ABSTRACT
The test of a prudent underwriter in the law concerning utmost good faith for insurance contract has been misapplied in the past. An objective test similar to that found in the law of negligence was used as the basis of the test. It is not until recent years that legal principles have been realigned towards a subjective test of the prudent underwriter and this brings the application of the test back into the realm of the law of contracts. This, together with the UK Parliament being more inclined towards greater consumer protection, led to the introduction of a slew of statutory provisions championing better consumers’ rights not just in the UK but also in commonwealth nations such as Australia and Malaysia. These new statutes had seemingly turned the old common law precedent on the principle of utmost good faith on its head and some commenters had even labelled it as the death of the principle! Nevertheless, research for this chapter demonstrates that the legal principles are still intact with modifications introduced to level the playing field in the application of the law towards the mass consumers. To encourage further and greater transparency on the application of the law concerning utmost good faith in insurance, the computation for losses payable could be made more transparent with adoption of a table of rates by the insurance industry which are verified by independent insurance actuaries.
