Inequality of the principle of utmost good faith in insurance law: Lessons from Indonesia

Abstract

This article aims to critically review the existence of the unbalanced application of the utmost good faith principle within Indonesia’s insurance industry. It also examines the implications of the recent Constitutional Court decision, which conditionally declared the utmost good faith in Article 251 of the Indonesian Commercial Law Code unconstitutional. The study employs normative legal research using primary and secondary legal materials, focusing on laws and insurance regulations, case law, court decisions, and legal principles relevant to the research topic. The findings indicate that, despite its widespread recognition, the implementation of the principle of utmost good faith in Indonesia has been characterized by significant inequality between insurers and insured parties. The principle's ambiguous characteristics result in challenging interpretations, as evidenced by the court decisions. The courts expand the principle, leading to subjective and potentially biased applications. In conclusion, the issuance of the Constitutional Court decision is meant to rectify these disparities. It has significantly impacted the country's insurance industry and all its stakeholders. Stakeholders must reassess and adapt to the new reality of the utmost good faith principle, ensuring a balanced responsibility between insurers and insured parties.