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New regulations for mandatory clauses in insurance contracts

In Official Gazette 218, published in 10 April 2018, The Superintendency of Companies, Value and Insurance issued the Resolution to determine the mandatory and prohibited clauses within all kinds of insurance contracts.

Regarding the mandatory clauses that must be included in the insurance contract, following are the most important changes:

  1. Changes regarding the way the Insurance Companies finance premiums. This is a remarkable change because Insurance Companies can set measures to avoid payment delays from now on.
  1. The underinsurance will be applied exclusively to partial losses.
  1. When the Insurance Company alleges over–insurance, it must return the premium collected in excess.
  1. When the Insurance Company alleges that the insurer needs a resolution from court to access a third-party liability, the Statute of limitation will be effective from the date when the Court notifies said Resolution.
  1. The payment of Claims from the Insurance Company will be made–from now on—via electronic payments or transfers; this means that checks will no longer be accepted for these payments.

Under the prohibited clauses are the following:

  1. Clauses banning the insurer to file Administrative claims before the Regulator Entity or to file the claim before the Judicial Courts.
  1. Clauses that limit the evidence that may be used by the insurer.
  1. Clauses that intend to limit the insurer to demand for compensation when the Insurance Company asks for duties that are impossible to be executed or are not in balance with the severity of the claim.

Under this resolution, Insurance companies must follow some conditions for the issuance:

  1. The Insurance Company must deliver to the insurer a copy of the policy with the general and specific conditions via e-mail.
  1. The font size shall not be less than 10.
  1. A summary of the policy with the relevant conditions and the Insurance Certificate shall be submitted to the insurer, upon its request.
  1. The observations of the regulator, after the approval, have to be inserted in the policy.
  1. The issuance of the policy must be made in a digital format, in compliance with the E-commerce law.

This Resolution is a remarkable advance in the insurance sector since it implies a modernization in terms of the issuance of the policies and the way in which the insurers must make payments to their insured.

It is recommended for Insurance Companies to analyze the implications of this Regulation and to adjust to this new reality, emphasizing the revision of the policy clauses in the different lines of businesses in which they operate.