What principle ensures that an insurer must honor the reasonable expectations of the insured?

The principle that ensures an insurer must honor the reasonable expectations of the insured is known as the "reasonable expectations" doctrine. This principle serves to protect consumers by acknowledging that insurance policies can be complex and difficult to understand. Therefore, it is crucial that the insured's expectations of coverage and benefits are considered legitimate as long as they are reasonable based on how the insurance product is presented and marketed.

The reasonable expectations principle emphasizes that even if the policy language is not explicitly clear, consumers should still be able to rely on the representations made by the insurer. For instance, if an insurer advertises a product suggesting that it covers certain risks or benefits, the insured is expected to assume that these representations are accurate. This approach fosters fairness in insurance transactions and promotes trust between the insurer and the insured.

In contrast, other principles like utmost good faith reflect the expectation for both parties to act honestly and disclose all relevant information, while the disclosure principle focuses on the requirement that insurers provide clear and complete information about their policies. The fair dealing principle generally speaks to the overall fairness in transactions but does not directly enforce expectations in the same way the reasonable expectations principle does.