Life insurance Bill based on clarity, competitiveness

The House of Representatives yesterday unanimously gave a second reading to amendments to the Civil Code on life insurance contracts.

Parliamentary Secretary Carmelo Mifsud Bonnici said the guiding principles in the drafting of the Bill were liberalisation, clarity and competitiveness to benefit society at large and Maltese insurance companies.

One of the last speakers in the debate, Parliamentary Secretary Tony Abela said this Bill would clarify various problematic areas regarding life insurance. It would give married people the possibility of taking out separate life insurance policies which would not form part of the community of acquests. And a spouse who took out a policy before marriage could also have the policy kept out of the community of acquests.

This Bill made it easier for the policyholders to designate beneficiaries and to change their beneficiaries as they wished, without reference to any will. Indeed, the life insurance policies would be kept out of succession laws.

This Bill also included provisions on survivorship policies which were especially beneficial for business partners where the partners indicated each other as the beneficiaries, better enabling them to continue the business.

The Bill rightly laid down that the people who were to be insured had to indicate their consent and awareness of the possible consequences. This was important to avoid abuse such as those one sometimes saw on television.

It was good, Dr Abela said, that this new law was very similar to the laws in continental Europe and the UK, which were Malta's main trading partners in such issues. This would benefit Maltese insurance companies.

This Bill was another important element in the financial services package. The financial services industry was growing steadily and would soon become the second most important after tourism in revenue terms.

At the same time the government was also working on a system of sustainable retirement pensions based on a guaranteed government pension supplemented by other funded pension schemes administered by private companies.

Dr Abela underlined the importance that insurance salesmen were well versed in the legislation. He also suggested the holding of information seminars for businessmen and others who may be interested in taking out a life insurance policy.

José Herrera (MLP) welcomed this Bill as a means to avoid abuse and disappointment. It was good that this Bill would amend the Civil Code, which was the law which dealt with contracts.

It was good that the Bill defined what was an insurable interest. In the past in the UK people used to be insured without their knowledge or consent, then murdered so that the murderer could receive the benefits of the policy.

It thus also made sense that where the contract of insurance referred to the life of a third party, his or her consent was required.

He could not understand, however, once such consent was given, it was irrevocable. He felt such a right should exist.

Interjecting, Parliamentary Secretary Carmelo Mifsud Bonnici said the content could be revoked when the policy actually said that such was allowed in terms of the policy.

Dr Herrera said there could be circumstances where the original reason for the insurance policy no longer applied, such as when insurance was taken out by a creditor, in which case revocation by the debtor should be allowed once the debt was paid.

He also asked why the life cover on children was being capped at Lm20,000.

Dr Mifsud Bonnici said children could be assured from as young as six months. This was a major risk for insurance companies, who did not conduct medical examinations on children before issuing a policy, hence the need for capping.

Dr Herrera said that once a policy could not be transferred without consent, could a policyholder sell his policy?

Dr Herrera also observed that when the purpose of the designation was for the provision of maintenance of the beneficiary or as a pension, funds in the policy could not be seized in the event that the beneficiary became bankrupt or insolvent. Nor would they be liable to attachment under a garnishee order. Was this fair, particularly when substantial amounts were owed to creditors and the policy also amounted to large amounts? He felt that a percentage of the amount should be liable to seizure, keeping a balance between economic and social rights. Could a person be insured more than once?

Dr Mifsud Bonnici said there were no provisions on this.

Continuing, Dr Herrera said he could not understand how the Bill would allow the parties to choose the jurisdiction which would govern the insurance contract, this even when the policyholder was Maltese and domiciled here and the insurer was Maltese with assets in Malta.

Winding up, Dr Mifsud Bonnici said this Bill would be beneficial to the financial services industry, the people in general and also the legal sector, which would now have more clear rules.

The guiding principles of this Bill were liberalisation, clarity and competitiveness, such that Maltese insurance companies would be able to compete with foreign companies and, ideally, have a competitive edge.

This Bill should not be seen as a precursor of the pensions reform.

Dr Mifsud Bonnici said the Bill did not prohibit anyone from taking out more than one life insurance policy since there could be different reasons for such policies.

Dr Mifsud Bonnici said the choice of jurisdiction would apply when, say, the insurer was French and wanted to be governed by French law. He hoped that legislation on the insurance sector would continue to be improved over the coming months.

The Bill was then given a second reading.