On Insurer’s Pre-contractual Duty Of Disclosure Of The People’s Republic Of China

Pre-contractual duty of disclosure means that insurers shall explain the content and articles of insurance contract to prospective policyholders before the conclusion of contracts. It also includes other duties, such as providing documents, warning about inconsistencies in the cover, making some suggestion and notice to prospective policyholders. The said duty of Chinese insurers is embodied in the Article 17 of Insurance Law Of The People’s Republic Of China. But because of some legislative defects, confusion and arbitrariness exist when applying this article. The academic circle saw a general debate on the understanding of the duty. Therefore, to give a theorical description of this duty and to find a reasonable legislation approach is of great value.This dissertation consists of introduction, text (six parts) and conclusion. The introduction is mainly about the topic selection, the significance of this research, and the state, thoughts, methods, innovation point and shortcoming of the research.Chapter 1 is about the rise of the pre-contractual duty of disclosure in civil law. The contract law is based on classical transactional mode:contract can only be concluded under parties’ free will. At that time, the fundamental point of legislation was to prevent parties from mistake, fraud, misleading and undue influence forms. Therefore, there was no duty of disclosure before the conclusion of contracts. But with the fading of classical trade mode, consumers often enter into contracts absent of their true will, under an information asymmetry, to which the traditional contract law can’t regulate properly. In order to change the situation, the merchants in strong position shall disclose, to help consumers conclude contract at their will. That’s the theoretical basis of this thesis.Chapter 2 is about the examples of foreign countries’ legislation approaches about insurer’s pre-contractual duty of disclosure. There exist three legislative patterns:The reasonable expectation doctrine of Anglo-American law ------indirect mode; "documents supply, explanation, suggestion and notice" of European insurance contract law------the ideal mode; and the public law mode, namely positive disclosure and negative disclosure, represented by Japanese insurance law. Such legislative achievements give us more choice and technique resources.Chapter 3 contains the systems and theories on Chinese insurer’s pre-contractual duty of disclosure. We find that the law system turn into alienation during its practice and the theorical arguements constantly exist as one-way conversation. The author believes that only with empirical methods can we explore the root of these problems.Chapter 4 is about the judicial fate of insurer’s pre-contractual duty of disclosure in China. Through the research and statistics of court verdicts, it is found out that the courts attitude towards Article 17 can be divided into three directions:strictly position, revised position and sidestep position. A further exploration indicates that all of these positions contain major defects beyond the social tolerance. Article 17 can not be applicable in judicial practice, so the review of the legislative issues becomes inevitable.Chapter 5 discusses legislative issues thoroughly. There are following mistakes in Chinese insurance law:too much requirements to insurer, logic errors of provision, legislation cuting from the commercial practice, no independent reponsiblity of insurance assitants, lacking equity of consideration and defects in legal system of protection. The lawmakers try to ensure policy-holder’s right to know, to make rational insurance choice, thus realize consensus between the parties. But linking the validity of contract terms with the insurer’s pre-contractual duty of disclosure sets a new judgement of the validity of contract terms and thus interferes with the theory of contract consensus.Chapter 6 discusses how to perfect and adjust the law system. The author thinks that the duty of underwriter’s pre-contractual disclosure should be shifted to the law governing insurance business. In this field, we can set an ideal standard of insurer’s duty consisting of "documents supply, explaination, suggestion and notice" (like the ideal mode of European insurance contract law). Insurer’s duty may be adjusted according to different trading patterns with a more strict supervision of insurance business.Besides respecting current rules of contract law, we need to make some supplements and adjustments in this field:firstly, if the parties reach accord between them, contract clause (including exemption clause) bind the insured. Secondly, if an applicant makes mistakes, the insurance contract can be revocable. Thirdly, if insurers defraud or mislead policy-holders, judges shall expand/adjust the insurance coverage. Fourthly, Because it is too difficult to affirm insurer’s fraud or misleading, policy-holders shoud be entitled to the right of rescission. Since few consumers pay attention to the details of contract after purchasing insurance, which limits the effect of the right of rescission. So the reasonable expectations of applicants, insured and in some instances, the third party beneficiaries, shoud be addressed. Also, contract construction principles and methodology shall be properly applied. This is an overall system adjustment based on the traditional theory of civial law, takeing the peculiar charateristic of insurance contract into consideration and the foreign countries’ legislation approaches as reference.