Principle of Utmost Good Faith (Uberrima Fides)
Insurance policies are contracts between the Insurer (insurance company) and the Insured (you). In the process of negotiations that lead to the formation of the contract, the Insurer and the Insured must be honest and open with each other. This is the Principle of Utmost Good Faith, or Uberrima Fides. A breach of the principle makes the policy voidable at the option of the aggrieved party.
The most common breach of this principle occurs in the declaration of medical history in the application forms. I have seen quite a number cases whereby medical history was not properly declared. The insured runs the risk of having the policy voided by the insurer. But the question is, did the insured choose to hide the truth or was lead to it by the adviser?
When filling up application forms, I would normally let the applicant fill up the medical details him or herself. I would provide the necessary help when needed. Why do I provide such services, or the lack of it to say, when I can help the client to fill in the form? The answer is very simple, the client knows his medical condition best. The questions in the form are meant to guide the applicant. I will render the necessary help to prevent the client from breaching the principle of utmost good faith, and in doing so, results in breaching the contract. This is for the benefit of the client.
Some advisers would help the clients fill in the forms. They could ask a very simple question like, “do you have any medical history?”. Without having the questions to guide them, the applicant may forget or just say no thinking that the conditions are minor. There are even horror stories of unethical advisers telling clients that they don’t have to declare the medical conditions. For the sake of closing the deal fast without any possible medical follow-ups, the adviser puts the benefit of the client into total disregard.
So, is helping the client to fill up the application form a service or dis-service? Think about it.