Kathmandu. Risk has become an inseparable word in life, health, business, home. In the midst of all the uncertainties — be it a sudden illness, an accident, a fire, a natural disaster or a market fluctuation — insurance companies are one of the few institutions people want to trust. But the question is: Where is this belief?
Insurance is not just a financial contract but it is a transaction of trust, a test of ethics and a practical exercise of responsibility. And the fundamentals that hold this whole structure together cannot be dismissed as textbook principles alone. Rather, they are the latent 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 parties 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 harmony comes into play. When a customer fails to provide accurate information or an organization knowingly enters into an agreement with unclear terms. It undermines public confidence not only in policy but also in the sector as a whole, and 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 even for those with no loss, the goal will be profit, not security. This will make insurance a risky gamble. Ultimately, it can be very harmful to society and the economy.
Damage arising from an accident or incident must be directly and objectively related to the insured risk – this is the basis for resolving the insurance claim. If the loss is due to something not covered by insurance, then the question naturally arises – to what extent is the company responsible?
The correct answer to this question comes from a proper cause-effect analysis. In this, 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 principle that insurance compensation is not about profit but about recovery from customer losses strengthens the ethical foundation of insurance. If a customer can profit from an insurance claim, they may be tempted to go elsewhere, cause an accident with malicious intent, 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 insurance agreements acceptable to both parties and keeping the market stable.
Sometimes the person or organization that suffers the loss is actually caused by someone else. For example, an accident is caused by 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, financial responsibility falls where it should be.
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 gain 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 action to minimize the damage once it starts. Just as it is irresponsible to record a house fire without trying to extinguish it, destroying evidence after an accident is a sign of bad intentions.
Thus, insurance companies argue that they are willing to bear the financial burden of sudden damages but do not want to be liable for negligent or intentional damages. This ethical approach makes insurance a responsible system, not just financially but also socially.
The world is rapidly going digital. From online policies, insurance claims through 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, particularly weak claims, unclear terms and a lack of customer information are real. New risks such as climate change, pandemics and global economic downturn have also been added. To fully address these issues, insurance policies need to focus not only on legal knowledge but also on effective policy philosophy.
On the one hand, what is the customer’s premium for? They need to know the circumstances under which they can make a claim and what their responsibilities are. Organizations, on the other hand, must ensure that they do not encourage actions contrary to the principles for short-term commercial gain. Without principled transparency and fairness, it is impossible to build a sustainable insurance industry. –Rajkiran Das/Insurance News BD
