Update on Revised Swiss Insurance Policies Act
The Swiss Insurance Policies Act (IPA) which governs the relationship between insurance companies and their clients has been partially revised. The new provisions mainly improve the situation of clients. The Parliament approved the revision on 19 June 2020 and the referendum deadline expired on 8 October 2020. On 11 November 2020 the Federal Council brought the revised IPA into force, effective from 1 January 2022.
The following changes to the existing Swiss Insurance Policies Act (IPA) can be highlighted:
Right of revocation and information obligations
The revision introduces a new 14-day right of revocation for the policyholder (art. 2a rev. IPA). The right of revocation is excluded for collective personal insurance, provisional cover and contracts with a duration of less than one month (art. 2a para. 4 rev. IPA).
In addition, stricter information obligations of the insurance company towards the policyholder are established (art. 3 rev. IPA). This information obligations include, among others, information on the scope of insurance cover and the right of revocation.
Under current law, retroactive insurance, i.e. an insurance contract with effect from a date prior to its conclusion, is not permitted, except for fire and transport insurance. The new provision in art. 10 rev. IPA allows for retroactive cover if an insurable interest exists. However, such an insurance is void if only the policyholder or the insured party knew or should have known that a dreaded event had already occurred.
New termination provisions
In case the information obligations in art. 3 rev. IPA are violated, the policy holder is entitled to terminate the insurance contract within a relative deadline of 4 weeks from knowledge of the breach of such duty (art. 3a para. 1 rev. IPA). This right of termination already exists under current law. New is the absolute deadline of 2 years instead of the previous 1 year (art. 3a para. 2 rev. IPA).
Under the new law, long-dated policies except for life insurance policies can also be terminated after three years and after each subsequent year with three months' notice in accordance with the ordinary right of termination (art. 35a para. 1 rev. IPA). The parties may agree that the contract may be terminated before the end of the third year. In this case, the periods of notice must be the same for both parties (art. 35a para. 2 rev. IPA).
Article 35b rev. IPA now codifies an extraordinary right of termination already supported by case-law, whereby the contract may be terminated at any time for good cause. Good cause is defined as: a) an unforeseeable change in the law which makes it impossible to fulfil the contract; or b) any circumstance under which it is not just and reasonable to expect in good faith that the person giving notice of termination is able to continue the contract.
Former art. 53 IPA on double insurance coverage is now covered by art. 46b rev. IPA on multiple insurance coverage. Paragraph 2 has been added, allowing the policyholder to cancel a contract within 4 weeks of the discovery of multiple insurance coverage.
In case of a significant reduction of the underlying risk, the policyholder can terminate the contract or ask for a reduction of the insurance premium with four weeks’ notice (art. 28a rev. IPA).
New limitation period for claims under insurance contracts
The limitation period for claims under insurance contracts is now of five years instead of the previous two years after the event giving rise to a claim (art. 46 para. 1 rev. IPA). Excluded are claims from the collective daily sickness allowance insurance (kollektive Krankentaggeld-Versicherung), which continue to be subject to a limitation period of two years (art. 46 para. 3 rev. IPA).
General direct right of action for liability insurances
According to the new provision in art. 60 para. 1bis rev. IPA the damaged third party or its legal successor generally have a direct right of action against the insurance company. The insurance company can raise any objections it has against the policyholder based on either the law or the insurance policy.
Breach of duties by the policyholder
The consequences of the breach of a contractual duty imposed on the policyholder take now into account the level of negligence of the policyholder and the causality between such breach and the event that triggers a claim as well as the amount of the same (art. 45 para. 1 rev. IPA).
In addition, the revised IPA has also been adapted to the requirements of electronic business transactions. This will allow the electronic transfer of information, such as notices from the insurance company to the clients and vice versa by e-mail.
Although this publication has been compiled with great care, Loyens & Loeff N.V. and all other entities, partnerships, persons and practices trading under the name ‘Loyens & Loeff’, do not accept any liability for the consequences of making use of this publication. The information provided is intended as general information and cannot be regarded as individual advice.
Judith RaijmakersPartner Attorney at law
Judith Raijmakers, attorney at law, is a partner in our Zurich office. She focuses on banking and finance matters including secured lending, debt (re)structuring, debt issuances and financial regulatory work.T: +41 43 434 67 24 M: +41 79 870 91 03 E: firstname.lastname@example.org
Diana LafitaAssociate Attorney at law
Diana Lafita, attorney at law, is a member of the Banking and Finance practice group in our Zurich office. She focuses on banking, insurance and capital markets regulatory and private matters.T: +41 43 434 67 49 M: +41 79 368 25 59 E: email@example.com