New life insurance provisions in the Civil Code

Parliament yesterday started debating a Bill to introduce the contract of life insurance in the Civil Code.

Parliamentary Secretary Carmelo Mifsud Bonnici said that although the insurance sector had long been in existence in Malta, there was no reference to it in the Civil Code and there had been various problems as a result.

One of the objectives of the Bill was to take life insurance policies out of the law of succession. The bill would make it clear that a life insurance policy was a contractual act. One major problem to date, which this law would seek to solve, was that several Maltese were electing to buy life insurance policies overseas. This bill would put Maltese legislation on a par with that of mainland Europe, thus enticing people to buy locally.

The Bill clearly established the rights of the policyholder in life and the beneficiaries after death and in certain other circumstances. It would therefore serve well in financial, legal and family aspects, as well as for new employment in the services sector.

The Insurance Business Act already regulated the workings of insurance companies, but had not tackled the contract itself. The sector was a fast-growing one that urgently needed regulation as it grew.

Dr Mifsud Bonnici said the Bill was presenting the possibility of insuring not only one's own life and those of family, but also those of third parties, subject to their approval. Policies that immediately came to mind were those concerning the lives of people working in industry, such as partners in business who insured each other's lives. The door was being thrown open to life insurance for long-serving employees in family-run businesses, in the sense that they could ensure their employers' lives.

Insurable interests could now also be taken care of through survivor policies, whereby a couple would leave each other the right to cash in on the policy on the death of one party or let the policy run to the end of the survivor's own life or attainment of a certain age.

The Bill also sought to make clear the identification of a beneficiary or beneficiaries through a new mechanism which was external to a will and testament.

In the case of married couples the Bill established a number of choices. The spouses could take out separate life insurance policies, each of which would regulate the affairs of the separate individuals. Such separate policies would be exclusive of the movable and immovable property that a married couple possess between them. This did not exclude the possibility of joint life insurance policies.

If one of the spouses held a life insurance policy before marriage, this would not form part of the property owned jointly by the couple unless so specifically stated by the first holder.

Certain circumstances could exist to make the pawning or surrender of a life insurance policy a necessity, leading to unclear possible outcomes.

The pledging of such policies was being made more simple so long as the beneficiary of the policy was kept informed of what was happening. This was a delicate and very technical sector that had long been crying out for clear regulation.

The relative mechanism would basically take one of two roads: either the policyholder could elect to sell off the policy by court auction, which usually rendered derisory amounts because of the lack of mechanism; or the policyholder could use the policy as collateral with debitors without losing out on its value.

For the first time ever the Bill was establishing insurance policies on the lives of children, which involved several considerations. At present such a policy could be taken out as early as the sixth month of a child's life. Now a policy would be taken out by either parent separately as administrator for the child, without the need for the other party's approval. This would involve even the lives of children born out of wedlock.

Such policies could only be made use of on the approval of the Second Hall of the Civil Courts.

The child would be the only beneficiary of the policy, without the possibility of involvement of any third party. When the child grew to adulthood he or she would take over the upkeep of the policy.

Dr Mifsud Bonnici said the amount of money involved in a minor's life insurance policy was being capped at Lm20,000.

The Bill was introducing the concept of international private rights, which was a legal mechanism to avoid litigation between parties living in different countries. These rights involved not only property but also the insurance and other sectors. One of the aspects considered during a conference held in Malta on The Hague Convention had been the potential case of a child being involved in a love triangle between two individuals of different nationalities who had got married in a third country. The conference had culminated in the Malta Declaration.

When the holder of a life insurance policy bought overseas passed away, questions inevitably arose over the rights of the heirs. The outcome in such a case would be regulated by the laws indicated as preferred by the original policyholder. If this preference was not made clear, the regulating law would be that of the policyholder's country of business or, more expressly if there were two or more such countries, the country where the holder's head office was situated.

Dr Mifsud Bonnici said a policy holder would be able to choose the beneficiary or beneficiaries of his policy on maturity or on death.

And as a life policy would not fall under succession duty, even if the beneficiaries declined the deceased's will, they would still benefit from the policy.

The mention of a beneficiary brought with it certain consequences and effects. It was being established that a beneficiary's share should be declared in writing but once this was done, the beneficiary would have a right for that money on death or maturity.

Dr Mifsud Bonnici explained that there were elderly persons who promised they would leave their carers a sum of money but did not and the carer then went to court asking for payment for services rendered.

In such cases, it would now be possible for the carer to be made beneficiary of a life insurance policy. But, of course, if the carer killed the policy holder, he would not benefit from that policy, which would immediately be terminated.

If the carer made an attempt on the life of the holder, the holder would have the right to strike off the beneficiary from the policy without the need for consent.

No garnishee orders could be made on money from life policies which established a life annuity for a sum amounting to double the highest pension in the country.

Dr Mifsud Bonnici said the new law would also regulate group policies. If a policy, for example, was being taken out for employees, certain requirements, such as the consent requirement, were being removed.

Dr Mifsud Bonnici was followed by Opposition justice spokesman Anglu Farrugia, who said the Opposition would back the Bill. His remarks will be reported tomorrow.