What situation would violate the principle of indemnity during an insurance claim process?

The principle of indemnity is fundamental in insurance, ensuring that a policyholder is compensated for their loss up to, but not exceeding, the actual financial loss incurred. This principle is designed to prevent an insured party from profiting from a claim, thus keeping the insurance system fair and sustainable.

Receiving a payout greater than the loss incurred directly violates this principle. If an insured individual were to receive more money than what they actually lost, it would result in an unfair advantage, allowing them to profit from their loss rather than simply restoring them to their pre-loss financial position. This undermines the core purpose of insurance, which is to provide financial protection and restore individuals after they face a loss.

The other situations listed, while potentially problematic in the context of claims handling or insurance ethics, do not necessarily violate the principle of indemnity in the same clear manner. For instance, submitting multiple claims for the same loss could be considered fraudulent behavior, but it does not inherently involve being compensated above the actual loss. Claiming damage from a prior incident, meanwhile, raises questions about the legitimacy of the claim but does not directly violate indemnity if the claim is legitimate and accurately reflects the loss. Hence, the focus remains on the situation where there is an overcompensation