When a prospective policyholder wishes to enter into an insurance contract with a particular insurance company, the latter has every interest in ensuring that the risk for which insurance is sought is as well assessed as possible.
Every insurance contract reflects, as it were, the existence of a risk in which the insurer intervenes and compensates if the risk event occurs. Just think of the intervention in case a house were to burn down. The potential burning down of the house is a risk where one is not sure if it will occur.
Risk assessment
Since insurance companies classically still aim for a certain profitability, assessing the risk profile and calculating premium is fundamental for them. In doing so, one starts classifying each prospective policyholder into a certain category ranging from good risks and bad risks according to the probability of the risk occurring. This classification, also called segmentation, is important for two reasons:
- One avoids that the good risks have to pay up and premiums for the bad risks;
- The insurance company obtains a good picture of the risks and avoids having only bad profiles in the portfolio.
This estimation and segmentation is classically done through all kinds of questions and information that the prospective policyholder has to provide. The Supreme Court stressed that the insurer, in turn, should not be passive, but should actively seek out the information itself.
The segmentation criteria differ according to the type of insurance. For instance, in the case of civil liability car insurance, the criteria will be as follows:
- age of the policyholder/driver(s)
- driving experience
- details of the vehicle
While in the case of life insurance, the insurer will consider the following criteria:
- age
- lifestyle
- health condition
Reasons for refusal
The key question that can be asked is whether an insurance undertaking may simply refuse a contract? The answer is as follows: based on the fundamental principle of contractual freedom, an insurance company may refuse to conclude a certain contract with a prospective policyholder, but must always give reasons for refusal.
Moreover, the refusal may not be based on the factors listed in the Anti-Discrimination Act of 10 May 2007 notably:
- age
- sexual orientation
- marital status
- birth
- ability
- religion or belief
- political opinions
- language
- health
- a disability
- a physical or genetic characteristic
- social origin or condition
One can depart from the above criteria only if there is a legitimate aim, the choice for the different treatment can be proven by actuarial data, and there is no other alternative left.
It is therefore legitimate to refuse a prospective policyholder because it appears that one has had many claims in the past. On the other hand, one may not refuse a contract because the prospective policyholder is of a certain social origin.
Has an insurer (wrongly) refused you an insurance contract?
If so, be sure to contact the lawyers at Wanted Law!