The introduction of the Early termination (after one year) and its extension to supplementary health insurance contracts has significantly increased competition in individual insurance. This was the aim, and it can be said that, in this sense, the objective has been achieved. As a result, insurers have come under pressure as the lifespan of their portfolios has shrunk. Paradoxically, this has limited the appetite for these markets, since profitability has fallen. This has effect to increase underwriting rates in favour of lower (relative) indexations on portfolios. Risk carriers favour retention strategies over conquest. Some of these loyalty strategies were sought by the legislator:
- Pricing efforts on renewal ;
- Improved management quality, availability, information, reduced processing times, on-line services, services ancillary to insurance, etc. ;
- Loyalty bonus (guarantee bonus depending on the length of the contract).
On the other hand, this has increased the temptation to “hang on” to policyholders by waging a guerrilla war of legal formalism to refuse cancellations. Below is a non-exhaustive list of the “tricks” and legal arguments put forward to refuse cancellations where the customer’s intention to cancel is not in doubt :
- Wrong reason : The insurer refuses the cancellation because the reason given is not the right one, even though another legal reason exists. Here are a few examples of refusals for incorrect reasons :
- The classic: Cancellation is requested on the Early termination (after one year). The insurer or its manager expects a “‘Termination on expiry” reason because they Early termination believe that the Early termination (after one year) can only be requested from the day after the expiry date.
- More vicious: An Early termination (after one year) is requested for the day after the expiry date: Refusal because the request was made a month before, so it is made before the one-year expiry date, even though the requested cancellation date is after the expiry date.
- The absence of a cancellation date requested by the insured (whereas the insurer is obliged by the Early termination (after one year), if it applies, to cancel 30 days after the request).
- The worst: refusal to terminate because the request was made ‘too early’. For example, a customer requests an The worst: refusal to terminate because the request was made ‘too early’. For example, a customer requests an after one year on 24 March for 30 April. The insurer claims that the only possible cancellation date requested on 24 March is 23 April (give or take 1 or 2 days) and refuses to cancel.
This is compounded by other inelegant practices, such as not sending a letter of refusal to prevent the customer from requesting cancellation again, even though this puts them in a situation of double insurance for several months. Clearly, this drift was not the intention of the legislator, who, on the contrary, wanted to simplify the introduction of competition and make the process more straightforward (see, for example, the ‘3 clicks’ cancellation procedure, which reinforced this intention). It had respected the principle of pooling insurance over time by maintaining a minimum duration of one year for contracts. In the face of the authorities’ failure to put a stop to these dubious practices, the major insurers (companies, mutual insurers and provident institutions) pounced on the breach in a clumsy and illusory attempt to reduce their cancellation rates. This has led to a significant increase in this harmful trend, and has of course made it much more visible. The regulatory authorities (particularly the French Directorate for Competition, Consumer Affairs and Fraud Control (DGCCRF) and the Prudential Supervision and Resolution Authority (ACPR) are unlikely to ignore this for much longer and they are bound to crack down hard on this kind of practice. The big insurers of course have the most to lose from this, since the fines they face are generally much heavier. Attempting to justify these practices in court would be illusory, and there will be no way out. Clearly, this trend of trying to prevent customers from leaving by unfair means is harmful first and foremost to the players practice it :
- Serious damage to their image with their customers and the public ;
- Risk of severe penalties ;
- No real impact, or even the opposite, on the churn rate;
- Increased number of claims (and therefore higher management costs).
But this also has a disastrous impact on the image of the profession. The legislator has retained a minimum duration of 1 year for contracts to ensure mutualization over time and preserve the technical balance of contracts. Damaging the image of insurers can only encourage a populist response and a change in legislation that would cut back on this one-year period, which is, for all intents and purposes, essential.
