Professional Documents
Culture Documents
Insurance Law
Protection of the weak
party
Samim Unan
References
This presentation is based mainly on
three works
Prof. Helmut HEISS, Insurance Contract Law between Business Law
and Consumer Protection (General Report prepared for the 18 th
International Congress on Comparative Law
Rodney LESTER, Consumer Protection Insurance, Primer Series on
Insurance Issue 7, August 2009
Dra. Andrea SIGNORINO BARBAT/ Dr. Antonio RABOSTO, Los Derechos
del consumidor y el seguro,, XII Congreso Iberolationoamericano de
Derecho de Seguros, Asuncion 2011
Transparency
Information
about
the prices
Terms and conditions
of the product
Information must be
- full
- plain
- comparable
Choice
Fair, non-coercive and reasonable
practices when
- selling the product
- collecting the payments
Redress
Inexpensive
and speedy mechanisms
To address complaints
Resolve disputes
Privacy
Personal data to be
kept confidential
protected
(when necessary) destroyed
Examples of udesirable
industry practices harmful to
consumers
Consumer protection
institutions in insurance
Contract law
Ideal solution: separate insurance
contract act
At least: a special contract section in
the general law or contracts law.
Contract law
A good B2C contract regulation
should differentiate between material and non
material non disclosure
should specify clearly the entry into force of
the contract (also the cover notes)
should specify when the underinsurance would
justify a proportionate compensation
should require a notification obligation for the
insurer when the insurer desires to cancel or
alter a contract
Contract law
A good B2C contract regulation (suite)
Should indicate how contracts will be
interpreted in case of dispute
Should provide for the use of plain and
accessible words and print size
Should state clauses that can not be
included (clauses such as warranty
clauses, compulsory arbitration clauses)
Direct insurance
Examples of commercial insurance:
hull insurance (transport vehicles),
cargo insurance (goods in transit)
Examples of consumer risk insurance:
life assurance, private medical
insurance
Insurance taken by the employer
against death, injury etc. of the
employees as a collective insurance?
Legislation on insurance
Historical development:
- Early stages: Protection of the insurer (and
also the so called community of insured
people) Example: the duty to disclosure of
the prospect policy holder, the prevention
of fraudulent claims
- Thereafter: mitigation of the harsh results
engendered by the protection of the insurer
Example: requirement of fault or link of
causation for breach of warranties (duties)
Legislation on insurance
Historical development (after 1950s):
- Consumer protection approach
This protection is provided by means
of mandatory provisions (setting
the compulsory boundaries of the
insurers to regulate the insurance
relationship through general policy
conditions)
Legislation on insurance
Insurance is nowadays mostly
regulated by special legislation. It is
not part anymore of the general
private (commercial) law.
Insurance acts generally do not make
any differentiation between consumer
insurance contracts and commercial
insurance contracts
Legislation on insurance
However
- In respect of the precontractual
information duty special rules for
consumers
- Out of court complaint mechanism
specifically for consumers
- Special protection for small and medium
sized business
are sometimes provided
Legislation on insurance
General Consumer Law rules to the
extent that they are also applicable
to insurance contracts, contribute to
the creation of insurance consumer
law
(especially rules about unfair terms
or distance marketing of financial
services)
Legislation on insurance
Consumerism: National laws on
insurance absorb instruments of
consumer protection to protect the
weak party .
The term weak party includes
Policy holder,
Consumers
Small and medium sized entreprises
Consumer rights in
insurance contract
Insurance contract law is described
as a monolithic branch of law (no
difference between consumer and
commercial contracts)
However many principles of the
consumer protection law have
penetrated insurance contract law.
Consumer rights in
insurance contract
Unfair terms (insurance contract being a contract
of adhesion, judicial control of unfair terms in
general policy conditions has an important impact
on insurance products)
Important problem: whether judicial control is
possible also with regards to exclusions?
Right to withdraw
Right to obtain information and advice/warnings)
Right to obtain contractual documents (in time
and in writing)
Shift in perspective
(Protection of the insurer + the
community of the insured persons
against adverse risk selection)
decreased
(Protection of the individual policy
holder against an adverse selection
of the insurance product) increased.
Duty to advice
Duty to advice (the duty to warn
about the inconsistencies)
Duty to inform
In the field of insurance, the
information duty is not only provided
for the precontractual stage but
applies also during the contract
period.
Sales practices
Sales practices
If the intermediary is a broker, the
consumer should be advised (at the first
contact with the intermediary?) if the
commission will be paid by the insurer.
The consumer should have the right to
require the amount of the commission?
(in all insurances or in certain insurances
only such as life assurance?).
Sales practices
* An intermediary should not be allowed to
be at the same time broker and agent for a
given general class of insurances (life and
disability, health, credit insurance .)
Reasonable cooling- off period (also known
as free look period) to struggle with
eventual high pressure selling and
misselling.
Sanctions (fines, withdrawal of license for
each of the above)
Unfair terms
Unilaterally prepared and non
negotiated contract terms not binding
when they create an imbalance to the
detriment of the consumer.
This rule does not apply when the
contract terms (general policy
conditions) are prepared by the
regulatory body (as they are not
prepared by the insurer unilaterally).
Right of withdrawal
In insurance law, in general the right
of withdrawal only provided in a
limited extent (life assurance).
However new texts such as German
ICA 8 and PEICL Art. 2:303 allow it
explicitly for any insurance contract
(under certain circumstances)
Obligation of contracting
Generally the obligation of
contracting is not specifically
provided in insurance except for
compulsory insurances whereas it is
a basic rule in general consumer law.
Resolution of conflicts
between insurer and policy
holder
Commercial courts
Consumer courts (bad solution)
Admiralty courts (not relevant)
Arbitration
ADR (Ombudsmen)
Class action
Complaints to supervisory authority
Dispute resolution
mechanisms
Internal:
Insurers to provide an internal avenue for claim and dispute
resolution (contact points for the consumer accessible during business
hours; statement in plain language of the main steps of the mechanism
provided; fairness in handling the customer dispute; statement of the
coordination with any Ombudsman or supervisory authority; avoidance
of unreasonable cost)
Dispute resolution
mechanisms
External:
A system allowing the consumer to seek
affordable and efficient third party recourse
(Ombudsman or tribunal)
Ombudsman made public
Ombudsmans impartiality and
independence from the appointing authority
The enforcement mechanism to be made
public.
Financial Literacy
Consumers should have access to
sufficient resources to understand
the products available to them.
Codes of Conduct
A principles based Code of Conduct
for insurers (and also for
intermediaries)
- prepared in consultation with the
insurers (intermediaries) and consumer
protection associations
- monitored (and enforced at the last
resort) by a statutory agency
- augmented by voluntary codes
Other Institutional
Arrangements
There must be a balance between
prudential supervision and consumer
protection
Market conduct + prudential
responsibilities (better to separate
these roles?)
Responsibility of insurers for their
public announcements
Guarantee schemes
They are provided especially for
mandatory insurances (motor vehicle
liability insurance)
For life assurances (especially when
used as loan collateral)?