The COVID-19 pandemic has highlighted the usefulness of new communication techniques and provided greater legitimacy to digitalisation projects in the broader context of adapting to new consumer expectations.
The insurance sector is not immune to these changes but remains nonetheless highly regulated, meaning that any modernisation project must be compatible with the applicable statutory framework. In this regard, a review of the provisions on distance insurance contracts reveals that insurers are subject to complex pre-contractual obligations to which particular attention should be paid prior to the conclusion of contracts.
'Distance insurance contract' definition
A 'distance insurance contract' is one concluded with a consumer under an organised distance sales or service-provision scheme organised by the insurer which, for purposes of the contract, uses exclusively one or more means of distance communication up to the conclusion of the contract (inclusive).
This type of contract is usually concluded by electronic means or telephone, without the parties being physically present at the same time in the same place.
Pre-contractual duty to inform
Distance insurance contracts are subject to a heightened pre-contractual duty to inform, rendered complex due to the existence of overlapping provisions. Insurers must comply not only with generally applicable provisions on the distribution of insurance contracts but also with contract law, including specific rules applicable to contracts concluded at a distance, which will vary depending on the structure of the contract, the means of communication used and the situation of the parties.
When it comes to insurance contracts, in addition to the information that must be provided when the contract is concluded in the presence of the parties, prior to the conclusion of the contract insurers offering distance contracts must inform the policyholder of:
- the policy's general and specific terms and conditions (this information can be provided during the term of a contract concluded by traditional means);
- the means of payment and execution; and
- any additional costs for the policyholder relating to use of the distance communication technique when this cost is invoiced.
Likewise, for distance contracts, insurers must indicate prior to the conclusion of the contract the EU member state whose legislation governs its relationship with the policyholder and the existence or absence of a guarantee scheme or other indemnification mechanism.
This pre-contractual information, the commercial objective of which should be obvious, must be provided in a clear and understandable manner to the policyholder, in accordance with the rules applicable to commercial communications. The means of communication used must be adapted to the distance communication technique employed, taking into account the principle of good faith in commercial transactions and the protection afforded to those deemed to lack capacity in the eyes of the law.
Contracts concluded by telephone
In the event of communication by telephone at the insurer's initiative, the latter must, in addition to the rules applicable to distance contracts, comply with a specific statutory procedure. In particular, prior to any communication with the policyholder, the insurer must identify itself and clearly indicate the commercial purpose of the call.
However, the pre-contractual duty to inform generally applicable to distance contracts can be relaxed with the policyholder's express consent. However, the burden of proof in this regard is borne strictly by the insurer.
Distance contracts concluded by electronic means
This category covers insurance contracts originally sent and received by electronic equipment for the processing (including digital compression) and storage of data and which is entirely transmitted, conveyed and received by wire, radio, optical or other electromagnetic means.
Aside from the rules applicable to distance insurance contracts in general, distance contracts concluded by electronic means require in particular that the insurer take steps to ensure that the policyholder and the competent authorities can easily, directly and permanently access information allowing them to identify, contact and communicate effectively with the insurer.
Moreover, the pre-contractual duty to inform should extend to the technical arrangements for formation of the insurance contract by electronic means, in particular:
- the various technical steps to be followed in order to conclude the contract;
- whether or not the concluded contract will be kept on file by the insurer and, if so, if it will be accessible;
- the technical means to identify and correct any errors committed in the data entry process before the contract is concluded; and
- whether the insurer should indicate the relevant codes of conduct to which it is subject, if any, as well as the manner in which these codes may be consulted by electronic means.
Finally, the policyholder's acceptance by electronic means is subject to rules with which the insurer must comply (eg, the sending of an acknowledgment of receipt informing the policyholder of the exact time of the conclusion of the contract).
Most distance insurance contracts, both life and non-life, are subject to a statutory right of withdrawal. Policyholders can withdraw from any obligation arising from the contract during a 14 or 30-day period from the date of the conclusion of the contract or from the date of receipt by the policyholder of the documents and information required to be provided in the pre-contractual phase. Proper fulfilment by insurers of their pre-contractual duty to inform will help to avoid the unpleasant surprise of belated withdrawal.
