Insurance Contracts in General

The Insurance Contracts Act is principally applicable to personal and indemnity insurance. Certain parts of the Act are applicable to deposit insurances with no insured (so called capital redemption agreements). The Act is not applicable to statutory insurance or reinsurance.

Personal insurance is an insurance, the object of which is a natural person. As an example of such insurance with regard to companies is, amongst others, voluntary medical expenses insurance for staff. Indemnity insurance describes an insurance taken out to protect against loss caused by material damage, liability for damages or other economic loss. As an example of such insurances are real estate and liability insurances.

The insurer is a body, which grants insurances, e.g. an insurance company. The policy holder is the one, who has made the insurance contract with the insurer. The insured is the one, who is the target of the personal insurance or the one for whose benefit the indemnity insurance has been made. Group insurance describes an insurance, the subjects of which are the members of the group mentioned in the insurance contract. The Insurance Contracts Act treats pension insurances equally to life insurances. A voluntary employment pension insurance is considered to be a group insurance.

Before offering insurance, the insurer must ask the policyholder for information about his needs and requirements for insurance and, taking into account the information received, determine the insurance needs. In addition, when offering investment insurance, the policyholder shall be asked to provide information on his/her investment experience and knowledge of the investment sector related to the insurance in question and, when making a personal recommendation, on his/her financial situation, including risk and loss tolerance.

The insurance contract defines which person or which group of persons is insured. The insurance contract consists of the insurance policy and the terms of the insurance policy. The terms of the insurance policy are the basic elements of the insurance contract. The terms limit what the insurance covers, what it does not cover and when it is valid. The general terms and conditions of insurance affect all similar insurances provided by the insurer. Special terms of insurance specify in what relation the terms of a certain private insurance differs from the general terms and conditions of insurance.

The terms of insurance must always be attached to the insurance policy. It is advisable to read the terms of insurance thoroughly before concluding the contract, in order to ensure that the insurance is truly applicable for the intended purpose and that the policy holder is aware of all steps required to be taken by him/her. The terms may e.g. require certain steps to be taken by the policy holder in order to prevent specific damages from occurring. Omission to take the steps can lead to decrease or refusal of compensation.

The provisions in the Insurance Contracts Act are mandatory for the protection of another insured person or the beneficiary of the insurance compensation who is not the policy holder. A term of the contract, which differs from the provisions in the Act and which is to the disadvantage of the mentioned persons, is unlawful. Therefore, if the beneficiary is someone else than the policy holder, a contract term, which weakens his/her position from the one offered by the Act, will be ignored. Correspondingly, the policy holder is protected, if he/she is a consumer or an entrepreneur or a corporation which is comparable to a consumer. When considering whether or not an entrepreneur or a corporation can be compared to a consumer in relation to the insurance company, the type and quantity of the business activity, as well as the circumstances will be taken into account.

As regards other types of insurance, please see the sections covering Corporate Law, Asset management, Personnel, Consumer Protection and Product Liability. These sections cover, amongst others, insurances relating to business operations, IPR insurances, statutory and voluntary insurances relating to staff and entrepreneurs, as well as product liability insurance.