Background
On 31st August 2009 the Israeli Commissioner of Insurance (hereinafter: "the Commissioner") published new directives concerning claims handling and public appeals management by various institutional bodies, including insurance companies.
The new directives which will come into force on 1st July 2011, apply to several branches of insurance including pension, life insurance, personal accident insurance, health insurance (excluding dental insurance), motor vehicle and apartment insurance.
Within the framework of the new directives the Commissioner explained that claim settlements is an essential part of insurance company business, and that the mode of action during the settlement process has a major impact on the implementation of the insured's rights and the insured's ability to consider the various options it will encounter during each stage of this process.
Therefore, it is important to establish a clear set of rules which will apply to the settlement process.
Each insurance company should determine its own rules (hereinafter: "Set of Rules") according to the following guidelines:
1. The same rules should apply to all claims and all insureds. Nevertheless, an insurance company may set a different set of rules for particular claims, provided that the nature of the claim justifies this.
2. A set of rules which was established shall not unreasonably differ from the set of rules published by the Commissioner in the new directives.
3. The dates and the periods of time in the set of rules shall not be longer than those determined in the directives.
4. If an insurer establishes a set of rules which is unreasonably different than the one determined in the directive, then the set of rules published in the directive shall apply.
5. For each type of claim the insurer shall prepare a comparison table showing the difference between its set of rules and the rules published in the directive (hereinafter: "The Comparison Table")
The Commissioner's Set of Rules
According to the new directives, as soon as possible after receiving a new claim the insurer must provide the insured with all documents relevant to his or her claim, including the set of rules, instructions on how to proceed with the claim, documents required, information regarding the insured's rights to receive compensation and the Claim Submission Form. In addition, 30 days after receipt of the insured's documentation, the insurer is required to send the insured a notification regarding its decision or advise about further steps which are still required in review of the claim.
In the event the insurer decides to pay insurance benefits to the insured, payment will be accompanied by a written notification which will include, inter alia, the following data or reference to supporting documents (such as an expert opinion or a loss adjustment report):
1.1. In case of a one-time payment:
v Reason for the payment
v A reasonable, detailed damage calculation breakdown
v Withholding tax, if applicable - the exact amount that was withheld
v Calculation of the tax and a reference to the provision in the law.
v A reference to pay slip or approval of the tax authority
v Details regarding payments which were deducted from the insurance benefits according to the insurance policy, the insurer's regulations or any law.
v The deductible
v Advanced payments deducted or any undisputed payments
v Interest and linkage: linkage - type and method, interest rate, additional interest and linkage amounts, interest arrears and reference to the relevant regulation and/or law
v The specific date on which the insurance company received full documentation required for examination of the claim.
1.2. In case of payments in installments:
· With the first payment the insurer must detail, in addition to the above, the following:
v The date and amount of the first payment
v The payment schedule
v Details of maximum period of time during which the insured is entitled to payments, subject to the provisions of the policy, the insurer's regulations or any law.
v The maximum period before re-examination of entitlement to payment
v The rules for re-examination during the payment entitlement period.
v Entitlement extension mechanism.
· An insurance company is permitted to reconsider the insured's right to installments, subject to rules which must be published on its website.
· An insurer shall not reduce or discontinue the payment of installments, unless it is acting in accordance with the policy conditions or the insurer's regulations on this matter, and only after it has notified the insured of its intention to do so (hereinafter: "Notice of Change"). In case no rules have been determined as stated, the insurer will give the insured a Notice of Change at least 30 days before reducing or discontinuing the installments.
Settlement Notice
Pursuant to the new directives, an insurance company shall not offer an insured an unreasonable settlement proposal. In any event in which the parties agreed on a settlement, the insurance company should provide the insured with a written proposal and a reasonable time within which to consider it.
Continuance/Discontinuance Examining Notice
In the event that the insurer requires an extension of time for examination of a claim, it is obliged to provide the insured with a written notice detailing the reasons for requesting such extension (hereinafter: "the Continuance/Discontinuance Examining Notice"). Such notice must be given every 9 days unless, according to the previous notice and the policy terms, a specific date was determined for evaluation of the damage (maximum period - one year).
An insurer is exempt from sending a continuance/discontinuance examining notice in the event the insured instigated legal proceedings or has ignored 2 notices which included a request for documentation or data.
Claims Limitation
Any payment notification or any continuance/discontinuance examining notice sent to the insured will refer to the limitation period in which the insured's claim against the insurer is expected to prescribe and will clarify that submission of the claim to the insurer does not stop the limitation period.
Right to Dispute
Any payment notification or any continuance/discontinuance examining notice will include clarification as to the insured's right to dispute the insurer's decision and the manner in which this should be done. The insured also has the right to submit its dispute to the insurer's ombudsman or any other authority including the court or Commissioner of Insurance.
Expert Opinion
In the event an insurer intends using an expert in order to assist in assessing the damage, notification should be given in advance to the insured. The insurer must also give the insured an explanation as to the expert's role in damage assessment and notify of its right to appoint an expert on its own behalf. The above mentioned does not include appointment of a private investigator.
There are specific rules as to the drafting of an expert opinion.
Subrogation and Third Party Rights
An insurance company must notify the insured in advance of its intention to file a subrogation claim against a third party, and to detail whether the insured has any right in such claim.
In addition, the insurance company must send any judgment, arbitration award or settlement agreement regarding the subrogation claim to the insured within 14 days.
Third Party Claim
According to the Israeli law, an injured third party may file a direct claim against the insurer of its tortfeasor. Pursuant to the new directives, such third party may approach an insurance company and request information as to the existence of an insurance policy of a certain person or in connection with a certain event. In such case, the insurance company must give the third party the relevant information within 14 days.
The insurance company is required to notify the insured of its intention to compensate a third party, and must give the insured 30 days to object.
The Board of Directors and Management Role
The Board of Directors of an insurance company must approve the insurer's internal set of rules regarding claims and public appeals clarifications and settlements, and must re-discuss these rules at least once a year (starting from 2013 - once every 2 years).
The insurer's management must approve the set of rules for every type of claim, the comparison table and the schedules set therein.
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