The rules on the duration and termination of insurance contracts governed by Belgian law have often been found overly formalistic and complex, especially by consumers.
Save for a few exceptions, the duration of non-life insurance contracts can, in principle, not exceed one year. Instead, such contracts are tacitly renewed for successive one-year periods, subject to a notice for termination or objection to the tacit renewal being made by one of the parties.
A significant change was introduced by the law of 9 October 2023 regarding the simplification of termination rules for insurance contracts (the "Law"). The Law enters into force today, 1 October 2024, and brings important changes to how and when insurance contracts can be terminated, with the aim of offering greater flexibility and more consumer-friendly options.
How? New Electronic Methods of Termination
Under the previous rules, a notice for termination could only be made by registered mail, bailiff's writ or the delivery of a physical termination letter against proof of receipt. These formalities have proved to be burdensome, especially for consumers.
The Law introduces new electronic methods for terminating. First, policyholders can now terminate their contract via a registered electronic mail using a qualified electronic delivery service within the meaning of the eIDAS Regulation. Additionally, if the insurer or intermediary opts to offer a digital environment, the policyholder can terminate through the insurer's digital platform using a qualified electronic signature or seal. Interesting to note is that insurers do not get a similar right to use the digital environment for their own termination of the contract.
When? Updated Notice Periods
One of the other key changes in the Law is the amendment of the notice periods for expressing their wish to stop the automatic renewal of a contract. Previously, both the policyholder and insurer had to notify their wish to not renew at least three months before the contract's expiry date. As from today, policyholders can stop the automatic renewal with only two months' notice. Insurers, however, remain subject to the give three months' notice period.
Consumers only! The Right to Terminate After the First Year
The most significant change introduced by the Law is that consumer-policyholders are granted the right to terminate non-life insurance contracts (that are tacitly renewable) at any time after the first year, without costs or penalties or having to provide a specific reason. This means that consumers can terminate the insurance contract, even if it was renewed for another one year period. Consumer will still have to respect the two months' notice period. With this change, the legislator aims to provide consumers with greater flexibility and freedom to manage their insurance coverage without being burdened by long-term commitments. Insurers, on the other hand, do not get a similar right. The latter remain bound by the one-year term of the insurance contract and the three months' notice period.
To protect policyholders' financial interests, the Law further provides that the consumer has to be pro rata reimbursed for any premiums paid for periods beyond the effective termination date, in line with the "premium credit" ("premiekrediet" / "crédit de prime") rule under Article 73 of the Belgian Insurance Law.
Final thoughts
This legislative update aims to provide more flexibility and protection for Belgian insurance policyholders, making it easier to terminate or switch contracts. Although the legislators' goals are commendable, it remains to be seen if they will be fully achieved. The insurer is not obliged to put in place a digital environment for communication. In absence thereof, the only remaining electronic option for the policyholder, is the use of a mail delivery service within the meaning of the eIDAS Regulation. Today such digital registered mail services are not yet well known or wide-spread. One could question if the use of such service is not still too formalistic for consumers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.