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Draft Guidelines for Insurance Programmes
by Adv. Tammy Greenberg
On 6th September 2011 the Israeli Commissioner of Insurance published draft guidelines for insurance programmes sold in Israel. The guidelines impose on insurers a wide duty of disclosure and clarity in drafting the wording of policies.
The introduction to the guidelines refers to the gap in knowledge and professionalism between the insurer and the insured and as a consequence, the need for discovery and transparency.
Generally speaking, a policy should be drafted in a fair manner and should not take advantage of the insurer's power over the insured. It should include all relevant information and be worded in clear and simple words.
Here are the main guidelines given by the Commissioner in order to achieve the object of a fair and clear policy.
1 Fairness
Insurance programmes will be drafted in accordance with the insured’s reasonable expectation. For example, a programme covering “operation expenses” must cover more than the doctor’s fees for the operation.
2 Coverage granted should adhere to the real needs of the insured.
For example, an extension to cover jewellery outside a residence, conditioned on the insured's wearing the jewellery, is not required since there is no risk of loss in this situation.
3 Condition for effective date
An insurance programme must not include a provision conditioning its effective date after the insured was accepted for cover. For example, it is prohibited to include a pre-condition for coverage according to which, there was no change in the insured’s health after the date of the proposal form.
4 Unreasonable exclusions are prohibited
For example, the Commissioner prohibits the common exclusion, according to which burglary risk in non-populated areas is conditioned by effective security measures of equipment on the premises when the equipment is not operational. According to the Commissioner such condition is not reasonable since, if there are effective security measures there is no risk of the equipment to be stolen.
5 Non-reasonable demands for proving entitlement to insurance benefits are prohibited
For example, a demand to provide an insurer with original documents when the insured is required to provide them to another authority.
6 The insured has the full right to appeal the insurer’s decision
Any provision limiting the insured’s right to dispute the insurer’s decision is prohibited. For example, an arbitration clause forcing the insured to arbitrate with the insurer instead of filing a claim in court is prohibited.
7 Specific exclusions in respect of facts which the insurer could have clarified in advance are prohibited
For example: age limitation.
8 Asymmetry between the parties is prohibited
For example, an insurer cannot demand receipt of notices by registered mail if the same manner is not imposed on the Insurer.
9 The insurance programme must include all information necessary for its understanding
For example, an insurer that wishes to exclude “extreme sports” should define the meaning of "extreme sport" and indicate the types of sport which are excluded.
10 The title of the policy will reflect the cover
11 The Insured should not be misled in respect of his rights
For example, the common clause in Liability Insurance, according to which the insurer may chose to pay the full limit of liability and avoid further involvement, is not binding due to Section 66 of the Insurance Contract Law – 1981, according to which a liability insurer must also pay defence costs even beyond the policy limit.
The draft guidelines were published and insurance companies are invited to provide their comments thereto.
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