Download fundamental principles of russian insurance contract law

FUNDAMENTAL PRINCIPLES
OF RUSSIAN INSURANCE
CONTRACT LAW
The Week of Russian Commercial Law
in London, 19 November 2010
FOUR BASIC PRINCIPLES OF
INSURANCE CONTRACT LAW
Compensation
Equivalence
Freedom
of Contract
Warranty of Indemnity
in Compulsory
Insurance
PRINCIPLE OF COMPENSATION
AND CLASSIFICATION OF INSURANCE CONTRACTS
VARIOUS CLASSIFICATIONS
OF INSURANCE CONTRACTS
Insurance against Insured
Losses
Amounts
Insurance against Life Insurance
Losses
Damage
to Property
Personal Injury
Based on the method
of determining the
indemnity amount
Based on the
character of relations
(compensational/
accumulative)
Based on the
insurance object
This classification best matches the principle of compensation
Ааа
The basis of classification
RUSSIAN CLASSIFICATION
 Property – personal

mixed, as being based on the object of insurance and on the
method of determining the indemnity amount
 does not fully correspond to the principle of compensation
 leads to a number of problems
a) types of insurance being not precisely determined
b) disputes regarding the method of calculation of losses
c) disagreement as to the nature of insurance value
 Sooner or later the Russian classification
will be brought in line with the the principle
of compensation
FREEDOM OF CONTRACT
AND PROTECTION OF THE INSURER’S CLIENTS
DISPROPORTIONS IN THE
INSURANCE MARKET
Informational
The insured is far less informed about the service provided, and his
knowledge being rather limited compared to that of the insurer
Contractual
The insurer cannot work otherwise than in compliance with the
standard terms of insurance
Freedom of contract must not be
used to profit from disproportions
WELL-KNOWN MEANS OF
ELIMINATING DISPROPORTIONS
 The common requirement of good faith
 when signing, executing and interpreting a contract
 Specific tools of response to bad faith
 setting aside unfair contractual provisions
 prevention of unfair business practices
 application of consumer protection law
 Means of «soft law»
 standards of best practices
 methods of alternative dispute resolution
 Supervision
 an important aim of insurance supervision is protection of
rights of the insurer’s clients
ELIMINATION OF DISPROPORTIONS
IN RUSSIAN LAW
 The common requirement of good faith
 absent in the Civil Code of the RF at present, but offered in
the Concept of Development
 Specific tools of response to bad faith
 unfair provisions are stricken just occasionally, as a rule, at
the discretion of courts
 legal measures of preventing unfair business practices are
absent, as well as the notion thereof
 non-application of consumer protection law to property
insurance contracts
OTHER TOOLS TO ELIMINATE
DISPROPORTIONALITY
 Consumer law
 consumer law does not apply to property insurance contracts
 Tools of «soft law»
not yet developed on the insurance market
 Supervision
a means of deterrence rather than of elimination of
disproportions
 Legal means of elimination of
disproportions are so far absent in Russian
law
EQUIVALENCE
AND FINANCIAL STABILITY OF INSURERS
WELL-KNOWN MEANS OF
ENSURING EQUIVALENCE
 Requirement of disclosure of information
on risks
 when signing an insurance contract
 while the contract is valid
 Keeping insurance statistics
 Rate making
 actuarial calculations based on insurance statistics
 Valuation of assets and liabilities
 valuation of assets at market value
 actuarial valuation of liabilities based on insurance statistics
ENSURING EQUIVALENCE IN
RUSSIAN LAW (dislosure of information)
 Requirement of disclosure of information
on risks
 applied, but, as well as all over the world, courts are becoming
more reluctant to view it as a must duty of the insurer
 the insured will only experience adverse effects if he
intentionally concealed important information
 the consequences are stretched in time, i.e. refusal of
indemnity is impossible –first the agreement has to be
declared invalid
ENSURING EQUIVALENCE IN
RUSSIAN LAW (other legal means)
 Keeping insurance statistics
 actual insurance statistics is not systematical, but occasional
 Rate making
 methods of calculation are but the simplest, therefore insurers have
to apply to the system of coefficients determined by the rule of
thumb
 Valuation of assets and liabilities
 there exists environment (claim adjusters, standards, legislation) for
valuation of assets (including property), but one cannot rely on it in
complicated disputes – valuation of one and the same property by
different claim adjusters can differ by 50%, if not 100%
 state claim adjusters whose opinions courts are guided by use oldfashioned 1970’s methods with adjustment factors
 no obligatory actuarial valuation of the insurer’s liabilities
ENSURING EQUIVALENCE IN
RUSSIAN LAW
 Russian insurance law is now passing
from «salary schemes» to actual
insurance, and, in my viewpoint, reliable
actuarial calculations will soon be in
demand
WARRANTY OF INDEMNITY
IN COMPULSORY INSURANCE
THE PRINCIPLE OF WARRANTY OF
INDEMNITY IN COMPULSORY
INSURANCE
Compensation
Freedom of
Contract
Equivalence
The Principle of Warranty
THE INFLUENCE OF
THE PRINCIPLE OF WARRANTY
 The principle of warranty ties up the other
principles in the following manner
 relationships between an insurer and a beneficiary are
regulated by law and must not depend on mutual relations
between the policyholder and an insurer
 refusal of indemnity is only possible in the event there is no
loss occurrence
 the insurer cannot refuse to provide insurance coverage, even
if the premium payment is overdue
 However, these legal means are so far
absent in compulsory insurance law
THANK YOU
for your
attention