Read the article published on 17 December 2010 (in French)
WHAT IS IT ALL ABOUT?
When you take out an insurance policy, your risk continues over time, therefore, the policy must have a certain continuity too, usually on an annual basis. This clause is called tacit renewal, because the contract renews "automatically", without either of the two parties being obliged to act. This renewal happens at a pre-determined date, calculated by deducting the "notice period" (most often expressed in number of months) from the anniversary date of the contract.
THE INSURANCE CODE (FRANCE)
Despite this perpetual system, the French regulatory texts have allowed for a certain number of cases where you can interrupt your policy's mechanism during the insurance period:
- if one of the following events occurs, a three month notice period applies (article L 113-16 du code des assurances) :
• change of registered address;• change of marital status or situation;• change of profession;• retirement or ceasing your activity.
- if the insurer cancels another policy of the insured after a claim (article R 113-10 du code des assurances);
- by the liquidator or authorized debtor, un case of bankruptcy, within the three months following the court;
- by the inheritor, the acquirer or the insurer if the insured transfers the ownership of the assets covered by the insurance policy (article L 121-10 du code des assurances);
- immediately :
• if the insurer looses its license (article L 326-12 du code des assurances) ;• if the assets covered by the insurance are requisitionned (article L 160-6 du code des assurances) ;• if the assets covered under the insurance policy are lost, be it by insured event or not (article L 121-9 du code des assurances).
The insurer also has rights, for instance, in case of increase of risk and/or in case of false declaration/omission.
The "loi Châtel" has since modified insurer obligation, because not only it obliges them to notify the insureds (natural persons) of the possibility to not renew not more than 3 months before and at the latest 15 days before the last day available to cancel. If the insurer does not respect this, you have a additional 20 days after having received the annual bill, however, if it is not received before the anniversary date, you can cancel your contract at any time, without penalty.
INSURED ADVANTAGES
- Not having to think about renewing the contract
- Not having to renegotiate the contract (submit insurance proposal forms)
- Being able to budget from year to year
- If the insurer wants to cancel or significantly modify the terms and conditions, the insurer is obliged to communicate its position in advance of the renewal date, which leaves time for the insured to find anther solution.
INSURER ADVANTAGES
- Not having to think about renewing the contract
- Not having to administratively or technically "manage" the renewal
- Being able to budget from year to year, allowing the constitution of a client "portfolio"
- If the insured wants to cancel or significantly modify the terms and conditions, in the insured is obliged to communicate its position in advance of the renewal date, which leaves time for the insurer to react.
It is worthy to note that the advantages for both sides are of similar origins.
CONCLUSION
Tacit renewal has a reason for existing that applies to all parties, you must just know for what it is used and how it functions, to better be prepared for the multitude of situations of daily life that could happen, necessitating a desire to renegotiate the insurance policy.
if your risk decreases and the insurer refused to reduce the premium accordingly (article L 113-4 du code des assurances);
