Issues with the Legal Framework of Insurance Contract in Slovenia

In the Slovenian legal system, insurance contracts are regulated under the Slovenian Code of Obligations (Obligacijski zakonik; OZ), while insurance activities, in general, are governed by the Slovenian Insurance Act (Zakon o zavarovalništvu). In addition to these two acts, insurance activities are also subject to several special regulations that transpose European insurance contract law into the Slovenian legal order. Consequently, the regulation of insurance contracts is not only outdated but also fragmented, which leads to increased legal uncertainty. A lively debate has evolved in the Slovenian legal community and several proposals have been made to address this uncertainty.

The insurance contract regime in the Slovenian OZ is largely copied from the Yugoslav Code of Obligations, which means that it is over 40 years old. Since then, circumstances have changed significantly – insurance as an economic activity has expanded, the diversity of risks has increased, and there is a growing variety of new insurance products on the market. Given that the insurance industry is a major economic activity, and the insurance contract is the cornerstone of contractual insurance law, we can anticipate changes to the Slovenian regulation of the insurance contract in the future. Some of the most critical and most heavily discussed topics in current proposals for a new regime are:

 

Pre-contractual duties and obligations

There is a dire need for more detailed regulation of the policyholder’s duty to disclose all circumstances relevant for the assessment of the insured risk, the insurer’s obligation to inform the policyholder about the characteristics as to the insurance, and to advise him of any discrepancy between the insurance offered and its requirements, so as to enable the policyholder to make an informed choice of the insurance product that best aligns with his requirements.

 

Classification of insurance into indemnity insurance and insurance of fixed sums

The current regime classifies insurance into property and personal insurance. However, under the proposed regime, insurance would be categorized as either ‘indemnity insurance’ or ‘insurance of fixed sums’, following the model of the Principles of European Insurance Contract Law. In the case of indemnity insurance, the insurance sum is assessed based on the indemnity principle as compensation for the loss suffered. For insurance of a fixed sums, where the amount of the loss cannot be quantified, the insurance sum will be predetermined in the insurance contract. Insurance of a fixed sum would only be allowed in case of accident, health, life, marriage, birth, or other personal insurance. This conceptual change would further align Slovenian insurance regulation with international market standards.

 

Liability insurance

In a liability insurance contract, the insurer undertakes to compensate the injured party directly for damages caused by the insured. The current regulation of liability insurance under the OZ is deficient and rudimental, as it contains only two short articles. In particular, the concepts of (i) the insured event and (ii) direct claims of the injured party require more precise definitions. Presently, the OZ does not provide any details on these topics. It is currently proposed to change the concept of direct claims of the injured party, according to which the primary beneficiary of the liability insurance contract would be the insured, as in the case of other property insurance, rather than the injured party, who is not a party to the insurance contract. The injured party would only be a secondary beneficiary if the law specifically recognises this position.

 

Bonus and malus system (comparable to the no-claims bonus system in common law jurisdictions)

After entering into an insurance contract, the insured is more likely to omit certain precautions due to the availability of insurance. With the bonus and malus system, insurers encourage the insured to behave in a careful and responsible manner. Currently, the issue of bonuses being considered when switching insurers is not regulated, and since insured individuals frequently switch insurers, the proposed reform requires the insurer to consider the insured person’s past claims record with other insurers.

 

Claims exceeding of the sum insured

An insurance company’s liability is typically limited, and in cases where a single insured event causes aggregate damage to different victims, the losses can often exceed the sum insured. The current regime does not address this situation. The proposed regime would ensure that all victims are treated fairly by proportionally reducing the pay-out to each victim.

 

Group insurance

Since contracts for group insurance are already widespread in other European countries and are not yet regulated by the Slovenian OZ, the proposed regulation includes a chapter on group insurance.

With these proposed reforms of insurance law, Slovenia will become a more attractive jurisdiction for insurers to underwrite risks in this region. If you have any questions on the above, please do not hesitate to contact the authors.