Are consumer policies subject to restrictions? If so, briefly describe the range of protections offered to consumer policyholders.
Insurance & Reinsurance
Consumer policies are not subject to any particular restrictions by the Central Bank. However, there are a broad range of protections afforded to consumers of financial products under the Consumer Protection Code (the “CPC”). The CPC applies to financial services providers regulated either by the Central Bank or by a regulator in another EU or EEA Member State, when providing services to consumers in Ireland on a freedom of establishment or freedom of services basis.
Under the CPC, regulated entities are required to act honestly, fairly, and in the best interests of the consumer and the integrity of the market. Firms are obliged to obtain certain information from a consumer prior to providing a product or service, in order to assess the suitability of a product for the individual consumer. This includes information on the consumer’s needs and objectives, personal circumstances, financial situation and where relevant attitude to risk. The CPC also sets out the obligations on financial service firms when dealing with consumers in respect of advertising, contacting consumers, claims processing, handling of errors and complaints, maintaining records and providing information on products. In addition, regulated entities are required to disclose certain information to consumers in respect of conflicts of interest and any remuneration arrangements in place.
Consumer policies are strongly protected under the CPC and regulated entities may be subject to administrative sanctions by the Central Bank for any failure to comply with its provisions.
Consumer policies must meet the requirements of the Consumer Rights Act 2015 (CRA 2015). The CRA 2015 prohibits the use of unfair contract terms in consumer agreements and consumer notices (including announcements, promotions and renewal letters). A term will be unfair if, contrary to the requirement of good faith it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer. Core terms (i.e. terms that either relate to the main subject matter of the contract or to the price to be paid) cannot be assessed for fairness to the extent that they are sufficiently transparent and prominent. Importantly, in insurance contracts core terms will include exclusions and conditions. To ensure that the insurer is able to rely on such terms both policy conditions and exclusions must be transparent (which will require drafting in plain and intelligible language) and also prominent (so that the consumer is sufficiently aware of the term). Certain terms are likely to be unfair such as high cancellation charges, terms that allow the insurer to determine the characteristics or price after the contract has been entered into. Any term found to be unfair will not bind a consumer.
In addition to the prohibition on the use of unfair terms, ICOBS prevents firms from seeking to exclude or restrict or rely on any exclusion or restriction of duty of liability towards a customer or other policyholder unless it is reasonable to do so.
The Insurance Contracts Act provides far-reaching consumer protection as its provisions are mandatory to the benefit of the insured. Even where the term of an insurance contract does not directly violate the Insurance Contracts Act, the courts may at their own discretion set aside any contractual provisions or interpretations of such contractual provisions if the court deems them to be manifestly unreasonable under the general Contracts Act, even if such decisions are rare in insurance cases.
Since the Insurance Contracts Act is very beneficial to the insured, insurers do not tend to provide any additional customer protections in insurance policies. However, in practice, insurers sometimes waive some of their rights or settle the claim in a way that is more beneficial to the insured than what follows from the policy.
The customer protection provisions of the German Civil Code (BGB) apply in full to insurance contracts, regardless of whether or not the customer qualifies as a consumer.
With regard to so-called “jumbo risk” policies, the parties are, subject to the transparency and fairness requirements for standard terms (see below), permitted to deviate from any mandatory insurance contract law provisions as well as the mandatory European conflict of law provisions contained in the Rome I Regulation. Pursuant to section 210 of the German Insurance Contract Act, a jumbo risk is – building on the definition in Art. 13 No. 27 of the Solvency II Directive defined as a policy that falls within certain classes of business (such as railway rolling stock, aircraft, ships, goods in transit or commercial trade credit insurance), or for other classes such as P&C, liability, financial losses where the policyholder exceeds at group level the limits of at least two of the following criteria: (i) a balance-sheet total of EUR 6.2 million; (ii) a net turnover of EUR 12.8 million; (iii) an average number of 250 employees during the financial year.
Except where the details of the relevant clause have been specifically negotiated by the parties, the provisions concerning standard terms under sections 305 et seq. of the German Civil Code apply. Under these provisions, any clauses of the standard terms and conditions that are surprising, non-transparent or unfair are void and deemed as replaced by what would apply if the contract was silent. The standards of what is deemed to be non-transparent or unfair may be less stringent with regard to professional customers, in particular with regard to jumbo risks.
Many provisions of the German Civil Code are supplemented by provisions in the German Insurance Contract Act. Except with regard to jumbo risks (see above), any terms diverging from certain mandatory provisions to the detriment of the (professional or non-professional) customer are void, e.g. an insurer may normally not reduce benefits where the policyholder is able to demonstrate the absence of gross negligence (sections 28, 32 of the German Insurance Contract Act).
The Insurance Contract Act includes detailed regulations which determine relevant requirements in relation to non-disclosure and so on, which are mainly intended for consumer policyholders (see question 1, third paragraph). These requirements do however apply generally (with the exception of policies covering larger risks), and are therefore not of specific relevance to consumer policies.
Marketing and sales activities are also subject to relevant general legal requirements, such as unfair contract terms legislation under the Marketing Act. Cooling-off rights also apply to sales to consumers by telephone or online.
Consumer policies are subject to certain regulatory provisions on sound practices that restrict and limit the activities regarding the offer and commercialization of insurance operations and products by insurance companies.
Chapter 4.5 of the Circular contains clauses to be mandatorily included in the general conditions of certain insurance policies to protect the interests of the policyholders, insureds or beneficiaries.
Also, there are recent judicial precedents in Mexico in which Courts have recognised that insurance policies must be construed by applying a contra proferentem rule.
In addition to the consumer protection provisions discussed above in Query 15, IA Resolution No. 3 of 2010 sets forth rules as to steps the insurer must take upon policy renewal, claims procedures, and maintenance of company complaint registers.
HAAD and DHA also maintain consumer complaint processes relating to medical cover in the respective Emirates.
One area where consumer protection regulations are notably lacking is the Bankassurance field. Banks that engage in the offer of insurance cover are not regulated by the IA. This leads to a regulatory gap that has been problematic in the life insurance market, as certain banks have been reported to engage in deceptive marketing and sales of their life products, in a manner inconsistent with the consumer protection provisions set forth in IA Resolution No. 3 of 2010.
The insurance laws of many states provide special protections for consumer insurance policies (also called “personal lines” insurance). These include “free look” periods that allow consumers to return a policy for a full refund within a short period of time (typically five to thirty days) after purchasing it. Additionally, insurance laws sometimes mandate certain minimum benefits and coverage levels and limit an insurer’s right to cancel or non-renew a policy.
The VersVG sets out extended rights for consumers, particularly in relation to the termination of insurance policies. Consumers have the right to withdraw from an insurance contract within two weeks after conclusion without giving reasons (Article 5c VersVG). With regards to life insurance policies, consumers can withdraw from the contract within 30 days after conclusion (Article 165(a) (2a) VersVG). Also, consumers can terminate an insurance policy with a term of more than three years, at the end of the third year or every following year (Article 8(3) VersVG), but might have to provide compensation for discounts received due to the longer term of the insurance policy.
Consumer policies are also subject to the KSchG, which provides a broad range of protections to consumers. For instance, Article 3 KSchG provides consumers with the right to withdraw within one month from conclusion, if the insurance contract was not concluded in the business premises of the trader or at a trade fair. Furthermore, consumers may also withdraw from insurance contracts, if circumstances, which were essential for the consumer’s consent, are less likely to occur than depicted by the trader (Article 3(a) KSchG). Consumers can withdraw from such contracts within a week after such fact is noticeable to the consumer. With regards to insurance contracts for a duration exceeding one year, the right of withdrawal expires one month after the date of conclusion.
In general, a contractual provision not individually negotiated is deemed to be unfair, if, contrary to the requirement of good faith, it significantly alters the balance of the parties' contractual rights and obligations to the detriment of the consumer. For instance, with regards to insurance contracts, the consumer’s burden of cost must be as transparent as possible. Similarly, a contract stipulating a burden of proof for the consumer stricter than the general statutory rule is invalid. Article 6 KSchG provides a non-exhaustive catalogue of contractual provisions that are considered unfair and are considered invalid as such.
The CPA [please refer to question 11] provides that insurance policies must include certain minimum clauses required to protect the insured (e.g. term of the contract, early termination provisions, a detail of fees and/or charges, etc.)
Insurance laws and regulations require minimum contents and additional restrictions. As stated above, as a general rule the commercialisation of insurance policies in Chile is subject to such policies general terms and conditions being previously deposited in the Insurance Regulator´s Policies Deposit. This deposit is publicly available and deposited policies models must comply with the minimum requirements set forth in specific insurance regulations.
Currently, neither the ISA, ISO, nor ICA contain consumer protection provisions. Since 2012, however, Art 8 of the Unfair Competition Act (Bundesgesetz gegen den unlauteren Wettbewerb) provides for protection of consumers against unfair clauses in general terms and conditions of insurers. No relevant case law exists so far but is expected to develop in the future.
Further, de lege ferenda a certain number of consumer protection provisions may be implemented in the ICA, which is currently proposed to be amended.
The consumer protection and defense rules privilege the consumer's interest in financial products due to the disadvantage resulting from the particular circumstances of the consumer relationship. In the case of contractors, insured, and/or beneficiaries who have the status of consumers, in accordance with the provisions of the Consumer Protection and Defense Code (approved by Law No. 29571), are applicable the provisions of Financial Products or Services and the Regulation of Transparency of Information and Contracting of Insurance. The provisions of these rules regulate the suitability of contractual conditions, mainly regarding the clarity and transparency that must reflect the contractual terms, as well as the communication of relevant information in the stage prior to the contracting of the insurance, at the time of contracting and during the term of the insurance contract, including regulation on how to disseminate such information (through the website, information brochures and even the sales force).
Insurance policies are structured to incorporate comprehensive mechanisms for customer protections that they are required to include by law, and typically include the following:
- Details of the Insurance Ombudsman, who is appointed by the Insurance Council to address complaints by the insured against the insurer, in relation to the settlement of claims.
- The IRDAI requires insurers to formulate a grievance redressal policy and file it with the IRDAI. Policyholders who have complaints against insurers are first required to approach the grievance or customer complaints Department of the insurer.
- In cases of delay or no response relating to policies and claims, the IRDAI can take up matters with the insurers to ensure speedy resolution. Only policyholders, claimants or the insured can approach the IRDAI for assistance and advocates, agents and other third parties are not allowed to approach the IRDAI.
IRDAI Regulations provide, amongst other obligations, that insurers follow certain practices at the point of sale of the insurance policy to ensure that the insured can understand the terms of the policy properly.
In addition to the above, as a consumer, while there are no exclusive procedures or judicial venues for resolution of insurance or reinsurance disputes, insurance policies are contracts of indemnity and parties can approach a civil court (or arbitration) to claim for a breach of contract in accordance with the appropriate territorial jurisdiction.
The Consumer Protection Act, 1986 lists insurance as a service. As an alternate remedy, the insured can opt for a summary procedure and approach the consumer courts, which are empowered to provide compensation for any deficiency of the insurer in servicing a claim.
Insurance companies are subject to the Consumer Protection (Fair Trading) Act (Cap 52A). The Act prohibits unfair practices, such as conduct which reasonably results in a consumer being misled, and taking advantage of a consumer if the insurer knew or ought to know that the consumer is not in a position to protect its own interest, understand the character, nature or effect of the transaction or any matter related to the transaction.
MAS also requires registered insurers to provide a 14-day "free look period" to its policyholders of a life policy or accident and health policy with a duration of one year or more. This allows the policyholder to terminate the policy within 14 days from the date of receipt of the policy documents without incurring any premiums.
The PPF Scheme also provides coverage for policyholders of various classes of consumer policies in the event that the insurer concerned is insolvent or unable to meet its obligations.
The existing insured protection system can be classified according to the following criteria: (a) solvency: capital requirements and constitution of technical provisions; (b) contractual: rules on the drafting of clauses and the non-admissibility of abusive clauses, consumer-friendly interpretation in membership contracts and specific rules on insurance contracts in the Civil Code; (c) transparency of information: rules on publication and content of financial statements, advertising of suppliers and products; and (d) supervisory bodies focused on consumer protection, such as SUSEP, ANS and the National System of Consumer Protection.
All policies are subject to the Contract Law which is a pro consumer law. The law includes various Restrictions which intend to protect the insured. For example, restrictions and exclusions must be emphasized. If the insurer failed to do so he cannot rely on the Exclusion.
Questions included in the Proposal Form must be specific. Failing to do so will prevent the Insurer from relying on the answers. Only answers to specific questions are relevant. The insured does not have an independent duty of disclosure.
No precedential conditions are allowed. Insurance contracts cannot be voided unless in case of proven fraud. Generally, if the risk was aggravated, the remedy of the insurer is proportional payment of insurance benefits.
Yes, consumer policies are indeed subject to restrictions. Firstly, the MiFID rules of conduct are applicable to both insurers and insurance intermediaries. Secondly, the provisions of the Insurance Act are of a mandatory nature, which must also be regarded as a protection mechanism for consumers. Moreover, the Insurance Act also aims at protecting consumers. Finally, consumer policies must also be in compliance with consumer protection law, which can be found in Book 6 of the CEL. It is important to note that a consumer has a period of at least 14 calendar days to withdraw from a distance contract concerning a financial service, including an insurance policy. The consumer can exercise this right without payment of a fine and without reason (Art. VI.58, § 1 CEL).
Customer protections provisions impact the content of insurance policies (or interpretation thereof) and on pre-contractual information to be provided, particularly in the case of distance sales or life-assurance contracts.
Generally, an insurance contract (whether life or non-life) must comply with the FIC’s requirements concerning its form and content. The FIC specifies mandatory information that must be included in all insurance contracts, such as the identification of the insured person(s) or property, nature of the insured risks/events, date and time on which the cover starts, duration of the policy, etc. From a consumer protection perspective, an insurance contract must be drafted in clear and non-ambiguous terms, with specific requirements applicable to exclusion clauses. The form and content requirements are more stringent for life assurance contracts.
In addition, the contractual relationship between the insurance company and the insured must be balanced. As a result, contractual terms found to be unfair are not enforceable against consumers and ambiguous or unclear terms are interpreted in the consumer’s favour.
The Committee of Unfair Terms (“Commission des clauses abusives”) responsible for detecting unfair provisions has issued two lists of provisions setting out (i) provisions automatically considered as unfair and (ii) the ones which are presumed unfair. This Committee also issues recommendations and guidelines concerning provisions in insurance contracts.
The provincial and territorial laws and regulations all prescribe statutory conditions that, depending on the jurisdiction, are included in either all contracts or only certain types of contracts (such as fire or auto policies). The statutory conditions contain provisions for items such as the right of parties to terminate coverage, requirements to report changes to material risk and the process for providing proof of claims. The provincial and territorial laws and regulations also generally prescribe fair market practice guidelines, although these guidelines are for the most part drafted in general terms.