loss of Rs.50,000 both insurers will pay Rs.25,000 each and not more.
This is done to ensure that the insured does not make any profit out of the loss.
She can claim Rs. 50,000 from one Company, but not from both.
The principles of ‘subrogation’ and ‘contribution’ do not apply in personal
accident policies as these are not contracts of indemnity

8. Subrogation
The law of ‘subrogation’ may be defined as the transfer of rights and
remedies of the insured to the insurer who has indemnified the
insured in respect of the loss.
For example: Mr Shankar had dispatched a consignment of cotton,
valued at Rs.50,000 through Agarwal Transport Service. The
consignment was insured for Rs.60,000. The consignment was
destroyed by fire, due to negligence of the driver and resulted in total
loss. The insurance company will pay the claim to Mr Shankar of
Rs.50,000. At the same time it will acquire the right to recover from
Agarwal Transport Service.

9. Proximate Cause
‘Proximate Cause’ refers to the event that proves to be the dominant cause and there is a direct
link between it and the resultant loss.
Proximate Cause is important because when it comes to establishing the cause of a loss, and
whether it is covered under the insurance contract, we need to look at the dominant cause of
the loss.
For example: Mr. Pinto, while riding a horse, fell on the ground and had his leg broken, he was
lying on the wet ground for a long time before he was taken to hospital. Because of lying on the
wet ground, he had fever that developed into pneumonia, finally dying of this cause. Though
pneumonia might seem to be the immediate cause, in fact it was the accidental fall that emerged
as the proximate cause and the claim was admitted under personal accident insurance.

10. Thank You
Jaswanth Singh G
Insurance (InsureTech) & Pensions Domain Consultant and
Faculty
Innovator @ indiaassurance.in and allinsuranceclaims.in
+91 8310765785 +91 9449049107
jaswanth@indiaassurance.in