Parliamentary proposition to changes in the Insurance Contracts Act

Some of the most important proposed changes are:

• A duty to act according to professional conduct and liability for breach of duties under the Insurance Contracts Act
• A duty to have an appropriate system for handling the insured’s complaints and claims under the Insurance Contracts Act
• A “digital first choice” for communication

Professional conduct and liability for breach of duties

To ensure the insured’s interests and the market’s integrity, the proposal imposes a duty on the insurer to identify possible conflicts of interest and to act in an honest, upright and professional manner. The insurer is obligated to act according to professional conduct based on the duties that applies to the service and what is otherwise agreed upon.

The proposition sanctions by law the already existing non-statutory professional liability. If the insurer does not fulfill its duties mentioned above, the insurer will be responsible for the financial loss caused by the breach upon the insured. However, this liability is restricted to financial losses that could reasonably be foreseen by the insurer as a possible consequence of the breach. The proposed rule sanctions liability regardless of whether there is a breach of contract.

The proposal places the burden of proof upon the insurer regarding whether the insurer has fulfilled its duties under the Insurance Contracts Act.

System for handling the insured’s complaints and claims

The proposal further imposes a duty on the insurer to have an appropriate and effective system for handling complaints and claims from its customers.

Complaints and claims regarding a breach of the insurer’s duties under the Act, must be answered in a written document. The answer must be conveyed to the insured within a reasonable time. Whether the answer has been conveyed within a reasonable time, will depend on a specific assessment of the extent and complexity of the matter, and if there has been previous correspondence between the parties regarding the question. The need to gather information will also affect this assessment.

If it is not possible to convey a final answer to the insured within 15 working days, the insurer must convey a preliminary answer containing a clear indication as to why a final answer is not given and an indication of when the insured will be given a final answer. This deadline can be extended to 35 days under exceptional circumstances.

Digital first choice for communication

As of now, use of electronic communication with the insured is regulated by article 20-3 in the Insurance Contracts Act. According to this article, a demand in or pursuant to the Insurance Contracts Act that certain information must be given in a written manner, is not in hindrance of the insurer using electronic communication if the insured has explicitly accepted this (“opt in”).

The parliamentary proposition suggests a more comprehensive legislation regarding electronic communication. The most significant proposed change is the implementation of a “digital first choice” for communication. This allows the use of electronic communication without a prior acceptance from the insured. However, the insured must be given the opportunity to reserve itself against digital communication at the contract formation or at the first electronic approach from the insurer (“opt out”).

The proposition does, however, set certain limitations as to what communication channels the insurer may use. Firstly, electronic communication must happen in an . This means that the insured, in a sufficient manner, must be made aware that legally relevant information has arrived in its electronic . Secondly, where the Act demands that a written document is used, the insurer must use paper or another lasting medium. This means that the insured must be able to store the information in the document and that the chosen medium makes it possible to cite the stored information in an unaltered manner for a time period that is adequate for the purpose.

If an electronic message contains information that it is vital that the insured gets knowledge of, the proposition also imposes a special duty of loyalty on the insurer. The insurer must ensure that the insured is aware of the electronic message and that it contains important information. Whether the information is of vital importance will vary depending on the contract in question and who the recipient is, and an objective interpretation must be made. For example, dismissal or a message of denial of a compensation claim should be considered of vital importance. The proposition does not state how the insurer must ensure that the insured is aware of the message. However, it is not necessary for the insurer to ensure that the insured has read the message. To ensure that the insured is aware of the message, the insurer can use an alternative form of communication. For example, an SMS can be sent to the insured with a notification that an important message is available in its electronic inbox. However, this provision is only compulsory for insurance contracts signed with consumers.

The proposed guidelines for electronic communication will apply to all contracts and services that are comprised by the Insurance Contracts Act. They will even apply before an insurance contract is signed or a service has been performed. Furthermore, the rules will not only apply to the relationship between the insurer and the insured, but also to other parties that the insurer will be communicating with, such as co-insured persons and others that have rights under the insurance.

Status of the parliamentary proposition

The proposition has not yet been treated by a standing committee for further recommendation to the Parliament. Most of the proposed changes are identical or nearly identical to articles in the new Financial Contracts Act proposed in Prop. 92 LS (2019-2020). This proposition was unanimously passed by the Parliament on the 1^st of December in 2020. As the proposition to changes in the Insurance Contracts Act also implements parts of the Insurance Distribution Directive (IDD), it is likely that it will be passed.