Utmost good faith principle in Indonesian insurance law as a legal reason to harm the insured party

Abstract

The principle of utmost good faith has been recognized as one of the essential principles in insurance, and its practice in other countries has been fairly applied to both parties. It is suspected that this insurance principle in regulation and its implementation in Indonesia only burdens one unilateral. Therefore, this study aims to prove the allegation that the principle of utmost good faith favors only the insurer and its application in dispute resolution directed at harming the insured party. This study uses a case study approach, with five insurance legal cases in the form of court decisions as purposively selected objects. Qualitative analysis (content analysis) was then carried out to obtain data: data codification, data presentation, and conclusions/verification. The principle of utmost good faith is regulated by the following documents of Indonesian insurance law: Indonesian Commercial Law Code, Act No.7/1992 and Act No.40/2014. The results showed that the utmost good faith principle in several Indonesian insurance regulations is more in favor of insurance companies. The insurance company always utilizes Article 251 of the Indonesian Commercial Law Code or the utmost good faith principle as a shield to commit fraud, and refuses to fulfill its legal liability with the aim of harming the insured. AcknowledgmentsWe thank to the Ministry of Education, Culture, Research and Technology of the Republic of Indonesia for supporting and funding this research until it was completed on time.

Indonesia Insurance Development with Various Aspects and Prespectives of The Regulatory Approach

“…Government Regulation Number 73 of 1992 is a provision governing the conduct of insurance business. The formation of this government regulation is based on the objective of insurance which in principle is able to encourage the growth of Indonesia's national development, so that in sustainable implementation it is necessary to have a directive so that insurance business activities run in accordance with applicable law and regulate insurance companies in Indonesia so that they develop properly and in accordance with the foundation and principles of a healthy and responsible business [12].Looking at the contents of the entire Government Regulation Number 73 of 1992, it is clear that the preparation of this regulation still refers to Law No. 2 of 1992, this can be seen from the same emphasis on several provisions contained therein.…”

“…For this reason, people finally choose to invest in insurance. The insurance that is generally chosen is general insurance such as home or property insurance, vehicle asset insurance, life insurance, death insurance, work accident insurance, and so on [12]. Aside from being a form of risk control (financially), insurance also has various benefits which are classified into: main functions, secondary functions, and additional functions.…”

Application Of The Utmost Good Faith Principle In Life Insurance Business Management In Indonesia

“…The principle of good faith is a principle that requires the parties to act honestly, and not to mislead or conceal any information that is important to the contract, with the application of good faith obliging all parties to disclose to the other party any information that might influence the other party's decision to enter a contract. (Mulhadi & Harianto, 2022)…”

“…The Commercial Code itself does not discuss in detail the meaning of life insurance, but chapter 3 (Commercial Code) discusses life insurance, which, when detailed in Article 302, states that if a person's life can be insured for the needs of the person who interested, either for life or for a time determined by agreement. Furthermore, it is further explained in article 303 that the interested person can hold insurance, even without the knowledge or permission of the person whose life is insured.The principle of utmost good faith is a principle that obliges the parties to act honestly, and not to mislead or hide any information that is important to the contract, with the application of good faith obliges all parties to disclose to other parties any information that might influence the other party's decision to make contract (Mulhadi & Harianto, 2022).…”