UNDERWRITING & DISCLOSURE
Utmost good faith definition
Utmost good faith is a principle requiring both the insurer and insured to disclose relevant information honestly before and during a contract.
In practice, this means the party being insured (the proposer) must disclose all material facts known to it during preliminary negotiations for an insurance contract and during the contract if there are any changes. If a proposer doesn't make full disclosure, the insurer is entitled to avoid the contract. If the insurer doesn't make full disclosure, the insured can have their premium returned. This term gives insurers, brokers, reinsurers and risk managers a common way to discuss the concept when reviewing policies, claims, regulation or market data.
This term is especially useful in insurance market analysis, policy wording and risk transfer decisions. It helps determine when cover applies and what obligations exist under the insurance contract. It also helps users compare how insurance is structured, regulated, priced or claimed across different markets.
Utmost good faith is closely related to duty of disclosure, material fact, insurance contract and underwriting. Linking these concepts together helps build a clearer glossary structure and gives readers a stronger understanding of how individual insurance terms connect within wider international insurance practice.
At a glance
- Used in
- Insurance market analysis, policy wording and risk transfer decisions.
- Purpose
- Helps determine when cover applies and what obligations exist under the insurance contract.
- Important because
- Clear definitions support better comparison of insurance products, market practices and regulatory requirements across jurisdictions.
- Related terms
- duty of disclosure, material fact, insurance contract and underwriting.
Example of utmost good faith in insurance
An applicant withholds information that would affect the insurer’s decision to offer cover. This may breach the principle of utmost good faith and affect the validity of the policy.