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Insurance companies may, as a general rule, charge policyholders
for early surrender of their investment as long as the amount
charged is justified by the costs involved.
This ruling by the Court of Appeal in Warsaw affects virtually
all unit-linked life insurance policies in Poland. Some insurers
charge 100% of the policy value for surrender in the first year of
the policy, due to relatively high remuneration of agents selling
that type of insurance.
On 4 February 2011, a clause containing the early surrender
charge was entered in the register of unfair contract terms in
consumer contracts. Under Polish law, businesses may not use
clauses appearing in the register in their model contracts and
general terms and conditions.
However, the Court of Appeal in Warsaw has ruled, while
examining similar clauses used by another insurance company, that
the imposition of an early surrender charge is not necessarily an
unfair contract term, as long as the amount of the charge can be
justified by the costs connected with early surrender that are
incurred by the insurance company (ie costs of execution and
administration that would have been covered by premiums paid after
the date of early surrender).
The Court's decision is final.
This article was written for Law-Now, CMS Cameron
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to circumstances prevailing at the date of its original publication
and may not have been updated to reflect subsequent
developments.
The original publication date for this article was
16/07/2012.
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