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Mortgage loan insurance: pay attention to the exclusion clauses

Each year, thousands of disputes are opposed to policyholders and insurers on the grounds, in particular, that some exclusion clauses in the borrower’s insurance are lacking in accuracy. In its 2021 activity report, the Insurance Brokerage points out the practice of too general a wording, depriving policyholders of the compensation to which they are entitled. These are diseases that cannot be objectified, repeated subjects of this imprecision. Disputes on the rise in 2021 In 2021, the Médiation de l’Assurance (LMA) received a record number of reports, around 20,000, compared to 17,350 in 2020, which already recorded an increase of 18% in one year. In 47% of cases, solutions favorable to the insured were found. This influx most often testifies to the difficulty that policyholders have in understanding their insurance contract. It is true that insurance regulations are renowned for their complexity. The main sources of litigation are: health insurance and mutual funds (24%) pension insurance contracts (23%) life insurance (20%) home loan insurance (13%) pension insurance (10%). As for the reasons for the disputes, their origin is mainly due to the total or partial refusal of compensation (39%) and to the management of the complaint / contract management (36%). The increase in postponements in 2021 is also explained by the entry into force of the modernization law of 2019 which requires the use of mediation or conciliation for disputes of less than 5,000 euros, or a significant share of cases submitted to LMA . Better public knowledge of the mediation system must also be recognized. Not to mention that, since the use of mediation is free, some users no longer hesitate to contact LMA, believing that their complaint could have been better managed by the broker or the insurer. The volume of mediation requests could also increase soon with the establishment of a faster referral procedure: today an insured can only turn to LMA after two negative responses from the insurer, including that of the claims office, or two months of silence on the part of the insurer in response to his request. Fuzzy exclusion clauses In its report published on 29 August, LMA warns that “it is not acceptable for the persistence in contracts of clauses declared illegal (sometimes for a long time) by the Court of Cassation”. The terms used in the general conditions are sometimes imprecise, for example in car or home insurance where the expression “lack of maintenance” of the vehicle or accommodation allows the insurer to justify an exclusion of the guarantee and therefore a refusal to pay compensation. The Insurance Code requires service providers to write clauses on the one hand with very visible characters, and on the other formal and limited (article L.113-1 Insurance Code), qualities that are lacking in some insurance contracts. The exclusion clauses must not be subject to interpretation. LMA cites the example of a clause that excludes mental illness, including nervous breakdowns, from the Temporary Total Incapacity for Work (ITT) guarantee. Putting on sick leave for a depressive state, the insured, covered by a collective mortgage insurance contract, was refused compensation. The jurisprudence has held that the expression “mental disorders” without any precision does not allow the exclusion clause to be formal and limited: the insured cannot know precisely the cases in which he can be covered or not. Another example of an imprecise clause concerns back pathologies. A clause that excludes “disability and disability (…) arising from low back pain, (…) and other back pain” is not formal and limited as a whole if part of this clause is not is not (more backache) . Psychological and psychiatric disorders, as well as back conditions, qualify in the borrower’s insurance as non-objectivable diseases and may be subject to redemption by exclusion against an additional insurance premium from the borrower. Check out our guide to borrower insurance to find out all about this essential coverage as part of a mortgage. LMA also mentions in its report the implementation of the Lemoine law of 1 June 2022. market practice, which until then had been based on the notion of risk. There is no doubt that LMA will have to analyze the new exclusions or questions that insurers will be asking and are already asking about the behavior and lifestyle of borrower insurance applicants.

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