Contracts

General

What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?

According to the general principles on the conclusion of contracts, the conclusion of a (re)insurance contract requires an offer and acceptance. Usually the insured places the offer to enter into an insurance contract via a standard insurance application form, in which case the insured is bound to the offer for a maximum six weeks, unless a longer period has been individually negotiated between the insurer and the insured. The contract is deemed to have been concluded once the insurer's acceptance declaration has reached the insured. This may be an express declaration that the insurer accepts the application or, alternatively, the delivery of the insurance policy to the insured, which the insured can understand only as the insurer's consent to the conclusion of the contract. 

There are no formal requirements for the conclusion of a (re)insurance contract. Thus, the contract can be validly concluded orally, in writing or conclusively. 

Mandatory/prohibited provisions

Are (re)insurance contracts subject to any mandatory/prohibited provisions?

Mandatory/prohibited provisions regarding insurance contracts can be found in several laws, including the Insurance Contract Act, the Civil Code, the Consumer Protection Act and the Remote Financial Services Act Act. For example, these provisions deal with the insured's rights to withdraw from the insurance contract; the insured’s obligation to pay the premium, the communication between the insurer and the insured or the maturity of the insurer's performance under the insurance contract. Many of them are only unilaterally mandatory, which means that the parties may deviate from these provisions to the benefit, but not the detriment of the insured.  

Reinsurance contracts are always business to business. There are hardly any mandatory or prohibited provisions in this respect. However, a reinsurance contract must not violate good morals or any statutory prohibitions.

Implied terms

Can any terms by implied into (re)insurance contracts (eg, a duty of good faith)?

The good-faith duty is generally implied in all contracts, including (re)insurance contracts. The Supreme Court has based the interpretation of (re)insurance contracts on this general principle. 

Standard/common terms

What standard or common contractual terms are in use?

The Association of Austrian Insurance Undertakings publishes insurance terms and conditions for various insurance products online. They are not mandatory and may be deviated from.

No standard or common contractual terms are in use. All Austrian (re)insurers use terms and conditions which are incorporated into the (re)insurance contract, usually by reference. These vary substantially between not only the different kinds of insurance product, but also the different (re)insurers.

‘Smart’ contracts

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?

In general, insurance product sales are largely agency and broker driven. The main financial technology used for the conclusion of (re)insurance contracts is the online sale of insurance products, and price comparison websites have gained popularity since entering the market.  In any case, there is still capacity for growth in this respect.

(Re)insurers offer various smart products as side products to a (re)insurance contract, such as a storm, bad weather or hail early warning system informing customers via text message about said upcoming weather conditions. Further, the development of wearable technology is affecting the health insurance market. For example, a customer may collect bonus points for certain health protection measures that it has taken (eg, running, climbing stairs or undergoing a regular health examination), all of which is tracked over the Internet. At the end of a certain period, the customer may cash in the accumulated bonus points at selected shops or service providers.

Breach

What rules and procedures govern breach of contract (for both (re)insurer and insured)?

This depends on the contract provision that has been violated and can be answered only on a case-by-case basis. For example, if the policyholder has infringed its main contractual obligation (ie to duly pay the premium in full), the Insurance Contract Act provides that the insurer may, under certain circumstances, withdraw from the contract or terminate the contract (in case of failure to pay a subsequent premium). Further, default on payment may result in the insurer being released from its obligation to provide cover for an insured event even though the contract does not end.

Further, the violation of obligations by the policyholder and/or the insured, if different, may, under certain circumstances, release the insurer from its obligation to provide cover but only if the parties have contractually agreed on that. Conversely, if the insurer denies coverage, the policyholder or the insured may challenge this decision by bringing the insurance claim to court.