Insurance and Consumers Rights

EXECUTIVE
SUMMARY

The insurance market in Chile is a
very competitive and regulated market. The accelerated growth of the industry
has come up against the issue of consumer’s rights. In the search fora balance
between development of the industry and protection, authorities have issued
several regulations that seek to guarantee and protect the rights of the weaker
party in the insurance relationship. How can a harmonious application of the
various standards be achieved?

THE INSURANCE MARKET AND CONSUMER
RIGHTS

The insurance market in Chile,
characterised by a large number of insurers and a very competitive environment,
is regulated through the Superintendence of Securities and Insurance.

One of the obligations of this
Superintendence is to maintain a registry of all the general conditions and
clauses corresponding to insurance product policies.  Any policy or additional clause which is to
be offered in the market to the general public must be previously recorded in
this special registry.  The purpose of
the registry is to provide a minimum guarantee for consumers that the policy or
clause fulfils the requisites the authority has determined[1]. 

The particular conditions of the
policy specify the details of the contract by defining aspects such as the identification
of the parties, the object subject to the insurance contract, the agreed
premium, deductibles, etc.

The correct determination of the
contents of the insurance contract—the general and special conditions—is of
vital significance: the clarity of its content may prevent future disagreements
between the insurance company and the insured party. 

The Superintendence and authorities
in general have adopted a very protectionist position towards the insured
parties.

An individual who acquires insurance
assumes various minimum responsibilities, such as the obligation of paying the
premium, and of course, the obligation of knowing the contents of the contract
he is signing.  In order to make it
easier for the consumer to understand the contents of a contract, the
Superintendence has issued several very specific rules obliging insurance
companies to provide clear information to the consumer. This is a very delicate
matter, particularly in relation to collectively contracted insurance.

There is a separate authority that
monitors the protection of consumer rights, known as the SERNAC, the “National
Consumer Service”. 

Law No. 19,496, “Rules on the Protection
of Consumer Rights” published on March 7th, 1997, is a general law whose
provisions do not apply to the activities of production, manufacture, import,
construction, distribution and marketing of goods or services covered by
special laws[2]. 

It should be pointed out that the
insurance contracts are covered extensively by different legal bodies.
Therefore, one could conclude that Rule Nº 19,496 should not be applicable to
the insurance market.

Nevertheless, there are several
insurance contracts that are defined as adhesion contracts, in accordance with
Article 1 of Law Nº19,496. For insurance policies corresponding to “adhesion
contracts”, all of the rules related to the protection of Consumers Rights should
therefore be applied.

Insurance contracts which are not
adhesion contracts, therefore, are not to be regulated by the SERNAC standards.
These correspond to insurance contracts signed with general conditions models that
are not recorded in the Superintendence special registry; transport, aviation
and marine hull insurance contracts; and those whose annual premium is equal to
UF 200 or more[3].

It is particularly important to
determine whether an insurance policy is governed or not by Article 1 of Law
Nº19,496, given the new special financial regulations introduced by Law 20,555.
This granted to SERNAC, which is the authority responsible for the application
of Law Nº 19.496, new attributions in financial matters.

Among the new articles introduced by
this Law is the following:

“Adhesion
contracts for credit services, insurance and, in general, any financial
product, drawn up by banks and financial institutions or by support business
companies, commercial establishments, insurance institutions, compensation
funds, savings and credit cooperatives, and any natural or legal provider of
such services or products, must specify at least, in order to promote
simplicity and transparency, the following (…)”

Did the legislator intend to classify
all insurance contracts as “financial products”? If that were the case, all
insurance contracts would have to be governed by not only by their special
rules, but also by the special financial SERNAC standards.

When analysing the application of
the special financial SERNAC standards, and given the history of this Law and
the spirit behind it, distinctions can be made between the following:

a)              Insurance
not associated with financial products and services, such as: SOAP insurance
(compulsory personal accident insurance); vehicle insurance; home insurance;
fire insurance; personal accident insurance; and indemnities offered by
traditional brokers or retail brokers. Given that these kinds of insurance have
no relation or connection with financial products, they should not be regulated
by the special financial SERNAC standards.

b)             Insurance
associated with financial products and services.  This is the case of insurance offered by
Banks, associated with financial products such as mortgages, consumer loans,
credit lines, credit cards; and insurance associated with fire and earthquake,
unemployment, serious illnesses etc. In these cases, the special financial
SERNAC standards should apply.

c)              Insurance
which correspond to financial products. 
This covers life annuities receipts, for example. The special financial
SERNAC standards should apply.

Why is the above classification so
important? The new Law established new information obligations regarding these special
financial standards. It should be noted that the Superintendence had already
recognized and issued many different regulations applicable to insurance
companies in general, intended to protect and assist insurers in the protection
of their rights[4].

Two different legal bodies governed
by different authorities provide very specific regulations regarding the same
subject-matter: information. Which regulation prevails? Should one prevail over
the other?

This problem should not be resolved
by determining which Law should prevail; the intention should be to reconcile
the interests of both legal bodies. When one takes into consideration the fact
that the legislators are seeking the protection of the consumer rights, it is
clear that the correct answers to our questions lie in the respect for, and
compliance with, of all applicable provisions.

Are the new measures beneficial for
consumers? Only time and the practical application of these new provisions will
provide us with an answer to our question.

María Jesús Pérez Matta

Uribe, Hübner y Cía.