Basic Principles of Insurance
In the insurance world there are six basic principles that must be met, ie insurable interest, Utmost good faith, proximate cause, indemnity, subrogation and contribution.
Insurable Interest
The right to insure arising out of a financial relationship, between the insured to the insured and legally recognized.
Utmost good faith
An
action to disclose accurately and completely, all facts material [material fact] about something that will be insured is requested or not. The meaning is: the insurer must honestly explain everything clearly about the extent of the terms
/ conditions of the insurer and the insured must also provide a clear and correct for objects or interests of the insured.
proximate cause
is an active cause, efficient cause that chain of events
that lead to a result without the intervention of the start and working actively from a new and independent.
Indemnity
One mechanism by which the insurer provides financial compensation to place the insured in a financial
position that he had prior to the loss [Commercial code article 252, 253 and affirmed in section 278].
Subrogation
Right transfer request from the insured to the insurer after a claim is paid.
Contribution
While the insurer the right to invite any other person equally bear, but do not have the same obligations to the insured to participate in providing indemnity.
Abstract
Abstract In standard models of contracts, efficient incentives require the promisor to pay damages for nonperformance and the promisee to receive no damages. To give efficient incentives to both parties, we propose a novel contract requiring the promisor to pay damages for nonperformance to a third party, not to the promisee. In exchange for the right to damages, the third party pays the promisor and promisee before performance or nonperformance occurs. We call this novel contract “anti‐insurance” because it strengthens incentives by magnifying risk, whereas insurance erodes incentives by spreading risk. Anti‐insurance is based on the general principle that when several parties jointly create risk, efficient incentives typically require each party to bear the full risk. Without a third party, the most that can be achieved is to divide the risk among the parties. By improving incentives, anti‐insurance contracts can create value and benefit everyone as required for a voluntary exchange.
Journal Information
Current issues are now on the Chicago Journals website. Read the latest issue.Journal of Legal Studies [JLS] publishes interdisciplinary academic research about law and legal institutions. It emphasizes social science approaches, especially those of economics, political science, and psychology, but it also publishes the work of historians, philosophers, and others who are interested in legal theory and use social science methods.
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