Changing The Insurance Sector One Legislation At A Time
In your insurance work, what are the matters you commonly deal with alongside your clients? How do you help them avoid litigation in this segment?
I provide a full range of services to our national and international clients in the insurance industry: we assist them on a daily basis at the design stage, in drafting new products or introducing adjustments in existing products, we help them at the claims-handling stage, in responding to complaints, we represent clients in insurance litigation, and we assist them in their dealings with the regulator.
We also provide in-depth knowledge of sector-oriented advice in insurance-related areas, such as tax, competition, employment or data protection. The problems that arise in such areas are often not insurance-specific, but they are problems which insurers have to face, and it helps when their legal advisers know the sector inside out.
Currently one of the most sought-after expertise within our team is that of data protection, in view of the new EU General Data Protection Regulation.
The Insurance Distribution Directive (Directive (EU) 2016/97) is also at the onset of quite a few requests for advice. New product oversight and governance requirements will apply as from 1 October 2018. Insurers must prepare for this and we are prepared to help them get through that process.
This is also how we help clients avoid litigation in this segment. Compliance is our main focus. However, that is naturally not always possible. Sometimes litigation is unavoidable. Oftentimes we are only called upon to assist when a claim has already been filed in court against our client. Even then, a positive aspect of working in insurance is that insurer clients are usually very open to settling a case when it makes business sense to do it. So, it helps if one provides them with the numbers to support their decision.
And then there is also litigation that is initiated by insurers, such as subrogation claims.
I should add that we also take part in insurance litigation on behalf of the insured or an injured third party against an insurer. We are often prevented from doing so by our strict conflicts of interests, rules and policies, but we will happily assist when the insurer in question is not a client.
You have drafted legislation in the field of insurance law in the capacity of adviser of the Portuguese Government; can you share with Lawyer Monthly the challenges involved with this?
The most relevant legislation I have helped create was related to the collateral assignment of life insurance in home loans. Ideally no significant legislative measures should ever be introduced, in any field, without the prior study of their potential socio-economic impact. But the resources are not always available. It is hence vital for those drafting legislation to be extremely aware of the sector so that such impact may be anticipated. Well-intentioned changes often backfire due to their authors’ insufficient knowledge of the sector they are attempting to interfere with. In my case the main purpose of the measures was consumer protection. The main dangers of such an attempt are twofold: one could get carried away and draft legislation that is so protective of consumers that enacting it becomes unrealistic; and one could make it more expensive for insurers to distribute the relevant insurance, which would naturally result in policyholders having to pay higher premiums for the insurance. One should tread very carefully so as to avoid such dangers.
How would you say this legislation changed the insurance sector?
I would not go so far as to say this legislation changed the insurance sector, but it did play a relevant role in the improvement of life insurance products specifically designed to be used as collateral in home loans. Before such legislation existed, policyholders would often end up paying more than strictly necessary, because their debt to the bank would decrease with each monthly payment but the insured sum would often remain the same. This is no longer the case. On the other hand, this legislation also attempted to stop product bundling. Such measures were unfortunately as not as successful. We live and learn.
Morais Leitão, Galvão Teles, Soares da Silva & Associados – Sociedade de Advogados, SP, RL.
Rua Castilho, 165, 1070-050 Lisboa – Portugal
Tel.: +351 213 817 400
Fax: +351 213 817 499
My name is Margarida Lima Rego. I am associate professor of private law at the School of Law of NOVA University, Lisbon, and of counsel at the Portuguese law firm Morais Leitão, Galvão Teles, Soares da Silva & Associados, SP, RL, where I head the Insurance and Reinsurance, Insurance Mediation and Pension Funds Team.