Utmost Good Faith and Fairness in Life Insurance: Restoring Consumer Confidence
22 Pages Posted: 17 Feb 2017 Last revised: 20 Feb 2017
Date Written: February 6, 2017
Abstract
When a claim is made under a life insurance policy the claimant, and the community more generally, expect it will be handled in a way that is procedurally and substantively fair. This paper argues that the duty of utmost good faith, a fundamental principle in the legal framework governing contracts for life insurance, not only demands procedural and substantive fairness, but in fact requires conduct of a higher standard than fairness. It highlights structural issues plaguing the industry that limit insurers’ capacity to meet the community’s reasonable expectations in this respect, and considers appropriate mechanisms to address these limitations. There is a compelling imperative to do so, as they perpetuate an expectation gap that is particularly detrimental for consumer confidence in the industry as a whole.
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