Utmost good faith (uberrimae fidei)

What is utmost good faith?

Utmost good faith, or uberrimae fidei, is the principle that an insurance contract rests on full and honest disclosure by both sides. The proposer must tell the insurer every material fact that would affect its decision to accept the risk or fix the premium, and the insurer must explain the cover, exclusions and conditions truthfully. If one side breaks this duty, the other can avoid the contract.

Ordinary commercial contracts work on "buyer beware". Insurance is different because the proposer knows far more about their own health, habits, property and past losses than the insurer can find out. The law makes up for that gap by placing a higher duty of honesty on both parties.

How utmost good faith works in India

The principle comes from English common law and is written into Indian statute in a few places:

• Marine Insurance Act, 1963. Section 19 says a marine contract is "based upon the utmost good faith" and either party may avoid it if the other does not observe it. Section 20 says a circumstance is material if it "would influence the judgment of a prudent insurer". Courts apply the same reasoning to other classes of insurance.
• IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024. These define "material information" as the important and relevant information explicitly sought by the insurer in the proposal form, and state that the duty of disclosure applies to both the insurer and the prospect.
• IRDAI (Insurance Products) Regulations, 2024. Regulation 4 requires every insurer to design products that adhere to the basic principles of insurance, utmost good faith among them.

The Supreme Court has repeatedly applied the principle. In Manmohan Nanda v. United India Assurance (2021) it held that what counts as material depends on the policy, the risk and the questions in the proposal form, and that an insurer which accepts a proposal with a blank column cannot later claim suppression on that point. In Mahaveer Sharma v. Exide Life Insurance (February 2025) it ruled that partial non-disclosure of some small existing policies, where a large policy was disclosed, did not justify repudiating a death claim.

Time limits on challenging a policy

Indian law caps how long an insurer can rely on non-disclosure:

See Section 45 and moratorium period for detail.

What utmost good faith means for distribution

Most disputes over non-disclosure begin at the point of sale, so this principle is a distribution problem as much as a claims problem.

• The proposal form is the contract's foundation. Since material information is defined as what the form explicitly asks, every question must be answered by the customer, in full. Agents and bank staff who fill forms on the customer's behalf, or tick "No" to medical questions to speed up issuance, create claims that will be repudiated later and complaints that will be traced back to the channel.
• Disclosure runs both ways. An adviser who downplays exclusions, waiting periods or co-payments breaches the insurer's side of utmost good faith and fits the regulatory definition of mis-selling.
• Early claims get scrutiny. Life claims within three years and health claims before the moratorium ends are investigated for non-disclosure. Distribution leaders often track early-claim repudiations by channel, branch and seller to find where disclosure is weak.
• Tele-verification and digital journeys help. Pre-issuance calls, video medical questionnaires and customer-entered health declarations create a record that the customer answered personally.
• Explain the consequence plainly. A good adviser tells the customer that hiding diabetes, a past surgery, tobacco use or an existing policy can cost the family the entire claim, and that disclosure may raise the premium but keeps the cover safe.

Common disclosure gaps at the point of sale