Luxembourg, 08/03/2002 (Agence Europe) - The Court of Justice has ruled that an article of the 1992 Royal Belge is incompatible with European law. The ruling imposes that all life insurance policies must inform the policy-holder that cancellation, reduction or surrender of an existing life-insurance contract for the purposes of subscribing to another life-insurance contract is generally detrimental to the policy-holder.
The Axa Royale Belge insurance company had learnt that Georges Ochoa, broker for the Stratégie Finance company, was proposing life insurance policies, with systematic deletion of this statement. Axa took the matter before a Belgian court to obtain condemnation of Stratégie Finance. In its opinion, its rival was thus violating the provisions of Article 4 of the Royal Decree. The Belgian company ordered Stratégie Finance to cease such practice or to pay a periodic penalty payment.
Referred to on this case, the Court of Appeal in Brussels had asked the European Court of Justice whether this compulsory statement were conform to the 1992 Directive on Direct Life Insurance. The Court replied that such a warning, by its general and vague nature, is therefore inappropriate for the purposes of informing the policy-holder as to the choice to be made and is more likely to dissuade the policy-holder from terminating an existing contract, even though the conclusion of a new contact might, in fact, be to his advantage. It said the information in the contact is therefore contrary to the provisions of the EC Directive of 1992 whereby the additional information that the Member States can require must be clear, precise and necessary for the correct understanding of the essential characteristics of insurance products.
Further to the judicial initiative of Axa Royale Belge, this obligation should no longer appear on any life insurance contract, including those proposed by Axa.