On The Insurance Agent's Explanation Obligation

In the field of insurance law theories, controversies remain in the theoretical problem of explanation obligation. Due to the evident consumptionalization of insurance business , the large gap of business capability between insurance agent and policy-holder and the unbalance of insurance knowledge and product knowledge between parties, there is a lack of an equal consulting mechanism in making insurance contracts. Policy-holders either accept the conditions listed in the contract or do not make the insurance contract and they have no room to bargain. Even if they want to bargain, they could not do it for lack of experience and necessary expertise in law knowledge. Though using format contract, insurance agent has actually restrained the opposite party's free idea expression and covered the essential unfreedom though the formal contract. In order to illuminate such defects, Insurance Law of PRC (Insurance Law for short) prescribes in its 17th and 18th entries the explanation obligation of the insurance agent which requires the insurance agent to illustrate the content of the contract to the policy-hold when making a contract, otherwise, the contract is invalid. This is to enforce the insurance agent's implementation of explanation obligation through the enforcement law, so as to reverse the unbalance in contract making.According to the 17th and 18th entities of Insurance Law, insurance agent's explanation content include common insurance contract entries and duty-exemption entries and the former is the most basic content of insurance contract. According to 19th entry, insurance contract should include the following: name and address of insurance agent, policy-holder and insurant, as well as beneficiary of life insurance; insurance object, insurance duty and duty-exemption, insurance period and the beginning time of insurance obligation, insurance value, insurance sum; premium and way of payment, insurance compensation and way of payment, contract-violation duty and dispute settlement, entries of Year/Month/Day of contract making. In line with this, insurance agent should explain the following to policy-holder: property of insurance contract, relationship, form, premium, sum, scope, and exemption duty, exertion of plea right and validity period of contract.In an insurance contract, policy-holder and insurance agent can freely make duty-exemption entries which are protect by law as long as they do not break law, administrative regulations and public interests. In practice, duty-exemption entries are mostly used to exempt the insurance agent's duty. Both 17th and 18th entries of the Insurance Law have pointed out the importance of duty-exemption in explanation obligation."Explicit explanation"in 18th entry refers to entry concerning duty-exemption of relevant insurance agent in insurance contract. Insurance agent has the obligation to make a comprehensive , objective and real explanation to policy-holder. When explaining, insurance agent should not only remind policy-holder to reader duty-exemption entry but also should make a thorough explanation concerning the content, items, purposed and application of the entries.Explanation obligation prescribed by 17th entry is usually interpreted as aiming at all the entries in the contract, and only prescribe what should be explained but not the lawful consequence if there is no explanation. The explanation obligation prescribed by 18th entry is aiming at duty-exemption entry in the contract, and out of consideration of protecting the interests of insurant and beneficiary, it proposed to insurance agent a noting obligation that surpasses that of ordinary people, namely, the insurance agent should explicitly explain the exception duty in the contract. However, what kind of explanation can constitute"explicit explanation"and whether explanation itself is a component of the contract is not prescribed. Such problems make the strength of duty-exemption entry at an unstable state, which is the direct reason for the occurrence of insurance contract tangle in judicatory practice, and is objectively bad for a stable contract relationship. Therefore, some people claim that this entry should be eliminated. Logically, 17th entry prescribes that"insurance agent should explain the contract content to policy-holder", which obviously includes explanation to the duty-exemption entry in contract. Since it is insurance agent's obligation to explain all the contract entries to policy-holder, no explanation or unreal explanation to any entry including duty-exemption entry should be considered as a violation of explanation obligation. Therefore, the prescriptions in 18th entry seem unnecessary.In essence, explanation obligation is to arrange the information collection duty for the two business parties, which suggests that the implementation of obligation is often before or during contract making. Once the contract is made, the rights and obligations of both parties have been fixed; therefore, there is no explanation obligation problem thereafter. Our Insurance Law has no definite prescriptions on the form of explanation obligation. In practice, it is often impossible to judge whether the obligation is implemented, which concerns the validity of contract. In practice, there are generally three ways for the implementation of explanation obligation: (1)written form, that is to print major contract entries at the back of insurance sheet and add written explanation for duty-exemption entry and related terminologies; (2) when policy-holder is doing policy procedure, insurance agent inform policy-holder the content and connotation of duty-exemption entry in spoken form; (3) when policy-holder ask to make contract, insurance agent provide a written explanation for him to read, and if there is any problem, insurance agent should make timely explanations and take down valid notes. If it is done in a spoken form, it will be hard to take evidence when entanglement occurs later. Therefore, a combination of written and spoken form will be better.Our Insurance Law only prescribed the lawful consequence for insurance agent's no explicit explanation but has no prescription for contents other than duty-exemption entry. As for this problem, some scholars in our country propose that insurance agent should assume lawful consequence if he provides no or unreal explanation.After in-depth analyses and discussions on the value foundation , implementation and violation consequence of explanation obligation, this paper points out two major limitations in insurance agent's explanation obligation system: the conflict between insurance principle and policy-holder's interests and poor operation possibility. Based on a review of related legislation both home and abroad, this paper proposes the introduction of policy-holder's observation period system, and suggests"definite explanation"standards prescribed by law. In addition, explanation obligation should correspond to disadvantage explanation principle in order to create a rigor and harmonious law system.