Background
Good insurance practice
At the beginning of 2009, the Insurance Ombudsman Bureau, the Advisory Office for Bank Customers and the Securities Complaint Board merged into the Financial Ombudsman Bureau, which provides guidance and advice on matters relating to banking, insurance and securities. The Banking, Securities and Insurance Complaints Boards operate in conjunction with the bureau, resolving disputes by delivering non-binding but traditionally – especially among the domestic industry – recommendations which are followed. The Insurance Complaints Board also handles disputes in which the insured party is a business entity.
The insurance industry must comply with good insurance practice. Good insurance practice is not a single written internal code of conduct, but an established concept encompassing:
- legislative provisions;
- guidelines and regulations issued by the supervisory authorities;
- guidelines of the Federation of Finnish Financial Services and its predecessor, the Federation of Finnish Insurance Companies;
- general principles of fairness and ethicality; and
- decisions of the authorities.
In 1998 the Federation of Finnish Insurance Companies prepared the principles for the claims-handling process, which explain how the requirements of law and good insurance practice are satisfied in connection with the claims handling of non-compulsory insurance for consumers. The object of the claims-handling process is for every client to receive, without undue delay, all compensation to which he or she is entitled on the basis of the law and the insurance conditions, even if he or she could not apply for all of them. An insurer should explain to the consumer the contents of the insurance, the information required to make a claim and the procedures involved in making a claim. If the claim application is subject to several different insurances, the insurer should advise from which insurance the compensation is coverable. Claims should be considered promptly within one month of receipt of the information required by the insurer. Any further inquiries should be made at the same time and the insurer itself will obtain the information that is best available to it. If an insurance condition is unclear, it must be construed for the claimant's benefit. If a claim is rejected, the insurer should advise the claimant on the grounds for the rejection. The decision must be clear and provide guidance on the dispute resolution procedures.
In 2002 the Federation of Finnish Insurance Companies issued guidelines for compliance with the law and good insurance practice in connection with the sale and cancellation of insurance contracts. The starting point is that every insurer has the right to decide what type of products it will sell, on what terms and conditions and to whom. The insurance contract is based on trust, which is not always achievable. The guidelines set out the conditions under which the insurer may reject an insurance application and cancel the contract.
In 2004 the Federation of Finnish Insurance Companies prepared the instructions for compliance with good insurance practice in connection with insurance investigation. There are many further publications which describe how insurance business should be carried out.
Good insurance practice also applies to foreign insurers if insurance services are provided in Finland. Good insurance practice requires that insurance terms and conditions and any other information be provided by a foreign insurance company to the insured, and that beneficiaries be provided in the insured's mother tongue, whether this be Finnish or Swedish. The insurer may diverge from this duty only with express consent.
Good insurance practice promotes insurers' everyday work as a self-regulatory system. Compliance is supervised by the Financial Supervisory Authority in the first place. Good insurance practice also comes up before the Insurance Complaints Board when insurance disputes are handled. Usually, disputes are decided directly under the law and applicable insurance conditions. However, in some cases which are open to interpretation, good insurance practice may be the decisive factor.
In November 2011 the Financial Ombudsman Bureau published the second edition of Good Finance Practice in Complaints Board Practice, a publication which gathers recommendations where the complaints boards have referred to good insurance, banking and securities practices. The publication presents 21 insurance cases from various stages of the insurance lifecycle. In those cases the Insurance Complaints Board recommended that an insurer not only pay insurance benefits as such, but also sometimes cover costs and pay compensation for contractual damages, where the insurer:
- had provided wrong advice, which caused damages;
- had failed to start claims handling on its own initiative regarding all insurances;
- having received a liability insurance claim and promised to revert after the pending court proceedings, had done nothing and simply waited until the debt had expired; and
- had failed to handle a car insurance application in due course and had subsequently rejected a claim when the car was damaged.
The Insurance Complaints Board's practice demonstrates that good insurance practice can sometimes be worth money to the claimants.
For further information on this topic please contact Matti Komonen or Herman Ljungberg at Hammarström Puhakka Partners, Attorneys Ltd by telephone (+358 9 474 2207), fax (+358 9 474 2247) or email ([email protected] or [email protected]).