Within fourteen days, two different views on the duty of disclosure regarding profiteering policies were published. Opposite to the ruling of the Kifid, the District Court ruled in a similar case that the insurer had no additional duty of disclosure. This discords between the Kifid ruling and the District Court ruling bring uncertainty to the position of insurers that provided similar profiteering policies around the same issue date.
Last year, the Dutch Financial Services Complaints Board (Klachteninstituut Financiële Dienstverlening, "Kifid") passed its ruling in a dispute concerning the duty of disclosure of Nationale-Nederlanden Levensverzekering Maatschappij N.V. ("NN") with regard to a so-called 'profiteering policy' (woekerpolis) in the pre-contractual phase. Following on this, the District Court of Middle-Netherlands (Rechtbank Midden-Nederland, the "District Court") published its ruling in a similar dispute concerning the duty of disclosure of ASR Levensverzekering N.V. ("ASR").
Substantive consideration of the European Court of Justice ruling
The European Court of Justice (the "ECJ") ruling states that the third life insurance directive (the "Directive") does not preclude insurance companies from being required to provide policyholders with information additional to the information listed in the Directive on the basis of general principles of domestic law. According to this ruling, insurers can be obliged to provide additional information before or at the conclusion of an insurance contract, if the following three cumulative conditions are met:
- the required additional information must be clear and accurate;
- the required additional information has to be necessary for a proper understanding by the policyholder of the essential elements of the contract; and
- the legal certainty for the insurance company is sufficiently safeguarded, so that it is foreseeable that the insurance company had to provide the additional information.
The Kifid ruling
The Kifid expressed that, with regard to an investment-linked insurance entered into in 1997, information concerning the premiums and the deducted costs thereof were necessary for a proper understanding by a consumer of the essential elements of the contract to be concluded. The Kifid furthermore ruled that an insurance company which offers investment-linked insurances, may always be required to at least inform consumers in the pre-contractual phase regarding what costs will be deducted from the paid premiums and the possible consequences thereof. This obligation follows from the general standards of Dutch private law, of which can be derived that it can be expected from a professional insurer that it will provide a private consumer with sufficient information to enable the consumer to make a reasoned decision whether or not to take out an insurance contract.
NN has brought an appeal against the Kifid ruling, since NN does not agree on the way Kifid explained the ECJ ruling. The case will be presented to the Kifid appeals board.
The District Court ruling
According to the District Court, regarding a profiteering policy entered into in 1993, nor the written nor the unwritten law of that time required the insurer to break down the costs or express the precise extent of the costs to the consumer. The District Court ruled that it was common practice in 1993 that it was sufficient to disclose pre-contractual information on the gross premiums and on the benefits. Also the Minister of Finance was at that time of the opinion that insurers were not obliged to provide information about the cost structure. Moreover, the District Court has taken into account that the aforementioned common practice was widely supported by society.
The District Court deemed that it was not foreseeable for the insurance company that it had to provide any additional information. The insurance company could, at that time, not know that it would be obliged to break down the costs and express the precise extent of the costs to the consumer.
The discords between the Kifid ruling and the District Court ruling bring uncertainty to the position of insurers. The uncertainty will possibly be eliminated later this year, when judgment will be delivered in the appeal in the case between NN and Wakkerpolis. In the event that the Kifid appeals board arrives at a different opinion which follows on from the District Court ruling, this might be an indication that the duty of disclosure of insurers in similar cases will be restricted.