Transparency in Insurance Contract Law

Transparency plays an important role in insurance law. However, this does not mean that transparency as a legal requirement only exists in this field. On the contrary, considerations and efforts to create (more) transparency are made in almost all fields of law. For example, legislation should be drafted transparently; state processes, e.g. the award of public contracts, should be designed in a transparent way. In general, the administration should act transparently. However, transparency has to be applied not only between the legislator respectively the public authorities and the legal subject respectively the citizens and taxpayers but also between private individuals: the customer should be provided with adequate information, depending on the specific situation. In addition, contracts or contractual clauses in particular shall be formulated in such a way that they are understandable and comprehensible to the parties involved. Transparency therefore serves to make processes comprehensible for the individual. As a rule, it is about compensating a gap between the parties involved in a concrete legal relationship. There may be several reasons for this gap: e.g. a knowledge or information advantage on one side, an unequal distribution of the available (financial) resources or an unequal position on the market. Frequently, a combination of several factors occurs. Adequate transparency is intended to compensate or at least to mitigate these discrepancies.

In Croatian insurance contract law, transparency is achieved through three regulations: the Civil Obligations Act, the Insurance Act, and the Consumer Protection Act. The Civil Obligations Act is the fundamental regulation of law of obligations in the Republic of Croatia which, in addition to the provisions on various types of contracts, also regulates the insurance contract. Transparency under the Civil Obligations Act is, as a rule, in one way. It refers to the obligations of the policyholder to notify on the circumstances regarding risk assessment, as well as the duty to report the occurrence of the insured event. A special exception to such a one-way communication (policyholder to insurer) is the insurer’s obligation to notify the policyholder that the insurance terms and conditions are an integral part of the insurance contract and to provide him with them. Any additional duty of the insurer in terms of providing additional clarification of the terms and conditions, advice to the policyholder or the insured are not prescribed by the Civil Obligations Act. Unlike the Civil Obligations Act, transparency in the Insurance Act and the Consumer Protection Act occur in the opposite direction, i.e. from the insurer to the policyholder/consumer. The consequence of this is the adoption of EU legislation into Croatian law. The Insurance Act has taken into account the legal order of the Solvency II Directive, which stipulates, inter alia, the information which the insurer has the duty to provide to the policyholder before the conclusion of the insurance contract as well as the duration of the insurance contract and the right to terminate the contract. The Consumer Protection Act is applied to the insurance contract that is concluded by means of the distance communication. This Act contains, inter alia, provision on the information that the financial services provider (the insurer) has to provide to the policyholder when concluding an insurance contract by means of distance communication.

Transparency constitutes a well-recognised element in contract law. However, with regard to insurance contract law, transparency is even more important and may not be overestimated. This is due to the fact that insurance is a so-called legal product. The legal initial situation is, therefore, evidently different compared to contracts for the exchange of goods. Characterised by sold goods, the latter can usually be seen, touched, felt or perceived by other means. Insurance contracts, however, do not entail dealings with ‘visible’ goods. Solely after the occurrence of an insured event, the insured risk materialises and becomes ‘visible’. Hence, insurance contracts are not characterised by an exchange of physical goods for money but by the exchange of a promise of performance for financial compensation. In the absence of any physical manifestation of a mere promise, a visual inspection is not possible at all—but this fact is not rendering the insurance product non-transparent per se.

The macro-economic condition in Greece has been one continuing financial (public debt) crisis since 2008, which has also adversely affected the private sector of the economy and most particularly credit institutions. The average GDP per capita has substantially decreased by about 14% since 2007; it was about US$32,000 in 2007 and had fallen to about US$28,580 in 2018. This is reflected in the insurance market as well, as the total revenue from premiums and the average insurance premium per capita are steadily decreasing during the past years.

This chapter deals with transparency in insurance contracts under Italian law. The theme is framed in Italian legislation and in the complex relationship between the Civil Code, the Consumer Code (Legislative Decree 206/2005, Cons. Cod), the Insurance Code (Legislative Decree 209/2005, Ins. Code, recently modified by Legislative Decree 68/2018), IVASS (Italian Insurance Market Authority), TUF (Legislative Decree 58/1998) and Consob (the Italian public authority responsible for regulating the Italian financial markets) regulation.

As a starting point to our analysis, it should be made clear that Polish law does not provide any definition of transparency. In everyday language (transparentny or przejrzysty), it refers to an easy way of recognising or foreseeing, as well as meaning; public; revealed; not dubious; unambiguous; clear; without any doubts or suspicions as to the real meaning; full disclosure; comprehensibility; etc. In such a context, ‘transparency’ is used in legal texts, as well as in court judgements and opinions of the doctrine. Seemingly, the Polish understanding of transparency does not differ from its universal, international meaning. It is also, without a doubt, recognised as one of the foundations of the efficiency of free trade.

In Portugal, mostly by virtue of its EU membership, there has been a dramatic increase in transparency requirements in the course of the last 20 years. In view of this, I argue that another question is begging to be asked: does it make sense to put all one’s eggs in the basket of information? In particular, should transparency as an ideal be allowed completely to replace trust in contractual relations? Information plays a central role in traditional contract formation models: contracting parties are meant to acquaint themselves with all the terms of the contracts they contemplate entering into so as to make an informed decision whether or not to make a commitment thereto. I argue that the protection of insurance customers can best be achieved if one complements the informational approach with a different approach consisting of treating financial products much like any other products, placing upon the insurer the burden to check that the products it offers to its customers are consistent with their demands and needs.

The demand for “transparency” is experiencing a boom in varied fields of political, social, legal, and economic reality as it is a common feature of the markets and systems of contracting in both private law and public law. In particular, in private contract law, the obligations of transparency experienced an important strengthening over the last decades, thanks in no small measure to the appearance and subsequent development of protective regulations for consumers and users. As is well known, in order to deal with the aim of confronting the information imbalance in consumer relations it imposes pre-contractual obligations of information on employers and relevant professionals to allow consumers to take out contracts while being fully informed which has come to be known as informed consent.

The issue of transparency is a fascinating and huge topic that deserves further in-depth research. Transparency is relevant in many different perspectives, and this chapter will only encompass some of them. First, transparency is an essential element of the relationship between the insurer and the intermediaries on one hand and their customers on the other hand. Transparency is relevant in both ways: the customer needs information about the insurance, the insurer and the intermediary, and the insurer and the intermediary need information from the customer in order to provide the right product and to be able to calculate the risk. Further, transparency is an essential element of the relationships between the insurance undertakings and intermediaries on one hand and the supervisory authorities on the other hand. Even in this respect, transparency works two ways. The supervisory authority needs access to full information from insurers and intermediaries in order to provide authorisation and to conduct supervision. The issue of transparency in this sense includes, among other things, data management, reporting systems, supervisory routines, etc. The insurers and intermediaries, on the other hand, need information and guidance about the regulatory framework of conducting business. The market needs stability and predictable supervision. This chapter encompasses only transparency issues in the relationship between the insurance/intermediary and the customer. Further, focus in this chapter is only the insurers’ and intermediaries’ duties to provide information to the customers. The customers’ duties of disclosure to the insurer are not included in this chapter.

The aim of this chapter is to analyse transparency measures applied within the Principles of European Insurance Contract Law (the PEICL) and to attempt to answer the question of whether the PEICL reflect (and, if so, to what extent) transparency standards of national insurance contract regulations.

In the last few years, the Chilean insurance contract law has undergone relevant modifications. For this reason, and prior to a detailed analysis of the transparency topic, it is necessary to consider that our Commerce Code comes from 1865, and in this context, in the insurance contract law free will predominates, which had the norms enacted by the Superintendency of Securities and Insurance (SVS) as the unique limit, and later the norms of the Consumer Protection Law number 19.496 of 1994 (LPC/1994). Nevertheless, in the latter case, the application of the protection norms was gradual. From Law number 20.555 of 2011, which modifies the LPC/1994, the Chilean legislator recognizes insurance as an adhesion and consumer contract. In this sense, our doctrine has stated that “[…] we believe that at this stage it is not possible to discuss the idea that we have created the principle of pro-consumer in the Chilean Law and is understood as an adhesion consumer contract where the importance of information and its defect, which is the asymmetry, causes a contractual imbalance.” In the aforementioned context, Law number 20.667, which came into force on December 1, 2013, completely substituted the Chilean insurance contract regulation in the Commerce Code. It is a substantial modification after 148 years of being in force. The legislative technique brought, as a result, unsystematic legal texts with some inaccuracies on legal terms, the reasons of which shall be analyzed in the following paragraphs.

Transparency is an important concept in insurance law. An insurance contract must be made transparent to the parties of the contract because of its special nature of management of risks. The component and standard of transparency vary at different stage during the lifetime of an insurance contract. This chapter is concerned with the requirement of transparency under Chinese Insurance Law. It critically examines the legal rules relating to the requirement of transparency on the parts of the insureds, the insurers and the insurance intermediaries throughout the lifetime of an insurance contract from the stage of entering into the contract, the currency of the insurance period, to the stage of making and settling claims.

In general terms, transparency in Insurance Contract Law can be defined as the fulfilment of the duty of good faith, which parties entering into an insurance contract have to comply with.

Ideally, the discussion about the Georgian concept of transparency has to be started directly by observing duties and liabilities of insurer. Such an approach would have been more precise for the contemporary meaning of transparency context. However, there are practically no regulations in Insurance Section of the Civil Code of Georgia regarding primary duties of insurer with regard to transparency. Therefore, it is reasonable if the discussion about the Georgian non-existing concept of transparency will be launched by analyzing the duties of policyholder and possibilities of interpreting, inducting, and deducting the context of transparency from other existing provisions.

The language on the rights and obligations contained in a written insurance contract form pertains into insurance products, which are intangible. An insurance company unilaterally establishes the Standard Insurance Policy, which regulates the contents of insurance contract. Moreover, as the insurance contract is a kind of “adhesion contract”, consumers with less bargaining power have less power and are given no opportunity to negotiate the conditions of insurance contract. They have a right to adhere to the terms or conditions or not, meaning, “take it or leave it”. Consequently, the insurance products tend to be unfair and against consumers’ interests because consumers have no choice but to make contracts although these contracts are against their interests.

The author summarizes the Transparency in the Insurance Contract in Peru, noting that it is a new concept in the country and that it is more legislated than applied and practiced by deficiencies of the Regulator. He exposes and criticizes the main problems related to the issue in the Peruvian insurance market, suggesting some changes and improvements.

The concept of transparency in the context of the Russian insurance contract law is relatively new. There is no formal definition of transparency or established court practice on this subject. For this book, we consider transparency in insurance contract law from two opposite angles and review two distinct duties of disclosure. The insured has a duty of disclosure of the risk and the insurer has a duty of disclosure of contractual terms. Over the years, the scope of these duties has been changing and evolving. Today, the emphasis has moved towards imposing more duties on the insurer as insurance products are becoming more and more sophisticated and the interests of the insured including consumers are getting more and more attention. The court practice has created a positive obligation upon the insurer to actively solicit information from the insured and to check it. This is just another confirmation of the general trend of extending higher standards of behaviour that are expected from the insurer in the consumer insurance to commercial and industrial insurance contracts and disputes.

The provisions of the Turkish Commercial Code (TCC) related to insurance law (Articles 1401–1520) are placed in the Sixth Book. The title of the Sixth Book is the “Insurance Law”, which goes far beyond the (Turkish) legislator’s will because a review of the provisions under this title shows that only “insurance contract law” is regulated here. These provisions, almost seventy percent of which were drafted in mandatory form, do not grade the risk. Thus, the person who is in front of the insurer on the contract table, whoever he is, becomes the “consumer of insurance”, and gains the protection of mandatory provisions of the Sixth Book of Turkish Commercial Code (TCC). That is, a “merchant” title of the person getting insurance protection will not prevent to take the protection of the mandatory provisions. In other words, these provisions provide the same degree of protection to an industrial company and a housewife under an insurance contract.

In Spain, the regulation of the insurance contract was initially included in the Commercial Code of 1885, in its Articles 380 to 438. However, given the obsolete nature of this regulation, in 1980 this set of precepts was repealed by the current Act 50/1980, of October 8, of Insurance Contract (LCS hereafter). The LCS is a special mercantile law specifically dedicated to provide an updated regulation of this contractual figure that since its enactment was conceived as a regulation in which the position of the insured as a consumer should be protected. This is a conception that underlies the principle recognized in the Spanish Constitution (CE onwards) of protection of consumers and users (Articles 51.1, 51.2, and 53.3 CE), and under which it is also explained that in Spain the regulatory framework of the insurance contract is not limited to the LCS itself, but must be completed with the regime established in the Revised Text of the General Act for the Defense of Consumers and Users of 2007 (TRLGDCU hereinafter) and in Act 7/1998, of April 13, on General Conditions of Contract (LCGC hereinafter).

Transparency relates to fairness in the civil law systems and is often embedded in the civil code provisions on good faith. Keeping that initial submission in mind, transparency is important in the field of insurance law, as insurance is a complex legal product accompanied by a complex legal framework. This interplay of complex legal product on the one hand and a complicated legal framework on the other, supplemented by a seller’s market focused on a relatively few insurance companies, requires a high level of transparency.

This chapter examines the extent to which transparency is achieved in the Australian insurance contract law. It focuses on the contractual relationship insurance between insurers and insured clients as set out in the Insurance Contracts Act 1984 (Cth) (the ICA). The analysis in both parts is structured under the four “quadrants” of the duty of utmost good faith—the first quadrant being the insured’s pre-contractual obligations; the second being the insurer’s pre-contractual obligations; the third being the insured’s post-contractual obligations after the inception of the policy and the fourth being the insurer’s post-contractual obligations.

Transparency in insurance in English contract law denotes an aspect of insurance law that deserves to be well analysed. Unavoidably, the notion of transparency in insurance contract law refers to the role that transparency plays in insurance law. In other words, we are dealing with the question of the existence and of the exact extent of standards of transparency, i.e., we are dealing with the requirement of transparency, which mainly attaches to the rights and duties of the contractual parties (including product and cost transparency).

The insurance transaction is characterized by information and power gaps between insurers and insureds concerning the interest insured and its exposure to a potential risk. In order to abridge information and power gaps between the parties of the insurance contract, various provisions were legislated by the Israeli legislator, the courts and the regulator—the Commissioner of Insurance, imposing duties of disclosure in the various stages of the insurance transaction, both in the pre-contractual stage, during the policy period and especially after the occurrence of the insured event.

This chapter explores the transparency issues related to contracts of insurance in Singapore. In the contractual context, there are two dimensions to transparency issues. First, there are issues related to insurers, who need information to make proper assessments of the risks to be underwritten. A substantial part of the legal discussion over insurance contracts has been devoted to this issue, addressing the underlying problem of asymmetric information in these contracts. Second, there are transparency issues for customers, regardless of whether they are businesses or consumers. These issues may include the transparency and features of insurance products and/or policy terms. Naturally, this raises concerns over misselling, financial consumer protection and the conduct of the business of insurers, insurance intermediaries and financial advisers.

South African law is based on Roman-Dutch law, as amended over time by legislation, positive (case) law, trade usages, and the incorporation of some principles from foreign jurisdictions such as English law in some legal disciplines, such as in insurance law.

In the United States, a mix of government regulation and common law decisions govern insurance contracts, and “transparency” in this context does not have a fixed meaning. There are not the sharp distinctions between public and private law that exist in many other jurisdictions (particularly in civil law countries). This is especially true in insurance, where laws regulating insurance contracts are typically a mix of specific government interaction—statutes, regulations, and regulatory notices and bulletins—and the common (“judge-made”) law. For these reasons, transparency standards for insurance agreements are best understood as including both access to essential information about the contract—the cost, forms, terms, endorsements, etc.—and disclosure and other regulatory requirements that support actual knowledge by the parties entering into the insurance agreement and consumer certainty of what coverage is provided.

The notion of transparency in insurance contract law finds an elaboration within the standard terms contained in insurance contracts. Such terms need to be drafted in a “plain, intelligible language” and this is better achieved when transparency is also preserved as in this way the rights and obligations of the assured are better safe guarded. Transparency in insurance contracts is classified according to the group of policyholders to which it refers.