In Ethics & Fraud Investigation insurance expert witness Barry Zalma writes:
Ethics is a process of systematically applying, using, defending and recommending concepts of right and wrong behavior. Ethical behavior is required of both parties to a contract of insurance for the system to work. Ethics is the essence of insurance. Insurance was created to spread risk from individuals to multitudes. Spreading the risk in a fair, ethical and honorable manner from one person to many is the basis upon which a system of insurance was founded. The insurance contract since modern insurance was first created was founded on the concept of Uberrimae Fidei. The phrase is used to express the principle that a contract must be made in perfect good faith, concealing nothing. In the case of insurance both the insured and the insurer must observe the most perfect good faith towards each other. Insurers and reinsurers are dependent on:
utmost good faith [which] may be viewed as a legal rule but also as a tradition honored by ceding insurers and reinsurers in their ongoing commercial relationships. [Unigard Security Insurance Co. v. North River Insurance Co., 4 F.3d 1049 (2nd Cir. 09/09/1993)]