Uberrimae fides

Uberrimae fides means “utmost good faith&rdquot; in Latin. Insurance is agreed uberrimae fides.

Buyers of insurance do not only need to answer the questions that the insurer asks honestly. They must also disclose certain facts unasked. These are those that may cause a "reasonable insurer" not to underwrite the risk, or to underwrite it on different terms. Failure to do this can invalidate insurance.

The reason insurance contracts are agreed uberrimae fides is that it helps to reduce adverse selection. If insurance contracts were agreed caveat emptor (buyer beware) like most other contracts, then the slightest omission from insurance proposal documents would attract significant numbers of people who could exploit the loophole.

The contrast of uberrimae fides with caveat emptor is legally correct, in that contract law in itself imposes no duties on either party to act fairly. However there are often other protections in place - particularly for consumers. Most transactions are covered by laws (such as the Sale of Goods Act), regulators and implied terms of contract.

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