Research About The Insurer’ Contractual Right To Terminate

Since Roman law period the idea of contract freedom has gradually evolved intoa civil principle. Since the generation of this principle, it has received the universalrespect of the community, but as the change of circumstances the principle of contractfreedom doctrine begins to be contrary to the contract justice. In order to protect thecontract justice, the right to rescind the contract emerged. Insurance contract can beconsidered as a special type of contract as the right to rescind it is very different fromthat to rescind other kinds of contracts. In the theoretical support of the principles ofutmost good faith and the price equality, the "Insurance Law" confers policy holdersthe right to rescind the contract without restrictions but make some strict limits to theright of insurers to rescind the contract.Base on the two versions of "Insurance Law" in1995and2009, China’sinsurance legal system has gone through a continuous improvement process. Theexisting "Insurance Law" can be considered of a milestone in the role to improve theright of insurers to rescind the contract. The existing "Insurance Law" regulates theright of insurers to rescind contract in the two ways, exercise conditions and limitingconditions. The most two important conditions in the seven exercise conditions arenon-fulfilling the duty of truthful account and a significant increase in the criticalityof subject-matter insured. On the basis of the original law legislators added somewords like “gross negligence”,“be sufficient to affect”, and “obviously” whicheffectively limits the right of insurers to rescind the contract. The new exerciseconditions are some losses in subject-matter insured and the termination andnon-reinstatement of rescinded insurance contract. These two terms play an importantrole in supplementing the exercise conditions of right to rescind contracts. In the new“Insurance Law”, the most important highlight for the right to rescind contracts is theadding of limiting conditions of rescinding right which include the following threeimportant points.1. Waiver and estoppels. When policy holders reasonably rely on the wrong meaning of what the insurer said, the insurer cannot turn back and nolonger have the right to rescind the contact. This way can effectively compensate thedefect that policy holders do not have enough professional knowledge and suppressthe dominant position of insurers.2. Scheduled period. When insurers got theopportunity to rescind contracts but they did not take it in the following thirty daysthey no longer have the right to rescind the contract.3. Incontestable clause. If it hasbeen more than two years since the establishment of contracts, insurers could notrescind the contract. This clause greatly enhances the long-term stability of insurancecontracts in terms of life insurance and protects the legitimate rights and interests ofinsurance counterparty. These provisions have played a positive role in improving theimage of China’s insurance industry.However, the amendment of current "Insurance Law" to the system of rights torescind insurance contracts is still a bit hasty and inadequate.1. Lack of rigor in theuse of vocabularies.“Gross negligence”,“be sufficient to affect”, and “obviously” areon behalf of these vocabularies. These vocabularies are difficult to be identified andmanaged in the practical operation and can easily lead to the departure from theoriginal intents of legislators.2. Obscure provisions to protect the duties of thesecurity of subject-matter insured. The legal effect levels and degrees, whichinsurance counterparty should follow when they fulfill safety obligations, are obscureand cause complications to both parties of insurance contract in practice.3. Thesubject of duty of informing “the significant increase of criticality” does not includeone of the contract parties-policy holders.4. The reference to the foreign system ofthe insurers’ right to rescind contracts is not scientific enough. Especially theprovision about “knowing state” of estoppels lacks of considering the faults ofinsurers; the applicable scope of the incontestable clause is too large; Lack ofexceptions in the incontestable clause and so on.5. The starting point after thecontract reinstatement for deraignment period is not clear. The academic circle hastwo different perspectives, re-calculation of starting point and accumulativecalculation for deraignment period. when the law does not expressly stated, we doesnot know how to use it in actual. These have led to the insurer can not use the right in the exercise, in some cases, n some cases, insurance contract rescission is practicallyinvisible. Therefore, China’s insurance contract rescission system still needs furtherimprovement.First of all, in the" insurance law" expressly insurance contract rescission systemlegislation principle--the principle of utmost good faith and the benefit balanceprinciple. The two principles are all insurance contract theory, in the absence ofspecific rules can be based on the two principles to regulate both the conduct of theparties. Secondly, according to the above questions to improve the insurer exercisingthe right of contract rescission terms and conditions. For example, let more rigorouslegal terms；Let the security obligation of legal norms the effectiveness level moreclearly；" Dangerous levels increased significantly." the main scope of the obligationof greater；Incontestable exceptions；Contract reinstatement of the incontestableapplicable provisions of more reasonable，and so on. Once again, must strengthen thedisciplinary system of insurance agents. Insurance agent fraud, concealment directlyaffect the insurer exercising the right of contract rescission. Thus the originaldisciplinary system on the basis of further strengthening, and the standardization.Only in this way, we can usher in the insurance industry real prosperity.