honesty is the best policy

Growing up, I've always been taught that honesty pays and lying is a sin. Once in a while telling a white lie has always paid off than being honest, for example telling my mom that I did not steal the cookie from cookie jar when I indeed took more than 3 on one occasion to spare myself from the rod. While minuscule lies like these are acceptable and does not do anyone harm along the way, lying on a big scale is sure to jeopardise or hurt someone. Hence the birth of 'doctrine of utmost good faith'. This doctrine is important in insurance contracts, in fact it is important and should be applicable to all contracts. As for insurance, it is governed that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal.

The insured is compelled to reveal the exact nature and potential of the risks that he transfers to the insurer, which in my opinion, is fair in return for the compensation that he would receive in the event of something undesirable. The insurer also has to make sure that the potential contract fits the needs of, and benefits the assured. In the case of Carter v Boehm (1766), Lord Mandfield stated this

Insurance is a contract of speculation... The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstances in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist... Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.