Are consumer policies subject to restrictions? If so, briefly describe the range of protections offered to consumer policyholders.
Insurance & Reinsurance
Consumer policies are restricted pursuant to several laws. For example, mandatory or unilaterally mandatory provisions in the Insurance Act (the latter is a series of provisions making void any agreement that, contrary to such provisions, adversely affects policyholders); and invalid provisions under the Consumer Contract Act.
For example, Article 10 of the Consumer Contract Act provides that:
“Any consumer contract clause that restricts the rights or expands the duties of the consumer beyond the application of provisions unrelated to public order in the Civil Code, the Commercial Code (Act No. 48 of 1899) and any other laws and regulations, and that unilaterally impairs the interests of the consumer in violation of the fundamental principle provided in the second paragraph of Article 1 of the Civil Code, is void”.
The Corporations Act and the ICA provide a range of protections for consumer policyholders. All PDS documents must be drafted in a clear, concise and effective manner that is easy for a consumer to understand. All consumer insurance policies are also subject to a 14 day cooling off period. Where a policyholder has purchased renewable cover, the insurer is required to advise the policyholder 14 days prior to its expiration whether the insurer is prepared to renew or extend the policy.
The ICA also provides a number of protections for policyholders, including notifications that must be made to insureds as to their duty of disclosure and the potential exclusion of the insurer's liability in certain circumstances.
The General Insurance Code of Practice (the Code) provides further protections to consumer policyholders where claims are made. Insurers which have subscribed to the Code are required to comply with strict time limits in managing claims.
Danish insurance companies are required to observe consumer protection regulation. The Insurance Contracts Act provides quite detailed mandatory regulations to benefit the insured. These include, inter alia, regulation regarding insurance premium, limitation periods, duty of disclosure and right of cancellation.
In addition, Danish courts may generally at their own discretion set aside any contractual provisions and terms fully or partly if the court deems them to be manifestly unfair. Thus, Danish contract law prohibits the use of unfair contract terms in consumer agreements. A term will generally be considered unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. Certain terms are in particular likely to be considered unfair, e.g. high cancellation charges or penalties.
There is wide range of provisions contained in the Insurance Law, the Civil Code as well as in the Act of 16 February 2007 on the protection of competition and consumers that apply to consumer (i.e. retail customer) policies. Additional requirements are set out by the KNF in its guidelines and recommendations regarding insurance distribution, bancassurance, product adequacy and product management system that introduce a number of obligations for insurance undertakings and intermediaries aimed at protecting customers (including consumers).
As a rule, all of the terms and conditions of insurance should be written in a transparent and unequivocal way. Any discrepancies or uncertainties are interpreted in favour of the customer (whether it is a consumer or not). There is a list of specific information that must be included both in the pre-contractual information as well as in the insurance policy and the terms and conditions of insurance.
Moreover, any unfair clauses in consumer contracts (i.e. ones that put the consumer in a worse position than that of the insurance provider) are forbidden. If such clauses are included in the terms and conditions of an insurance contract, which has not been negotiated individually with the consumer, such clauses are null and void.
More restrictions apply in respect of insurance-based investment products. According to the new Insurance Distribution Law insurance intermediaries and insurance undertakings that advise on, or sell, insurance-based investment products to consumers, should possess an appropriate level of knowledge and competence in relation to the products offered. They should assess the consumer's needs and offer a product that fits those needs.
Consumer Law numbered 6502 is applicable for the insurance contracts where cover is not related to a commercial activity. It provides that an insurance cover cannot be mandatorily requested (by financiers, etc.) and the consumer can freely conclude any insurance contract.
TCC also provides certain rules that could only be changed in favour of policyholders. The insurer shall inform the policyholder verbally and in writing regarding all matters related to the insurance contract, the insured’s rights, the provisions to which the insured has to pay special attention, notification duties that may arise in the course of insurance cover. The insurer shall also keep the policyholder during the contract period informed of the facts and developments that can be of importance relation to the insurance.
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.
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.
On its 100th anniversary, the Insurance Contract Act underwent comprehensive revision with its current version taking effect as of 1 January 2008. In revising the Insurance Contract Act, the legislator intended to promote consumer protection. For example, the new law, on the one hand, introduced extensive duties for insurers to inform and advise policyholders before the formation of the insurance contract and, on the other hand, restricted sanctions in case of breach of the policyholder’s obligations to disclose material risks pre-contractually or to cooperate with the insurer in the claims handling process. Accordingly, most provisions of the Insurance Contract Act which serve consumer protection are mandatory.
In addition to the Insurance Contract Act, insurance contracts are further governed by the German Civil Code (Bürgerliches Gesetzbuch, BGB). Even where the Insurance Contract Act leaves room for party autonomy, standard insurance terms and conditions are subject to Sections 305 et seq. BGB. Accordingly, provisions which are so unusual that the other party to the contract does not need to expect to encounter them do not form part of the contract. This may, for example, apply to foreign provisions copied and pasted into German policies. Furthermore, pursuant to Section 305c para. 2 BGB, any doubts in the interpretation of standard business terms are resolved against the user. Moreover, provisions in standard business terms will be ineffective if they unreasonably disadvantage the insured. While this scrutiny plays a predominant rule in consumer insurance, it is also relevant for business insurance.
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 insurance companies must observe with regard to the offer and marketing of insurance products and the content of insurance policies.
The Circular contains clauses to be mandatorily included in the general conditions of certain type of insurance policies, to protect the interests of the policyholders, insureds and beneficiaries.
Also, CONDUSEF has issued regulation and guidelines that must be observed by insurance companies for the protection of policyholders, insured and beneficiaries, focused on transparency, clarity and avoidance of abusive practices.
Finally, there have been judicial precedents in Mexico in which Courts have given guidance on the proper construction of insurance companies, per example, by recognising 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 165a(2a) VersVG).
Consumer policies are also subject to the KSchG, which provides a broad range of protections to consumer policyholders. For instance, Article 3 KSchG provides consumers with the right to withdraw within one month from conclusion of the insurance contract, if it was not concluded on 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 3a 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 and thus invalid, 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 considered unfair.
Norms pertaining to regulated insurance contracts and collective insurance described in No. 11 above, are applicable. There is a Consumer Protection Law enacted in 2004 to protect collective and diffuse interest of consumers, although its applicability to insurance policies has been disputed, since it is a matter highly regulated by special norms.
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. Insurance policies typically include details of the Insurance Ombudsman, who are appointed 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. Insurer is required to provide the details of the grievance redressal mechanism within the policy. Policyholders who have complaints against insurers are first required to approach the grievance or customer complaints Department of the insurer.
Insurers are required to necessarily form part of the Integrated Grievance Management System (IGMS) put in place by the IRDAI to facilitate the registering/ tracking of complaint on-line by the policyholders.
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 service by 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.
In general terms, substantive law is currently more favourable to insureds, but certain recent developments indicate a certain shift towards a more evenly balanced system. Insurance in Brazil is governed by the following statutory framework: (a) Decree-law 73, of November 21, 1966; (b) Complementary Law 126, of January 2007; and (c) the Brazilian Civil Code and the Brazilian Code for the Defense of Consumers. In terms of infra-statutory regulations, the National Council of Private Insurance (CNSP) has powers to issue regulations and the Superintendent of Private Insurance (SUSEP) issues guidelines (circulars) and ordinances. This legal framework is consistent with the legal principles applicable to the operation of insurance and insurance contracts and is similar to the legislative framework and concepts applied to insurance in Latin America and Europe.
Consumer protection and regulatory agencies in Brazil have a significant influence on the rules and regulations applied to the insurance market. In general, they act on a correct technical basis which guarantees relative equilibrium in the market, contributing to the development of the activity.
Moreover, the case law of the Superior Court of Justice (STJ) is particularly relevant in relation to insurance. The STJ is the highest court in the country for issues of federal law, which covers essentially all of the laws and regulations on insurance, and the regulatory activities of the Federal Government and regulatory agencies.
In the past, the Superior Court of Justice had a distinct tendency to find in favour of insured parties in relation to insurance issues, sometimes going so far as qualifying norms or establishing presumptions contrary to insurers in the interpretation of provisions of the Civil Code (particularly the interpretation of articles 763, 768 and 785). Recently, the STJ has taken a more technically sound approach applying the law in line with its technical basis. It is very likely that the court will take into account the rules edited by the CNSP and SUSEP as sources of interpretation and will adhere more to the actual wording of the law.
It is important to note that specific legislation (a Draft Law on Insurance – PLC 29/2017) is currently at an advanced stage of progress through Congress. If introduced, it will revoke several provisions of the Civil Code and CNSP and SUSEP rules. It is difficult to predict the repercussions of the law, but it is likely that it will lead to Brazilian courts reviewing the positions they took under the previous law in relation to the tenets and concepts of insurance and reinsurance law with possible change of approach in relation to certain issues (e.g. the regime of aggravation of risk, expenditure on salvage, apportionment of payout, direct third-party actions, follow the fortunes, statutory limitation, etc.).
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).
Policies concluded with consumer are regulated by:
- the French Insurance Code, which:
- sets out a standard legal regim that already has somewhat of a pro-consumer bias, in that it contains strict guidelines regarding the wording and layout of certain key clauses (i.e. exclusion clauses or warranty forfeiture clauses), non-compliance with which results in the said clauses being deemed unenforceable;
- contains provisions that specifically provide consumers with heightened protection, which were recently strengthened by the 17 March 2014 law on Consumer Protection, which inter alia enables insureds to terminate their insurance contracts any time during the coverage period (rather than exclusively at the annual renewal date) or cancel certain types of insurance (insurance contracts concluded at a distance or offered in conjunction with other goods and services) during an initial 14 day period.
- the French Consumer Code, also contains provisions that apply to insurance contracts, according to which:
- the interpretation of ambiguous contractual terms must always be made in the consumer’s favor, and
- clauses that create a significant imbalance between the rights and duties of the parties may be declared null and void by the Courts (which will, inter alia, take note of the recommendations emitted by the Unfair Terms Commission (“Commission des clauses abusives”), which regularly identifies standard insurance contract clauses it deems to be unfair).
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.
Except for large risk insurances, the provisions of the Insurance Contract Act 1980 are mandatory and shall prevail over the policy terms and conditions unless these are more favourable to the insured. The Act is considered as protective of the insured’s rights. Some of the protections offered to consumer policyholders are the following.
Under the Spanish Insurance Contracts Act, the clauses which limit the rights of the insured have no effect whatsoever if they have not been properly highlighted and specifically accepted in writing. A general form of acceptance by signature at the end of the contract may not suffice. These rules are not mere formalities. They are an absolute requirement in Spanish Law.
The only competent court to hear an action under the policy is the court of the domicile of the insured, and any agreement to the contrary shall be null and void.
The insurer is obliged to pay over the indemnity on completion of the investigations and
adjustments necessary to establish the existence of the loss. However, in the event it is not
possible to complete the adjustment quickly, the Insurer is still obliged to make, within forty
days from receipt of notification, an interim payment of the minimum sum which is likely to be due, according to the information available at the time.In addition to this, and in any event, if the Insurer fails to pay the indemnity within 3 months as from the date of the loss or fails to make an interim payment within 40 days, the Court will impose penalty interest equal to one and a half times the legal interest rate. This will be calculated on a daily basis. However, if two years have elapsed since the date of the loss without payment having been made, the annual penalty interest rate rises to at least 20%. The penalty interest also applies in favour of the prejudiced third party in civil liability insurance.
PIRL sets forth several duties of conduct for the benefit of policyholders, insured and beneficiaries, with the purpose of guaranteeing market transparency and customer protection. As a result thereof, ASF might prohibit or prevent insurance undertakings from distributing insurance products that impair or may impair the interest of the policyholders, insured and beneficiaries, notably as a consequence of the insurance products not being appropriate for the corresponding risk profile or in the event they clearly contribute to enhance conflict of interests among them.
Insurance undertakings must guarantee that relevant information and clarification duties are duly and timely performed. Furthermore, insurance undertakings must implement the necessary mechanisms for the purposes of preventing insurance products from being distributed without taking into consideration the policyholders’ profile.
Insurance undertakings must also implement an autonomous function which shall be responsible for managing claims submitted by policyholders, insureds, beneficiaries or injured third parties, being such function composed by fit and proper and professionally qualified individuals. Additionally, each insurance undertaking must appoint a clients’ ombudsman, which must be an individual with renowned prestige, qualification, reputation and independence, to whom policyholders, insureds, beneficiaries and injured third parties might submit their claims with relation to act or omissions of the insurance undertakings.
As regards to consumer policies, the principle of freedom of contract is applicable as a general rule. However, PICL provides a fairly comprehensive set of absolutely mandatory rules and another set of relatively mandatory rules that can only be altered to the benefit of policyholders, insured or beneficiaries.
The insurer must provide accurate information with regard to the insurance product. If the circumstances so require, it shall further clarify which are the most suitable policies for the specific risk to be secured. From a consumer protection perspective, an insurance contract must be drafted in Portuguese (save as otherwise requested by the policyholder and agreed with the insurer), in clear terms, be brief and rigorous and, whenever deemed possible, make use of plain and simple language. The most relevant terms of the insurance policy must be drafted in highlighted characters (e.g. clauses on limitations or exclusion of cover).
As regards to the interpretation of insurance contracts, given the circumstance that a typical insurance policy is composed of a document containing terms individually negotiated by the insurance undertaking and the policyholder and a set of documents containing the contract’s general and specific conditions, whenever a contradiction is detected between a standard term and a term individually negotiated between the parties, the latter shall prevail. In addition, an ambiguous standard term shall be interpreted in accordance with the meaning that is most favourable to the policyholder (that adheres to the standard terms).
Finally, it shall be pointed out that if the aggregate risk covered by the insurance policy is reduced and the parties do not reach an agreement as regards to the (reduced) premium to be paid, the policyholder shall be entitled to terminate the insurance contract.