What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
The Insurance Contract Law 1981 (the Contract Law) sets out all of the requirements for concluding insurance contracts.
The insurance contract (ie, the policy) must be in writing and handed to the insured together with a copy of the proposal form. Any limitation or exclusion must be underlined. The insured must truthfully answer any question which is essential to the willingness of a reasonable insurer would use to enter into the insurance contract and is specified in the proposal form. No independent duty of disclosure is imposed on the insured.
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
Certain insurance contracts are subject to mandatory wording, including those relating to:
- bodily injury in motor vehicles;
- private apartment dwellings;
- personal accidents; and
- travel insurance.
Other types of insurance contract must include certain elements as dictated by the Contract Law – for example:
- if an insurance contract is not cancelled ab initio, the insurer cannot cancel the contract after the insured event; and
- in suicide cases, insurers cannot cancel a policy if the suicide occurred 12 months after the contract was entered into.
Insurance benefits are linked to the cost-of-living index.
Can any terms be implied into (re)insurance contracts (eg, a duty of good faith)?
The Contract Law is silent on implied terms. However, according to court precedent, no implied terms can be added to the policy. All terms must be written in the policy.
Further, conditions precedents are not allowed and requirements that the insured will voluntarily disclose information which was not included in the proposal form are unacceptable.
What standard or common contractual terms are in use?
As the Contract Law sets out certain terms and obligations, most policies adapt its terms and import the wording of its terms and clauses.
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
For insurance and reinsurance purposes, there is currently no use of smarts contracts which skip the middle person (broker or agent). However, direct insurers (there are four such insurers) are creating direct contact with insureds and eliminating the use of agents, though this is not similar to blockchain.
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
The Contract Law governs breach of contract. For instance, if an insurer unjustly fails to pay insurance benefits, the court may obligate it to pay the consequential losses suffered by the insured as a result of a declination over and the above policy limits (ie, these are losses which the insured actually suffered, such as loss of income due to the declination of the claim or additional interest on loans taken out). These are not punitive damages, but a direct consequence of a declination.
If an insured breaches its contract, the insurer is entitled to remedies only if the loss is a direct consequence of the breach (eg, security measures not being implemented).
In case of late notice, insurers can decline coverage only if they can prove that the late notification actually caused it a loss (eg, the refusal of reinsurers to participate in a claim) and even then, up to the loss the insurer can prove.
If a breach relates to misrepresentation or partial disclosure, the remedy is payment of proportional insurance benefits.
Only a proven fraudulent breach entitles insurers to decline a claim in full.