On The Principle Of Utmost Good Faith, Of The Insurance Contract

The principle of max good faith, as the basic principle of insurance contract, has influenced the insurance contract entirely and deeply. Without the reasonable principle the insurance trade can't manage and develop steadily. But at the same time, because of the emergence of 'good faith Crisis', the indifference between the principle of max good faith and the principle of general good faith and the bad guarantee of related regulations people feel puzzled about the principle. Someone said that it seems that the 'Good faith Crisis' is more serious than the past although there was not the principle before. Under the background of 'Good faith Crisis' the paper between the search the history of the principle, compare the difference the principle of max good faith and the principle of general good faith and reveal the real concept of the principle. Then the paper demonstrates the reasonability of the principle and advises how to perfect the principle and the related regulations for adapting the need of reality.The rough content of the paper has seven parts. The first part is foreword. The proposition from the second part and the fourth part is what is the principle of max good faith. In part two we find the principle originated from the Sea Insurance through searching the history of the principle. With the flying time and the need of balancing the both side's profit the effect of the principle expands from the disclosure obligation and the guarantee obligation which restrain the insurant and insurance applicant to the explanation obligation, abandoning right and forbidding regretting which restrain the insurer.In part three the paper compares the difference between the principle of max good faith and the principle of general good faith in the view of China law and Britain law and American Law. In China the difference between the principle of max good faith and the principle of general good faith is puzzled. In general the concept of the principle of max good faith is that the two sides of the insurance contract must fulfill obligation entirely, don't deceive and hide the significant information of the insurance object and obey the agreement and promise of the insurance contract during they sign and fulfill the insurance contract. Otherwise the insurance contract I invalid. In China there are many different theories about the concept of the principle of general good faith. In Britain and America they attach importance to rules and cases while despising the principle. They look the subjective good faith as 'not knowing and being convinced deeply' and understand that the objective good faith means 'the good faith in fact and obeying the reasonable standard of fair deal'In part four the paper point out that the content of the principle of max good faith is reflected by the specific institutions which include 'the disclosure obligation, the guarantee obligation, remaining the safety of insurance object obligation, the notice obligation about the increase of the risk level and the obligation of trying best to prevent and reduce the lost' which reflect the obligation of insurant and insurance applicant and 'the explanation obligation and abandoning right and forbidding regretting' which reflect the obligation of insurer. Although there are many systems which reflect the principle the disclosure obligation and explanation obligation are the focal points in the paper.In part five the paper demonstrates the reasonability of the principle. The principle manifest its' reasonability and importance in the insurance because of the special characteristics of the insurance contract which means the existence of the asymmetric information, the need of the development of the insurance trade, the balance of the two sides' benefit and the remedy of the loophole of the law. The asymmetric information means the information is known by one side and isn't know by another side who can't verify the information, which includes the verification isn't realistic and worthwhile because the high cost. In fact the 'adverse selection' and 'moral hazard' exist side by side because of the asymmetric information. On the one hand the insurance company doesn't know the information about the risk of the insurance object and the insurant and insurance applicant feels puzzled about the special insurance provision. On the other hand insurer can't know accurately about the insurant and insurance applicant's prevention measure.In part six the paper points out the difficult position in reality and advises about how to perfect the principle. This part involves the insurant and insurance applicant and insurer's dishonesty and not credit and the choice between fair and efficiency. The paper advises that the principle should contribute to the development of the insurance trade through perfecting the law, strengthening the supervisor and management and improving the consciousness of good faith and so on. This part also analyses the principle in the view of limited reason, trade cost and so on in the view of economics analysis of law. The recognition about fair and efficience not only involves this proposition, but also include sht trying study about the research way of law and value direction.The paper utilizes the analysis way of law economic, explanation law and comparison law. Maybe the way of economics analysis of law is one of the special feature of the paper. Because of the difference between economic and la, they can't equal with each other completely. The economist often emphasizes the concept of 'rational man' who seeks for maximizing one's own self-interest and only shows limited concern about others' benefit. Meanwhile the jurist usually quote the concept of 'reasonal man', also called the man of good intentions and management, who conducts in the reasonable way and persevering and also considers about others' benefit. The above explanation doesn't mean that economic and law repel completely because 'A person must be rational if he wants to be reasonable, which is a powerful judgement.'The paper thinks the principle of max good faith is still the basic principle of the insurance contract and the foundation stone of the development of the insurance trade although the times has change and the insurance trade adjust and perfect by itself. Facing to the 'good faith crisis' in reality we must make function of the principle in the development of the insurance trade.