October 2023 marks the advent of a new law intended to simplify the rules on termination of insurance policies. This new law, dated 9 October 2023, will impact the forms that may be used to terminate an insurance policy and the period for opposing tacit renewal. In addition, the said law confers an infra-annual right of termination and grants the policyholder, in the event of a change of insurer, the right to request that the new insurer carry out (on the policyholder’s behalf) all formalities related to the policyholder's right of termination.
Regarding the forms of termination, the law introduces two new forms (without prejudice to the currently authorised ones). Firstly, it will be possible to terminate an insurance contract by registered mail sent electronically, but a qualified electronic registered delivery service (within the meaning of the eIDAS Regulation) must be used. In addition, provided that the insurer has made a digital environment available, the policyholder can terminate an insurance contract via this digital environment by means of a qualified electronic signature by the policyholder or a qualified electronic seal (within the meaning of the eIDAS Regulation). In this case, the insurer must provide the policyholder with an acknowledgement of receipt of the termination, which includes the policy number, over a durable medium. It should be noted that insurers do not have the right to terminate via the digital environment.
Regarding changes in the period for opposing tacit renewal, note that under current rules, the term of non-life insurance contracts can – in principle - not exceed one year and it is generally provided that such contracts are tacitly renewable for consecutive periods of one year, subject to an objection to such tacit renewal by one of the parties (i.e. the policyholder or the insurer) at least three months before the expiry of the contract. The new law provides for a distinct objection period for the policyholder and the insurer. The policyholder is granted a longer period to exercise the right to object to tacit renewal: at least two months before the term of the contract. The insurer, however, may only exercise its right to object to tacit renewal of the insurance contract at least three months before the term of the said contract.
In the new law, the most flagrant manifestation of the simplification of the rules on termination of insurance contracts is the introduction of a right to terminate certain insurance contracts at any time after the first year, without having to provide grounds and free of charge. This is an exemption to the regime describe above, but this right of early termination after the first year is not intended to apply to all insurance contracts. Only tacitly renewable insurance contracts meeting the following conditions may be terminated by the policyholder without charges or penalties and after the expiry of a one-year period:
- insurance contracts falling within the non-life insurance classes; and
- those covering consumers (within the meaning of the Belgian Code of Economic Law).
Furthermore, the Belgian legislator has also sought to protect the financial interests of policyholders who intend to make use of this early termination right, by providing that policyholders will be reimbursed for premiums relating to the insurance period subsequent to the effective date of termination. This has been arranged by a reference to the premium credit rule (art. 73 of the Belgian insurance law).
In the event of termination in order to change insurer (both in application of the "ordinary" regime provided for in article 85 of the Belgian insurance law and application of the newly introduced exemption regime for early termination as described in the previous paragraph), the new law grants the policyholder the right to entrust the new insurer with carrying out the formalities related to the policyholder’s right of termination. In addition, if the policyholder exercises this right, the new insurer must ensure continuity of insurance coverage.
The law of 9 October 2023 is due to come into force in October 2024. Therefore, Therefore, for our readers who are concerned by this legislative change, you have one year to implement these changes. Our Insurance and Finance team will be happy to assist you in this transition.
Benoît Vandervelde
Florence Berchem
Anaïs Casteur
