Information duties in the insurance sector

Information duties in the insurance sector

The extension of information duties in insurance regulations
 
Following three royal decrees of February 21, 2014[1], which entered into force on April 30, 2014, insurers and insurance brokers must comply with the rules of conduct defined by the Act of August 2, 2002 on the supervision of the financial sector and financial services.
 
The insurer or insurance broker who enters into direct contact with the policyholder must act in a loyal, honest and professional way in the best interest of the policyholder. All the information he/she supplies must be accurate, clear and not misleading.
 
The insurer or insurance broker must adequately inform the policyholder about him/herself and the services he/she provides – like whether he/she supplies advice and the related fees – as well as the types of insurance contract he/she can supply to the policyholder. He/she must also inform the policyholder of the related fees and costs and of the possible existence of conflicts of interest. All this information should be supplied in a form that’s understandable for the client.
 
Consequences for savings and investment insurance
 
For savings and investment insurance, this implies that the insurance professional will have to check the knowledge and the experience of the policyholders regarding this type of insurance products before they sign a savings or investment insurance contract. Likewise, the professional will also have to inquire about the financial situation of the policyholders and about the investment objectives they pursue.
 
If the insurer or the insurance broker comes to the conclusion that the insurance product is not appropriate for the policyholder, he/she will have to warn him/her.
 
If he/she cannot decide whether the insurance product is appropriate for the policyholder, he/she cannot recommend an insurance product to the policyholder. Finally, the insurance professional is required to provide a report to the policyholder on the mediation that took place and on the insurance contract signed.
 
Other important modifications
 
Prior to the entry into force of these royal decrees, insurers or insurance brokers were only required to identify the needs of their clients. With the amendments to Article 12bis, § 3 of the Act on insurance and reinsurance broking and insurance distribution[2], as reflected in Article 273 § 3 of the new Insurance Act of April 4, 2014, insurers and insurance brokers must now also make certain that insurance contracts meet the needs of their clients.
 
Before the change, policyholders had to choose an insurance policy by themselves, based on their needs. As a consequence of the new regulation is that the person required to provide information must make certain that the policyholder takes out an insurance policy that suits his/her needs. Even when they do not provide advice, they should warn policyholders against missteps.
Failure to warn policyholders taking out insurance contracts that do not reflect their needs will also constitute an error that can give rise to liability.
The provision of this information is not required for insurance policies regarding major risks.[3]
 
[1] Royal Decree of February 21, 2014 amending the Act of March 27, 1995 on insurance and reinsurance brokering and insurance distribution, BS (Belgian Official Journal) March 7, 2014; RD of February 21, 2014 on the rules for the application of articles 27 to 28bis of the act of August 2, 2002 on the supervision of the financial sector and the financial services in the insurance sector, BS March 7, 2014; RD of February 21, 2014 regarding the rules of conduct and the rules regarding conflict of interest management, as defined by the Law, in the context of the insurance sector, BS March 7, 2014.
[2]  Act of March 27 ,1995 on insurance and reinsurance brokering and insurance distribution, BS June 14, 1995.
[3] Major risks as defined by Art. 1.7 of the RD of February 22,  1991, establishing the general rules on the supervision of insurance companies or as of November 1, 2014 as defined by Art. 5, 39 ° of the Insurance Act of April 4, 2014 BS (Belgian Official Journal), April 30, 2014.