As regards disputes related to insurance contracts, it was a general experience that a large number of consumers are not aware of the fact that the conclusion of the insurance contract creates a contractual obligation between the parties rather than an obligation for claims. It was a typical argument that customers took out insurance so the “insurer should help when it comes to grief”. However, insurers provide coverage based on the contract between the parties for the risks and subject to the conditions stipulated in the contract, and perform the service set out in the same. Namely, the insurance contract does not cover all incurred damages and does not necessarily provide coverage for the claims regulated by insurance events.
It was a common experience that consumers failed to peruse, prior to concluding the contract, the general contractual terms (insurance regulations or insurance conditions) becoming part of insurance contracts, thus they realised only later for which risks are covered and under what conditions. Petitioners often cited in the procedures at the Board that they had not received the insurance conditions upon concluding the contract; however, the proposal documents contained in all cases, but one or two, the customer's declaration that he had received, become familiar with these instruments, and had accepted the content thereof. Petitioners should have proven against these documentary evidences that the declaration made there was not true. Another problem with this argument is that had the Board accepted that the insurance terms and conditions had not become part of the contract, the creation of the insurance contract would have also become questionable, because it would have not been possible to establish the existence of the agreement between the parties in respect of essential elements of the insurance contract (insurance events, insurance benefits, etc.). Accordingly, in the absence of a contract, insurers would not be obliged to provide insurance benefit for the damage suffered by petitioners. Thus, this argument of petitioners yielded a result only in very exceptional cases in which financial service providers usually undertook the repayment of premiums (in full or in part) within the framework of a settlement agreement.
PROPOSAL OF THE BOARD
IN RELATION TO TAKING OUT INSURANCES
It would mean a significant progress in the enforcement of consumers' rights, if upon concluding an insurance the proposal form called the customer(s) attention, more clearly than now, to the fact that the basic conditions of the insurance are included in the general contractual terms of the insurance, thus consumers would pay more attention to actually perusing those prior to concluding the contract rather than making only a declaration to this effect.
The vast majority of insurance contracts are still concluded through traditional sales channels; however – as a result of general technological progress – an increasing number of them are realised through online proposals. The number of contracts concluded online is particularly high among compulsory motor third party liability insurance (MTPL) contracts and travel insurances. At a large number of these insurance contracts the parties stipulate in their agreement, due to cost efficiency considerations, electronic communication. Based on this, the insurer is entitled to send the legal declarations related to the creation of the insurance contract, premium payment, termination of the contract and other legal declarations with material legal consequence, in electronic form (by e-mail or via its own customer portal) to the contracting party. Although in recent years, online contracting practice substantially improved, there were still a large number of cases among disputes taken to the Board that were attributable to the fact that consumers failed to check regularly the e-mail messages or disputed that those were sent to them. It was revealed in a large number of conducted procedures that, in order to benefit from the discounted premium, even those consumers opted for online contracting or electronic communication, who did not even have their own computer. These petitioners regularly argued that the prudent conduct of the insurer would have been to try to contact the consumer through other communication channels as well. During the procedures conducted at the Board, financial service providers were mostly able to confirm by authenticated system messages the time when the legal declarations were sent electronically and the success of the sending. Settlement agreements in these cases were concluded only when it could be established beyond doubt that the legal declaration sent by the insurer was returned to the service provider with an error message.
In a large number of insurance cases the dispute between the parties specifically concerned the fact whether the claim event (insured event) indeed occurred and the factual circumstance thereof. In these cases the laws governing proof bore special significance, according to which the facts necessary for deciding the dispute must be proven by the party who has vested interest in accepting those as true. According to the consistent and long-standing judicial practice related to insurance cases, it is the insured who has to prove that the insured event did occur, the causal relation between the insured event and the loss incurred, as well as the sum of the damage, while the proof of the existence of the circumstances giving rise to exemption burdens the insurer. The Board also applies the aforementioned principles in the cases taken to it. However, in a number of cases it was a problem that petitioners were unable to support with proper evidence the circumstances of the insured event cited by them.
In the sphere of insurance cases very often issues arose, that were relevant for making a decision on the merits of the case, and the assessment of which was the competence of an expert (technical, price or medical expert, etc.). Since the Board's proceedings do not allow to appoint experts or to conduct extensive evidence proceedings, unfortunately in these cases the Board was not in the position to make a decision on the merits. It is a particularly progressive and exemplary practice of insurers to include a technical, medical or claim expert beside a legal representative at the hearings held in the proceedings of the Board. This type of cooperation by the given financial service providers eased the dialogue between the parties, and fast consultation on the merits in expert issues.
In recent years group insurances represented an increasing ratio in insurance cases. The key feature of group insurance is that the insurance contract is made between the insurer and a company with vested interest in insurance rather than between the insurer and the insured. In the case of these insurance contracts the insured persons become the subject of the insurance contract by a declaration of joining or in certain cases they automatically become insured based on the legal relationship they have with the contracting party, e.g. employee, subscriber or other contracting legal relationship. A special type of these contracts includes those group insurances that create an insurance relationship between the insurer and the insured in relation to a bank card (typically credit card) contract. In these cases the insured becomes an insured party to the group insurance made between the bank and insurer merely by concluding the bank card contract. Such insurances also may include life insurances, payment protection insurances and travel insurances.
The general experience of the disputes initiated in respect of group insurances was that the insured were not aware of the conditions of the given insurance, namely the type of risks covered and under what conditions the given insurance provides coverage for the claim events suffered by them. Often the insured did not even know that by concluding the given contract (e.g. credit card contract) they simultaneously also became the insured party of the insurance contract. The new Civil Code maintained the rule – which existed in previous legal practice as well – that in the case of group insurance the insurer must fulfil its obligation to provide information only to the contracting party (i.e. not to the insured), i.e. insurers do not have the same obligation to provide information to the insured as in the case of other insurances. In cases brought before the Board the problem arising from this was clearly visible, namely that the insured or their legal successors enforcing the claim were not in possession of the information they needed to successfully file or enforce the claim.
However, in practice the parties concluded a settlement agreement in several cases in which it could not be established unambiguously whether the party that contracted with the insurer had provided the insured with the necessary information or the scope thereof or it was not documented properly that the information was provided or it was ambiguous.
PROPOSAL OF THE BOARD
RELATED TO GROUP INSURANCES
In the case of group insurances persons who become insured should receive more specific and detailed information from the insurer and/or the insurance intermediary about the fact that they became insured, the content and the detailed conditions of the insurance.
NON-LIFE INSURANCE PRODUCTS
FIRE AND OTHER PROPERTY INSURANCES (HOME INSURANCES)
The largest part of the received insurance cases, similarly to previous years, originated from liability insurance contracts, and within that from disputes related to home insurances. The most typical disputes in this group of cases comprised storm damages and other elemental losses (natural hazards), fire and explosion damages, and burglary. In the case of petitions of this subject matter, the parties had to clarify, with the collaboration of the Board, whether any damaging event occurred that is stipulated in the insurance contract as insured event, or is there any disclaimer clause or circumstance under which the insurer can be exempted, which precludes the insurer's payment obligation.
During the proceedings the reconciliation in respect of the comprehensive exploration of the facts related to the incurred claims ended with success in a large number of cases, as a result of which insurers often modified their position formulated during the claim settlement concerning the legal basis or the amount of the insurance benefit.
COMPULSORY MOTOR THIRD-PARTY LIABILITY INSURANCE
In addition to home insurances the largest number of cases taken to the Board originated from compulsory motor third party liability insurance (MTPL). In 2016, in terms of their numerical ratio, cases related to the said insurances were almost the same as home insurance cases. Cases related to home insurance and motor third party liability insurance accounted for more than two-thirds of non-life insurance cases.
Disputes arising from motor third party liability insurances still related to non-coverage premiums payable for the uncovered period stipulated in Act LXII of 2009 on Compulsory Motor Third Party Liability Insurance (hereinafter: MTPL Act), the bonus-malus classification of the insurance and the amount of the insurance premium specified for the contract. Non-coverage premiums arose due to taking out the insurance without due care (incorrect content of the proposal), the annual switching of insurer and the termination of insurance under the cause of premium non-payment. A substantial number of contracts terminated under the cause of premium non-payment – representing an outstanding number in the case of motor third party insurance - related to electronic (internet-based) contracting and electronic communication, applied due to cost efficiency considerations and encouraged by premium discount. Problems related to data capturing in the Central Claim History Registration System and data enquiries therefrom arose several times, similarly to previous years.
In 2016 the number of disputes received in respect of the insurers' tariff announcements and the calculation of insurance premiums applicable to the subsequent year was higher than in previous years. In several cases petitioners disputed that the notification on insurance premiums applicable to the subsequent year had been duly sent, and they stated that they had been unable to make a proper, objective decision in respect of switching insurers because of the lack of information. In these cases the parties made a settlement agreement on several occasions, in which they agreed on the termination of the contract, subject to pro rata settlement, by mutual consent. This permitted petitioners, in view of the expiry of the contracts, to conclude new motor third party liability insurance at a different insurer, perhaps with better conditions.
The amendment of the MTPL Act by Act CCV of 2015, affecting the insurers' premium tariffs, was a favourable change for consumers, as a result of which, insurers may apply discounts only to continuous contracts that are not terminated. Thus, in 2016 it was no longer the case that those who concluded a new contract received a more favourable tariff than the insurer's existing customers. This change is also expected to result in the simplification of premium tariffs announced by insurers, thereby becoming more transparent.
The proceedings initiated by injured parties of accidents (claims) caused by motor vehicles, in the course of which the injured parties file claims for damages, based on Sections 12 and 28 of the MTPL Act, directly with the insurer of the registered keeper of the claim causer vehicle, represent an increasing number of the disputes related to motor third party insurance. In these cases, the insurer becomes obligated, based on the substantiated obligation for claims arising from the loss caused by its insured, to exempt the insured perpetrator, in the manner and to the degree stipulated in the MTPL Act, from the reimbursement of the damages or the payment of monetary compensation. The issue of the insured perpetrator's liability for damages was a regular subject of dispute between the parties. On a number of occasions the dispute could be decided by comparing the documentary evidence recording the accident (police protocol, accident reconstruction drawings, accident reporting forms) and the traffic regulations applicable to the given traffic situation.
If in MTPL-related cases it was proven that the problem was attributable to administrative reasons at the insurer's or the preceding insurer's end, the insurers corrected the error by modifying the data, which due to the error were reported incorrectly to the Central Claim History Registration System. However, if the problem was not solely attributable to the irregular procedure of the insurer, then due to the binding rules of the MTPL Act there was no real possibility to resolve the dispute by a settlement agreement in these cases.
ACCIDENT AND HEALTH INSURANCE
As regards accident and health insurances, no new case type was taken to the Board. In these cases the subject of the dispute was still the extent of disability (decreased capacity to work) arising from an accident, as well as the existence or absence of the causal relation between the disability and former existing diseases. The decision of the said issues here as well belonged to the competence of medical experts hence the Board was unable to take a position. However, at the Board the insurers undertook on several occasions that they provide the insured with a personal medical examination opportunity, based on the result of which they would revise their position taken during the claim settlement.
Despite the difficulties of evidence, in 2016 a settlement agreement was concluded for the payment of more than HUF 11 million in an accident insurance case.
However, there were also cases when despite the unambiguous legal facts of the case and the statutory provisions, the service provider refused to pay the benefit or conclude a settlement agreement, and even provided for the application of certain terms erroneously.
The two typical problems in the cases related to CASCO insurance still included damages due to own fault and car thefts. In the cases taken to the Board, the subject of the dispute between the parties was usually the amount of the assessed insurance benefit rather than the legal basis. Due to this the passing of a resolution on the merits was hindered in several cases, as the assessment of the amount of damage suffered by the vehicle or the value of the stolen vehicle at the time of the theft was an issue that belongs to the competence of a motor vehicle technical expert. Nevertheless, conciliation between the parties yielded a result in several cases, as they reached an agreement with regard to standard equipment, extras and market value of the vehicle, and the amount of the costs incurred in relation to repair, confirmed by an invoice.
In 2016 several settlement agreements were concluded for higher amounts in casco cases. In one of the cases that ended with a settlement agreement a dispute arose with regard to the legal basis of the exclusion clause applied in the casco contract. The subject of the dispute was whether based on the casco contract the insurer is obliged to pay insurance benefit, if the consumer suffered an accident with his vehicle at the driving technique training track on wet surface during a shock-pad exercise. Initially the insurer rejected the claim for the payment of the casco insurance benefit, citing that the consumer's vehicle suffered the accident not during the normal use thereof in accordance with its intended purpose in the course of regular road traffic, and later it argued that the driving technique exercises performed on the training track under extreme circumstances are covered by the exclusion clause of the casco contract, according to which the insurer's indemnity obligation does not cover damages suffered during a race or the preparation for the race. In addition to the exclusion clause of the insurance contract, the insurer also cited the consumer's illegitimate and gross negligent conduct, and exemption from the payment under this title. According to its position, the accident that occurred in a restricted traffic zone on private property, where extreme circumstances are generated deliberately during which the vehicle suffers an accident, cannot be regarded as proper operation. During the hearing the parties clarified the facts of the case through the instrumentality of the acting member, and concluded a settlement agreement, according to which the insurer agreed to pay half of the vehicle repair cost claimed by the consumer.
OTHER, NON-LIFE INSURANCES
Some of the disputes taken to the Board occurred in relation to travel insurances. Travel insurances provide cover for unexpected illness, accident, loss of luggage suffered during travels abroad, and other risks specified in the insurance policy. The travel insurance contract is a single premium policy and the insurance premium must be paid immediately in one sum. The validity of the policy issued by the insurer is aligned with the duration of the travel specified in advance. Consumers taking out travel insurance may choose from a number of schemes, which may substantially differ from each other in terms of the risks insured and the limits of the insurance benefits. The general statement, applicable to all insurance contracts, also applies to the travel insurances, according to which the concluded travel insurance provides cover for the perils and risks stipulated in the general contractual terms (insurance terms and conditions or insurance regulations), which become an integral part of the insurance contract. Accordingly, only those claim events give rise to the insurer's obligation to pay the insurance benefit that were stipulated in the contract.
Disputes between the parties occurred in several cases on the issue whether the insured event stipulated in the insurance terms and conditions had materialised as a result of the claim event. It is a recurring dispute with regard to luggage losses whether the given luggage was stolen from locked premises or from the compartment of a car sufficiently protected against seeing through. In a number of luggage loss claims petitioners based their claim on the theft of chattels excluded by the insurance terms and conditions (electronic equipment, jewellery, cash), in respect of which – in view of the exclusion clause of the given contract – the soundness of the claim could not be established.
Trip cancellation insurances represent a special type of travel insurances. These insurances provide insurance protection for the event when a passenger is unable to commence a booked trip due to a reason specified in the insurance terms and conditions (illness) and needs to cancel the trip. The typical dispute in this case is whether the passenger's incapacity to travel existed at the time when the trip was cancelled and when the reason thereof occurred.
Payment protection insurance may be taken out for various credit products, personal loans or credit cards, typically in the form of group insurance. Based on the payment protection insurance upon the debtor's incapacity for work or unemployment, the insurer undertakes to assume the payment of instalments from the insured for a specific period, which usually lasts from six to twelve months, during which payments to the bank are made by the insurer. A number of payment protection insurance products also include life or health insurance cover, where upon the disability or death of the insured the insurer may assume the entire debt. It still gave rise to disputes between the parties in several cases, when the employment of the insured was effectively terminated due to redundancy or reorganisation, but the parties formally agreed on termination by mutual consent. In this case the payment of the insurance benefit by the insurer is conditional upon the insured's providing documentary proof, in the form of a document on the termination of the employment, that the termination of the employment by mutual consent took place due to one of the reasons stipulated in the insurance conditions, e.g. collective redundancy, reorganisation or the liquidation of the employer. In the vast majority of disputes that arose due to the death or disability of the insured – similarly to risk life and health insurance – the dispute between the parties related to the issue whether the death or the permanent disability of the insured is attributable to an illness or injury that already existed prior to the start of the insurer's risk inception or it has no relation of cause and effect.
Recently, the sales of certain types of goods insurance products by insurers have been on the rise. Based on equipment insurance the insurer reimburses unforeseen damages suddenly occurring during the use of a technical equipment (e.g. telecommunication equipment, household machines) as a result of claim events impacting the equipment externally, not falling within the manufacturer's warranty repair obligations (e.g. damage, breakage or destruction) in cases stipulated in the insurance conditions. The equipment insurances taken out particularly for high-value telecommunication equipment also include coverage for theft. Within the goods insurance product type the extended warranty insurance provides coverage for the internal failure of the equipment beyond the manufacturer's warranty period. The subject of the disputes most often related to the date of the breakdown and the cause of damage. As a result of the mass sales of the products – which mostly took place through technical stores and telecommunication service providers, which acted as the insurer's agent or the contracting party of the group product insurance – in a number of cases the existence of the proposal documentation and effective provision of the information included therein could not be properly confirmed. Bearing this in mind, in respect of these types of insurances financial service providers concluded a settlement agreement at the Board or satisfied the customer's claim outside of the proceeding in several cases.
LIFE INSURANCE PRODUCTS
TRADITIONAL LIFE INSURANCES
In the case of traditional life insurances no change occurred compared to the previous years in terms of the characteristics of the disputes. The vast majority of them still related to the legal basis of the rejection of death benefit. In these cases the beneficiary of the life insurance or the heir of the insured applied to the Board requesting that it should establish the insurer's obligation to provide the benefit.
The traditional death insurance products define it as an excluded risk when the death of the insured is attributable to an illness or injury that already existed prior to the start of the insurer's risk inception. The insurers rejected the beneficiaries' claim for the payment of the insurance benefit based on this reason.
Since, in the vast majority of cases, the protocols of post-mortem examinations state general illnesses – impacting a significant part of society after a certain age (thus in particular, high blood-pressure, cardiovascular diseases) – as the indirect cause of non-accidental death, which already existed at a substantial number of insured when the contract was concluded, this circumstance serves as an evident cause of rejection in the insurers' claim settlement practice. Whether the insured's death had a causal relation with the given pre-existing illness can be unambiguously established only by a medical expert, and as such the Board is not in the position to make a decision on such issues. Unfortunately, a large number of disputes arising from risk life insurances were terminated without a settlement agreement due to the impossibility of judging an expert issue.
UNIT-LINKED LIFE INSURANCES
Unit-linked insurances represent one of the most complex product groups within insurance products sold to consumers, which usually assumes investment skills and active portfolio management experience.
Unit-linked life insurance is a life insurance vehicle where the insurer places technical reserves, accumulated on the basis of the insurance contract, into asset portfolios (asset funds) created by it, having an independent investment policy, managed separately and comprising of theoretical settlement units of identical value (investment units), or into investment funds managed by another company authorised to manage investment funds, for investment purposes, depending on the choice of the contracting party and in accordance with the rules stipulated in the contract in advance. The insurer may establish several kinds of asset funds that pursue different investment strategies. There are safe asset funds offering lower yield and also asset funds that offer higher yield in the longer run, but investing in more risky assets. The insurer invests the cash collected as the consideration for the units purchased in asset funds in accordance with the asset fund's investment strategy. Therefore, the price of the investment units recorded on the counterparty's account is continuously changing, depending on the investment result of the given asset fund – i.e. the current value of all investment instruments in the asset fund – and it may also suffer a substantial loss. The paid insurance premium is also burdened by considerable deductions at the vast majority of unit linked life insurance products. One of the most significant items of this type is the cost charged by reducing the initial units, serving as coverage for the acquisition costs. In addition, the insurance is burdened by further deductions, specified in the conditions, such as e.g. the premium of risk insurance, handling fee, conversion charges, fund management cost, etc.
These insurance products are made for long term (10-20 years) and the surrender value, as a remainder right, is determined depending on the time elapsed from the term of the insurance. It is a typical problem that when the insurance is terminated due to the surrender of the insurance or premium non-payment before the maturity, the contracting party often receives a substantially lower amount than what he paid in; in extreme cases even the total deposited amount is lost.
In the procedures of the Board related to unit-linked life insurances petitioners typically cited that during contracting they did not receive proper information on the characteristics of the insurances, in particular on the rate of deductions, the calculation of the surrender value and that they must bear the investment risk. However, the recorded proposal documentation usually contained the consumer's declarations in full, according to which that he was familiar and accepted the conditions of the product in full, and as part of this the surrender table and his assumption of the investment risk. Petitioners should prove against this documentary evidence that during contracting they received different information. However, this is almost impossible, not only in the procedures at the Board, but also at the courts, and it was successful only in a very limited number of cases. Financial service providers are open for closing the dispute with a settlement agreement, if the proposal documentation of the life insurance contains some kind of an error or shortcoming, and this is revealed through the instrumentality of the Board.
Although in the past one and a half decade several legislative changes have been introduced protecting consumers’ interest and prescribing the obligation to provide continuous and proper information, in the case of recently expiring contracts the shortcomings in the regulations of the former period are evident. In the case of long-term contracts concluded for 10-20 years it becomes obvious now that the feature of these products is that the yields on the investments made from the paid in premiums are unable to offset the high deduction of costs. During the procedures of the Board, it was often observed that the business management and actual investment activity of asset funds created in relation to unit-linked life insurances were not transparent for the contracting parties, and often not even for insurers.
It is a progress compared to the previous years that in 2016 two settlement agreements of fundamental importance and of high amount were reached in disputes related to unit-linked life insurances, which expressly related to the topic of deductions and the management of asset funds.
Only a few petitions were received in respect of the pension insurances in 2016 as well, which did not allow us to draw general conclusions with regard to this product group. Disputes related to the amount of maturity benefit, the enforced tax allowance and the calculation of the surrender value, and usually ended with a settlement agreement.