Health insurance is one of the most, if not the most, important types of coverage anyone can have. The whole purpose of health insurance is to provide coverage of costs to an individual’s medical expenses. The basic tenets of effective health insurance include the Principles of: Utmost Good Faith, Loss Minimization, Proximate Cause, Indemnity, Contribution, Insurable Interest, and Subrogation.
The Principe of Utmost Faith, also known in Latin as Principle of Uberrimae fidei, implies that both the insurer and the person getting insurance must both go into the contract in good faith. It is up to the insured to fully disclose completely true information that pertains to the matter of insurance. Likewise, it is the responsibility of the insurer to provide truthful information in regards to the insurance coverage being provided which includes disclosing all material facts and not concealing any relevant information, as well as not misrepresenting any information related to the insurance.
The second tenet of health insurance I am going to discuss is The Principle of Loss Minimization. This basically implies that the insured must put in his/her best effort to protect their insured property from damage and/or loss. According to this principle, the insured shouldn’t act neglectful or irresponsible during such scenarios as a fire where personal property is at risk, just because he/she is insured. It is his/her responsibility to protect the property from loss. A common example of this would be when you are cooking and a grease fire starts, but you neglect to make any effort in putting a stop to this fire because you have homeowner’s insurance.
The next tenet of health insurance is the Principle of Proximate Cause, which means that when the cause of a loss is due to more than one cause, the closest cause is the one that should be used to determine the liability of the insurer. In order to find out if the liability for the loss lies on the insurer or not, the proximate cause should be looked into, the remote cause should not. An example of this would be when an animal chews through water pipes and causes a leak in your house. The closest cause would be the water causing the flooding, and since this is usually covered under homeowner’s insurance, the insurer would be liable for the damage. The Principle of Indemnity is another tenet of health insurance. Indemnity is when something (or someone) is protected against loss of damage. This principle states that the purpose of insurance is to put the insured into the same financial situation he/she was in before a loss occurred.
According to this, the sole purpose of an insurance contract is to compensate the insurer for a loss, but not to overcompensate. The Principle of Contribution is another tenet of health insurance which is a corollary of The Principle of Indemnity. If the insured takes out multiple policies on the same subject matter, then the Principle of Contribution is applicable to all contracts indemnity. According to this principle, when an insured’s loss is covered by more than two policies, he/she can’t recover more than an indemnity. The insured can only claim for compensation from the actual value of the loss from one insurer, and cannot go to another insurer and claim the same loss in order to make a profit. Another tenet of health insurance is the Principle of Subrogation, which is also an extension and corollary of the principle of indemnity, and applies to all contracts of indemnity as well.
Subrogation is when something is switched out or substituted for another. This principle states that if the insureds property is lost due to damage, the ownership of the property is passed on to the insurer after the insured has been compensated. The final tenet of health insurance is the Principle of Insurable Interest. This tenet states that the insured must suffer a financial loss due to the damage and/or loss of the object they have insured. A good example of this would be if a person makes their living creating videos for an online community such as YouTube and they have their camera insured. If this camera is damaged they will not be able to make any videos and therefore will not be able to make any money. Resources Akrani, G. (2011, March 23).
Principles of Insurance – 7 Basic General Insurance Principles. Retrieved January 07, 2018, from http://kalyan-city.blogspot.com/2011/03/principles-of-insurance-7-basic-general.html Nanda, T.
(2016, August 25). Principles of Insurance and Health Insurance. Retrieved January 07, 2018, from https://www.linkedin.com/pulse/principles-insurance-health-tarun-nanda