Which principle has shaped the formal structure of insurance?

The principle that has notably shaped the formal structure of insurance is the Law of Contracts. This principle underpins the entire insurance industry since insurance policies are essentially contracts between the insurer and the insured.

In this context, the Law of Contracts provides the framework for the creation, enforcement, and interpretation of insurance policies. It establishes the obligations of each party, including the insurer’s promise to pay a claim in exchange for the insured’s payment of premiums. Understanding this principle is essential for ensuring that both parties adhere to the agreed-upon terms, which include considerations such as policy limits, exclusions, and conditions necessary for claims.

The other principles mentioned, while relevant to the broader context of insurance, do not fundamentally shape the formal structure of insurance in the way the Law of Contracts does. For instance, the Principle of Mutuality reflects the concept of risk sharing among policyholders, and the Risk Transfer Principle discusses the idea of transferring risk from the individual to the insurer, while the Doctrine of Precedent pertains more to legal precedents in court rulings rather than the contractual nature of insurance. Thus, the foundation of insurance operates primarily under the principles set out in contract law.