Beyond Indemnity and Subrogation Principles: Can Insurance Be a Source of Profit for the Insured?

Keywords: Insurance, Insurance contract, Indemnity, Subrogation, Profit-making in insurance contracts

Abstract

The study examined whether an insured can make a profit from an insurance contract. It explored the principles of indemnity and subrogation to determine whether an insured can legitimately profit from an insurance contract without breaching contractual and equitable boundaries. It analysed principles of indemnity and subrogation, reviewed relevant case law and the literature. The research comprises semi-structured interviews with 336 participants, selected through a purposive sampling technique, from Sub-Saharan Africa, the UK, and the European Union, to gather diverse perspectives on the practical implications of indemnity and subrogation principles. The principle of indemnity is foundational but not absolute. While legal doctrine disallows profit-making, insureds may incidentally benefit due to policy structure or procedural oversights. The findings revealed that the theoretical basis of indemnity prohibits making a profit in an insurance contract. In practice, policy structures and insurer practices may result in perceived or actual gains for the insured. The findings suggest that an insured can make a profit in an insurance contract, but the profit must not be at the expense of the insurer. Insurers must enhance underwriting clarity, while insureds should understand the contractual intent. The study highlighted regulatory and practical implications for insurers and insureds. The study concluded with valuable recommendations to enhance transparency and integrity in claims processes.

Published
2025-10-06