RE-EVALUATING THE PRINCIPLE OF UTMOST GOOD FAITH IN INDIAN INSURANCE LAW: A CASE FOR LEGISLATIVE REFORM

Indian insurance law is based on the legal principle of uberrimae fidei, which means “utmost good faith.” This principle was created to fix the problem of information asymmetry between the insurer and the insured. In today’s market, though, powerful insurance companies are using this doctrine more and more to deny claims based on technical non-disclosures. This creates a big power imbalance that goes against the main social goal of insurance, which is to be a safety net, and it leaves policyholders who are already vulnerable unfairly exposed. This raises important questions about consumer protection and fairness in contracts. This article critically analyses the Insurance Act of 1938, its related regulations, and the development of Supreme Court case law through a doctrinal legal framework enhanced by socio-legal and constitutional viewpoints, to assess the doctrine’s practical implications. The analysis indicates a discernible judicial trend aimed at alleviating the severity of uberrimae fidei, as the Supreme Court increasingly incorporates principles of proportionality and fairness. Even with these improvements, policyholders are still not well protected because the rules are too broad, and the enforcement is too weak. The results show that just changing the way the courts work is not enough. This article advocates for a thorough legislative reform, suggesting particular modifications to the Insurance Act of 1938 to substitute uberrimae fidei with a legal ‘duty of fair presentation’ and to establish a framework for proportional remedies. These kinds of changes would make fairness and justice a part of the system, making sure that the law helps people instead of making their lives harder.