SWITZERLAND Law and Practice Contributed by: Peter Ch Hsu, Daniel Flühmann and Tiffany Ender, Bär & Karrer
under the insurance contract and may reclaim insur- ance benefits already paid together with default inter- est of 5%. Despite a breach of the duty of disclosure by the policyholder, an insurance undertaking may not terminate the contract under the circumstances described in Article 8 ICA – eg, if the insurance under- taking knew or should have known the incorrect or concealed fact or concluded the contract even though the policyholder did not answer a question (Article 8 ICA). If the insurance undertaking fails to comply with its information duty pursuant to Article 3 ICA, the policy- holder has the right to terminate the insurance con- tract by written notice (Article 3a paragraph 1 ICA). This right of termination expires four weeks after the policyholder becomes aware of the breach of duty, but in any case, at the latest, two years after the breach of duty (Article 3a paragraph 2 ICA). The information duties of the insurance intermediary are supervisory duties and their breach may expose the insurance intermediary to administrative and crim- inal sanctions, including punishment with a fine of up to CHF100,000 if the breach is committed intention- ally, and up to CHF50,000 if committed negligently (Article 86 ISA). Furthermore, this breach may also result in civil liability for the intermediary. 6.3 Intermediary Involvement in an Insurance Contract An insurance intermediary is either a tied intermediary or an untied intermediary (see 5. Distribution ). In an untechnical sense, tied insurance intermediaries are often referred to as insurance agents and untied insur- ance intermediaries are often referred to as insurance brokers, indicating the typical set-up of the contrac- tual relationship between the insurance intermediar- ies, the insurance undertakings and/or the policyhold- ers. However, the contractual qualification pursuant to Swiss private law does not always correspond with the qualification pursuant to Swiss insurance super- visory law. An untied insurance is in a fiduciary relationship with the policyholder and acts in the interest of the poli- cyholder (Article 40 paragraph 2 ISA). However, the broker’s remuneration/commission is often paid by
the insurance undertaking with which the policy is ultimately concluded. All other insurance intermediaries are deemed tied insurance intermediaries (Article 40 paragraph 3 ISA). The commission is typically priced into the insurance premiums the policyholder pays to the insurance undertaking. Consequently, from an economic per- spective, it is the policyholder that ultimately pays the insurance broker. This regularly entails potential con- flicts of interest which must be adequately mitigated by the broker. In this regard, the ISA provides for miti- gating measures (Article 45a and 45b ISA; see 12.1 Significant Legislative or Regulatory Developments ). 6.4 Legal Requirements and Distinguishing There is no specific statutory definition of the terms “insurance” or “insurance contract”. Based on prec- edent cases of the Swiss Federal Supreme Court, the following five elements characterise an insurance contract: • Risk Transfer: The insured persons must have an interest that they protect against a certain risk through the economic performance of the insur- ance undertaking. • Payment of a Premium: The premium is, in princi- ple, the price the insured (or the policyholder) pays in exchange for the performance by the insurance undertaking in the event that the insured risk mate- rialises. Features of an Insurance Contract Elements of an Insurance Contract • Performance by the Insurance Undertaking/Cover: The insurance undertaking must be under an obli- gation to perform to the insured or another benefi- ciary if the insured risk materialises. • Independence of the Operation: The insurance contract refers to an independent operation that is not an ancillary agreement or a mere feature or term of a non-insurance contract (eg, a warranty for a purchased good is usually not an insurance). • The final element is compensation of risks accord- ing to the laws of statistics (Systematic Business Activity).
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