Almost two years ago I published an article here about the state of affairs after the judgment of the ECJ (NN/Van Leeuwen) around investment-linked insurances, also known as “profiteering policies”. Meanwhile, this year judgments have been published of the District Court, the Court of Appeal and the Appeals Committee of the Kifid (The “Committee”) in this regard. Remarkably, when reading these judgments it can be gathered that there is not one single clear line between them. This gives enough reasons to once again take stock and to provide a short overview of the state of affairs in the “profiteering policies file”.
The first judgment to be discussed is the judgment of the Court of Appeal of Den Bosch dated 2 May 2017. In this case, brought against ASR, the holder of a mixed life insurance policy complained about the disappointing results – the proceeds from the insurance appeared not to be sufficient to repay the loan after ten years. The insured complained, amongst other things, that ASR informed her insufficiently and incorrectly about: (i) the administrative expenses, (ii) the premium for the term life insurance, (iii) the policy fees, (iv) the “difference selling/bid price” costs, and (v) other administration fees. The insured primarily claimed nullification of the agreement on the basis of error, and alternatively damages for breach of contract and/or unlawful acts.
In the first instance the Subdistrict Court found for ASR. In the appeal the Court of Appeal did not get to the substance of the claims of the insured: the Court of Appeal tested the insurance terms and conditions against Section 6:233 preamble and under a of the Dutch Civil Code (“DCC”) (the section referred to relates to the question of whether or not the terms and conditions are unreasonably onerous). Next, the Court of Appeal concluded that the stipulations with regard to the costs under (i), (ii) and (iii) were not unreasonably onerous. According to the Court of Appeal, there was nothing wrong with these stipulations.
Apparently, however, this was not the case with the stipulations relating to all other policy fees (iii, iv and v). These stipulations do not stand the test of Section 6:233 DCC. Throughout the term of the insurance, the insured would pay an amount of approximately EUR 3,000 for such fees (still to be increased with the administrative expenses and the premium), against an amount of money put in of EUR 13,000. The Court of Appeal ruled that such stipulations disrupt the balance between the parties considerably, at the consumer’s disadvantage. ASR knew or ought to know that average consumers who are reasonably well informed and reasonably observant could not understand that these costs would be this high. All this in view of (i) the cumulative impact of the stipulations, (ii) the complicated wording thereof, and (iii) the spread-out presentation of the stipulations.
As has been done until now in each investment-linked insurance case, the insurer brings forward as a key defence that it has observed all laws that applied at the time with regard to the provision of information to the customer. The Court of Appeal, however, does not acknowledge this: the general terms and conditions were unreasonably onerous with regard to the above-mentioned. According to the Court of Appeal, the fact that the insurer complies with the rules with regard to obligations to inform ‘does not justify a practice in which unreasonably onerous stipulations are used at all’.
Insufficient Provision of Information
After the judgment of the Court of Appeal of Den Bosch, on 22 June 2017 it was the Committee of the Kifid’s turn to to express an opinion on complaints about “hidden” costs of a mixed life insurance. The insured complained that when taking out the insurance the insurer informed him insufficiently and incorrectly about the “initial costs” connected to the insurance and the effects of leverage and capital erosion of the premium of the life insurance cover.
With regard to the initial costs the Committee found for the insured. According to the Committee, the insurer chose to only provide extremely sketchy information in the offer and insurance terms and conditions about the costs to be charged and it did not mention the initial costs. The Committee ruled that the insurer must bear the consequences of this choice. Not only were the costs mentioned simply not agreed upon, according to the Committee, but the insurer had not complied with its obligations to inform either, which obligations arise from (European) rules and regulations, especially from the Regulations governing the 1994 Provision of Information to Policyholders (Regeling informatieverstrekking aan verzekeringnemers 1994 (“Riav 1994”)).
The insured also complained about the adverse effects of the effects of leverage and capital erosion of the investment-linked insurance: if no return on investment of 6% or more was achieved on the money put in, the term life insurance would be terminated prematurely. Also in this case the Committee found for the insured. The insurer should have pointed out this risk to the policyholder on the basis of the rules and regulations applicable to insurers at that time (Article 2 paragraph 2 under b Riav 1994). Incidentally, the Committee added to this that this also arises from the additional effect of the requirements of reasonableness and fairness. In the Committee’s view, this way a so-called additional obligation to inform remained within the boundaries of the judgment of 29 April 2015 of the ECJ.
Therefore, this judgment was also to the insured’s advantage, were it not that the stipulations concerned were not tested at all against Section 6:233 preamble and under a DCC in the judgment of the Committee: the basis used by the Court of Appeal of Den Bosch and the Committee appears to differ.
Third Negative Judgment for Insurers
On 28 June 2017 it was the Court of The Hague’s turn to express an opinion on a case instituted against Aegon by the association Vereniging Woekerpolis.nl and three customers. This resulted in a third (partly) negative judgment for insurers. The policyholders reproached Aegon for providing incomplete and incorrect information about possible returns on investments on their investment-linked insurance and about the costs and term life insurance premium that they had to pay for the insurance.
With regard to the costs the Court found for the policyholders: the insurer provided the customers with insufficient information about investment charges and the amount of the term life insurance premium. Aegon – without having reached consensus in this regard – unilaterally determined the amount of these costs and this is not acceptable. So far, the judgment is still consistent with the Committee’s judgment. However, according to the Court, the reproaches with regard to the model return on investments do not hold water – the Court is of the view that the insurer has complied with the rules and regulations applicable at that time with regard to provision of information. Also with regard to the so-called “crash risk” (the risk that a fall in price results in the final capital not being achieved anymore) the Court ruled that there was no additional obligation to inform: this risk is characteristic of the investment risk that the policyholders have taken willingly and knowingly.
Judgment of the Court of Rotterdam Boost for Insurers
Although the judgments discussed above seemed to be negative for the insurers, on 20 July 2017 the Court of Rotterdam chose to steer a different course in a class action of the representative body belangenvereniging Woekerpolis.nl against Nationale-Nederlanden (“NN”). Also in these proceedings the policyholders complained that the insurer had informed them insufficiently about the costs and investment risks of investment-linked insurances, and that the stipulations in the general terms and conditions that relate to these subject matters would be unreasonably onerous.
The Court, however, went fully along with the line of defence of NN: the insurer has complied with the rules and regulations applicable at that time and has explained the policies in a correct manner with accompanying model returns on investments. All costs and premiums were included therein. Since the rules and regulations with regard to the provision of information have been met, the consumer is sufficiently protected and it cannot be ruled that the same contractual stipulations are unreasonably onerous pursuant to the European Directive on unfair terms in consumer contracts. In these respects the judgment fully contrasts with the above-discussed judgments.
To conclude, with regard to the “crash risk” as a result of the effects of leverage and capital erosion, the Court of Rotterdam ruled – just like the Court of The Hague – that this is a characteristic of the investment risk: in the Court’s view, customers who bought an investment-linked insurance deliberately took the risk that prices can go down.
The judgment of the Court of Rotterdam is a fine boost for insurers – where the Court of Appeal of den Bosch, the Court of The Hague and the Committee (partly) found for the aggrieved customers and claim clubs, the Court of Rotterdam ruled that the insurers have complied with the rules and regulations applicable at that time and that investors should bear the investment risks they took themselves. The series of judgments is, however, not very clarifying: there where they do agree, other statutory grounds are used to give reasons for their decision.
What also attracts the attention is that the complaints board broadly interpreted the duty of care and the obligation to inform, whereas the Court and the Court of Appeal looked at the rules applicable at that time that give a much more limited interpretation of the obligation to inform.
To be continued…
Various proceedings of the claim clubs, for instance those against Reaal (currently Vivat) and against ASR, are still pending. The claim club Woekerpolis.nl has already indicated that it will lodge an appeal against the judgment of the Court of Rotterdam. It looks like it will take some time until the “profiteering policies file” can be closed.