Search News and Articles
New Insurance Contract Legal Framework - Impact on the Bancassurance’s activity
Decree-law no. 72/2008, of 16 April - the new insurance contract legal framework ("DL 72/2008") - which entered into force on 1 January 2009, is a step forward in the Portuguese insurance sector regulation, not only because it covers regulation that was currently lacking in insurance legislation, but also because it sets forth new legislative solutions, in either case always reflecting the concern of granting an increased protection to consumers, the policyholders.
Additionally, DL 72/2008 now consolidates in a single document legal frameworks which were spread through different legal statutes, as it is the case, inter alia of legal frameworks concerning insurance contract mandatory requirements and insurance premiums, thus providing a set of common rules applicable to all insurance contracts and enabling the approach by Portuguese insurance industry to that of other European countries.
For credit institutions such as banks, which commercialise/distribute insurances, a bankassurance activity of main importance to many of them, this new legal framework certainly has a significant impact on the respective business, namely by increasing their obligations towards clients and insurers.
Besides all obligations insurance intermediary banks are subject to under the insurance mediation legal framework, enacted by Decree-Law no. 144/2006, of 31 July, they are now also subject to DL 72/2008, since the former expressly states that insurance intermediaries ought to refuse the sale of insurance contracts that do not comply with mandatory rules included in such law.
In this context, it is strategically of crucial importance for banks to be well aware of the rules applicable to the insurance contracts they sell, especially to those rules which are mandatory. Amongst these we would stress those rules referring to the contract's mandatory contents as well as to a set of information duties (both pre contractual duties and duties applicable throughout the contract's life) towards policyholders.
Furthermore, DL 72/2008 establishes rules on communications between policyholders and insurers when the same are held through an insurance intermediary.
Given its importance in the Bancassurance's environment, there should be pointed out the rules applicable to the group insurances (seguros de grupo), where banks usually play a triple role: policyholders, insurance intermediaries and insurance beneficiaries. This type of insurances are often connected with credit facilities granted, and credit cards offered, by the banks and they provide insurance coverage in contexts (such as unemployment or personal accidents) where the borrowers or credit card holders, as the case may be, are unable to meet their corresponding payment obligations.
In group insurances, banks have increased information duties towards their clients, the policyholders. This information includes the agreed insurance coverage and exclusions, policyholders' rights and obligations and the fees due to the banks on their intermediation. Non compliance by the banks with the said information duties may trigger tort liability and the obligation of banks to bear the part of the insurance premium corresponding to the policyholders to whom the due information has not been provided.
From January 2009 onwards, the new insurance contract legal framework together with the insurance intermediation legal framework have no doubt brought new challenges to the performance by the banks of their insurance related business, something that should be held into perspective should they want to maintain and strengthen their position as relevant insurance market players.
Author: Ana Rita Almeida Campos | senior associate at Vieira de Almeida & Associados