Application Of Incontestable Clause

Due to the fortuity of insured event, insurance contract has the nature of aleatory. Asymmetry of information between the insurance contracts parties may cause morale hazard easily. With a high requirement of honesty, it is therefore necessarily for both parties fulfill the duty of informing. Insured has the right to dissolve the insurance contract if insurer. Insurer may not have the insurance compensate due to untruthfully inform once the insured event happened, thus create economic difficulties, even cause interests’damage. Thus, incontestable clause has emerged in response to balance the interests’needs between the insurer and the insured.Incontestable clause has a long history from agreed terms to statutory provisions, from single insurance to multiple insurances; and is very important for the sound development of insurance industry, thus applied in insurance legislation all over the world. China’s insurance industry started quite recently, and developed at different levels, and the insured often holds mistrust attitudes towards the insurer. In order to curb the "lenient entry, stringent exit" phenomenon in insurance industry, incontestable clause has been introduced in China Insurance Law in2009, which is very important for China insurance industry development. But introduction of this provision is too simple, supporting system (such as exceptions) is imperfect, and legal environment is different, inherent defect of incontestable clause causes inconvenience frequently. This article proceeds from the legal basis of incontestable clause, and explores and elaborates applicable value of the incontestable clause; and uses foreign experience as reference. The author will give some effective suggestions on the development of the incontestable clause based on the current status of China.In more specific terms, this paper contains five parts.Firstly, the author makes an overall introduction (history and development) of incontestable clause. By distinguishing relevant concepts, confirms the intension and values of incontestable clause.The secondly part is focusing on the legal principle of incontestable clause; elaborates rationality and necessity from the utmost good faith principle, justice principle and the credit benefit protection principle, which can provide theoretical grounds to incontestable clause.Thirdly, this paper introduces relevant provisions and development trends in different countries, compares the advantages and disadvantages, and making recommendations to China’s clause.The fourth part focuses on applications of incontestable clause. The author uses rich experiences of other countries’ insurance industry, analyzes relevant clauses in China, investigate requirements and limits of incontestable clause based on the legal principle; for which could play a constructive role in practice.Lastly, a summation is made to generalize the theory and applications of incontestable clause in this paper; suggestions are proposed for further research and improvement.