Kathmandu. Life, health, business, home are not all risk-free. In the midst of all the uncertainty, whether it’s a sudden illness, an accident, a fire, a natural disaster or a market fluctuation — insurance companies are the only ones people are willing to rely on. But the question is, where is this belief?
Insurance is not just a financial deal. It is a transaction of faith, a test of morality, and a practical application of responsibility. The fundamentals that hold this whole structure together cannot be dismissed as textbook principles alone. Rather, they are the unspoken charter of the insurance industry.
The insurance business is essentially based on trust. The customer pays a premium in anticipation of some uncertain event in the future, and if that expectation comes true, the company promises financial security. Both sides have responsibilities: the customer’s responsibility to disclose the absolute truth, and the company’s responsibility to ensure safety on fair terms. This is where the principle of good faith comes into play.
When a customer fails to provide accurate information or an organization deliberately enters into an agreement with vague terms, it undermines public confidence not only in policy but across the board as well. Once that trust is broken, it is difficult to rebuild.
The principle of real financial interest in insurance contracts is not only legally but also morally necessary. An individual or entity can only insure property or life if the risk can cause them real financial loss. This will protect the insurance industry from potential misuse. If insurance is allowed to cover those who do not suffer any losses, the objective will be profit, not protection. This will turn insurance into a risky gamble. Ultimately, it can be detrimental to society and the economy.
Damage arising from an accident or event must be directly and objectively related to the insured risk – this is the basis for resolving the insurance claim. If the loss occurs due to factors not covered by insurance, the question naturally arises: To what extent is the company responsible? The correct answer to this question comes from a proper cause-and-effect analysis. The customer knows which risks are covered and which are not; The organization also knows the extent of its liability.
This combination of transparency and predictability increases confidence in insurance. The moral foundation of insurance is strengthened by the principle that insurance indemnity is not for the purpose of making a profit but also for the recovery of the customer’s losses. If a customer can make a profit from an insurance claim, they may be tempted to go elsewhere to cause an accident or file exaggerated claims.
On the other hand, if the company pays less than the actual loss, it is also an unfair practice. Therefore, establishing fair compensation means keeping the insurance agreement acceptable to both parties and keeping the market stable. Sometimes the person or organization that suffers the loss is actually caused by someone else. Suppose an accident occurs due to the driver’s negligence and the car owner files an insurance claim. Even though the insurance company compensates the customer, the real liability still lies with the negligent driver.
In such a situation, it is important for the insurance system to have the opportunity to determine third-party liability. This allows the client to get compensation faster. But, ultimately, the financial responsibility stays where it belongs. Similarly, if there are many insurances, the responsibility is divided equally among all of them. As a result, no single entity has to bear the additional burden and no one can take an unfair advantage by filing multiple claims for the same damages.
Having insurance does not mean that the customer is helpless. Rather, it is the responsibility of the customer to take immediate and appropriate steps to minimize the damage once it is done. Just as it is irresponsible to record a video without trying to extinguish a house fire, destroying evidence after an accident is a sign of bad intentions. Therefore, insurance companies argue that they are willing to bear the financial burden of accidental damages. However, they do not want to take responsibility for negligence or intentional damage. This ethical approach makes insurance not only a financially responsible but also a socially responsible system.
The world is rapidly going digital. From online policies, to claims via mobile apps, to automated risk analysis – everything is changing. But building a technology-based insurance system without understanding the fundamentals is like building a glass building on a shaky foundation.
Insurance fraud, weak claims, unclear terms and a lack of customer information – these problems are real. New risks such as climate change, pandemics, and a global economic downturn have also been added. To fully address these issues, insurance policies should focus not only on legal knowledge but also on producing effective policies.
On the one hand, customers need to know what their premium is for, under what circumstances they can claim and what their responsibilities are. On the other hand, the company should ensure that actions contrary to the principle are not encouraged for short-term business gain. It is impossible to build a sustainable insurance industry without principle-based transparency and fairness. –Raj Kiran Das/Insurance News BD
