Obligation to provide information when concluding an insurance contract

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As people’s standard of living improves constantly and their financial resources become more abundant, they tend to strive for a happier and more peaceful life and begin to think about preparing for the risks that may arise in the future. . In such circumstances, insurance is invented to be an optimal financial service, a mechanism to provide social security and the best tool to protect people against unpredictable risks. However, not all insurance costs are paid when an insured event occurs. Therefore, in many cases, insurance buyers are denied insurance proceeds because they have breached their duty to provide information. So what is a disclosure requirement and what should insurance buyers, policyholders and insurers do to avoid breaching this requirement? In the context of this article, the author will seek to clarify the provisions of Vietnamese laws on the obligation to inform each party to an insurance contract.

1. Definition of an insurance contract

An insurance contract is an agreement between an insurance buyer and an insurer, under which the insurance buyer must pay an insurance premium and the insurer must pay the insurance proceeds to the beneficiary or indemnify the insured person when the insured event occurs.

Currently, insurance contracts are divided according to the object and the insured service into three groups comprising personal insurance contracts, property insurance contracts and civil liability insurance contracts. Thus, the objects of personal insurance contracts are the health, safety, longevity and life of persons. In contrast, the object of property insurance contracts is the property; and the subject matter of civil liability insurance contracts is the civil liability of the insured towards a third party according to law.

In addition to the content further agreed between the parties, an insurance contract includes the following content:

a) Names and addresses of the insurer, the purchaser of the insurance and the insured or the beneficiary;

b) Insured object;

c) Sum insured and value of the property insured in the case of property insurance;

d) Scope of insurance, conditions of insurance;

đ) Exclusion clauses;

e) Period of insurance;

g) Insurance premium rate and mode of insurance premium payment;

h) Timing and mode of payment of the proceeds of the insurance or the indemnity;

i) Dispute settlement provisions;

k) Day, month and year of conclusion of the contract.

With respect to life insurance, before entering into contracts with purchasers of insurance, insurers must register standard contracts with the Department of Industry and Commerce in case the contracts will be enforced in any province or provincial town or the Ministry of Industry and Trade. in case the contracts are applied nationally or in two or more provinces.

In accordance with the law and the content of all insurance contracts in force, each insurance buyer, insured person and insurer is obliged to provide information. The obligation to inform these subjects must comply with the principles of sufficiency, good faith and honesty so that the parties assess the potential risks to decide whether or not to conclude the insurance contract. Simultaneously, the information provided by the parties will also be used as evidence in court in the event of a dispute.

2. The obligation to inform policyholders

When entering into insurance contracts, insurance buyers must provide personal information such as name, age, financial status, marital status, medical information, etc. for insurers to review and assess the approval of the insurance buyer’s application for insurance, determine the insurance premium payable and the insurance coverage received when the insured event occurs.

To make the process of providing information to insurance buyers more convenient and less time consuming, most insurers today use questionnaires to collect information about insurance buyers. The majority of these questions are “yes/no” questions and will be recorded in the insurance application. When answering “yes” to a question, insurance buyers will be required to provide information in the detailed description section to explain their answer. The main themes of these questions generally revolve around the lifestyle, professional and health situation of insurance buyers and policyholders.

Pursuant to point b, clause 2, section 18 of the Insurance Act 2000, purchasers of insurance must sufficiently and fairly furnish all particulars relating to the contract of insurance when requested by the insurers. Accordingly, policyholders must declare and answer the questions in the insurance application honestly and sufficiently. Moreover, to underline the obligation of information of the underwriters of insurance, the law on the activities of insurance of 2000 devotes the entirety of article 19 – Responsibility of information, to the regulation of this matter. Similarly, when concluding insurance contracts, policyholders must provide insurers with sufficient information relating to the subject matter of the insurance and assume responsibility for the accuracy and truthfulness of these informations.

In addition to the obligation to provide information when establishing insurance contracts, insurance buyers must also inform insurers of circumstances that may increase risk or generate more liability on the part of insurers when the implementation of insurance contracts at the request of insurers. .

In the event of breach by the insurance subscribers of their obligation to inform, the insurers are entitled to unilaterally suspend the execution of the insurance contracts and to collect the insurance premiums until the moment of the suspension.

3. The information obligation of insurers

Like insurance buyers, when concluding insurance contracts, insurers are also responsible for compliance with the information obligation. Accordingly, insurers must provide sufficient information relevant to insurance contracts, explain the terms and conditions of insurance, the rights and obligations of each party to purchasers of insurance, and take responsibility for the accuracy and the veracity of the information they provide.

In addition, due to the confidentiality and sensitivity of the information provided by insurance buyers, insurers must keep such information confidential and must not disclose such information to third parties except with the consent of the insurance buyers or the request of the competent public bodies. .

Insurance buyers also have the right to unilaterally suspend the performance of insurance contracts and to demand compensation from insurers if they discover that insurers intentionally provide false information in order to conclude insurance contracts. .

Thus, as can be seen, compliance with the information obligation is mandatory when concluding and implementing insurance contracts. The main reason for this is the particularity of insurance contracts. Thus, unlike other contracts, insurance contracts are essentially financial guarantees for policyholders by transferring risks to insurers. Transferred risks are risks that occur in the future and do not actually exist at the time the contract is established, therefore, they are very difficult to predict and determine. Insurers can only refer to information provided by policyholders to predict potential risks and decide whether or not to take out insurance contracts. Consequently, the information provided by the parties before or during the implementation of the insurance contracts must be truly complete and sincere.

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