Jordanian Parliament Approves Articles of Insurance Contract Law

Jordan's Parliament has approved 13 articles of the draft Insurance Contract Law, edging closer to a comprehensive overhaul of the nation's insurance sector regulations.

The House of Representatives, in a session led by Speaker Mazen Al-Qadi and attended by government officials, greenlit articles 13 through 25 of the proposed legislation. This follows an earlier session where the first 12 articles were approved.

A key amendment was adopted regarding Article 13, pertaining to cases of premium payment default. The approved text stipulates that an insurer can request contract termination with compensation if a policyholder fails to pay an insurance installment within 30 days of receiving a payment notice. An addition was made to clarify that compensation can be adjusted “wholly or partially as the case may be.”

Minister of State for Political and Parliamentary Affairs, Abdul Monem Al-Oudat, emphasized the importance of balancing the rights and obligations of both insurers and policyholders. He stated that the approved article aims to achieve fairness between the parties, clarifying the obligations of the insured party before an incident occurs.

Al-Oudat further noted that the judiciary will determine the extent of damages and subsequent compensation. He highlighted the law as a significant step toward modernizing the insurance sector, promoting contractual stability, fairness, consumer protection, and clear responsibilities, while also reducing legal disputes arising from ambiguous language.

Article 14, as approved, outlines the responsibilities of the insured party to notify the insurer of any covered risk and provide necessary documentation within the period specified in the insurance contract. Failure to comply does not necessarily forfeit the right to compensation, unless the insurer suffers damages as a result of the breach.

Article 15 stipulates that the insured party must relinquish ownership of the insured assets to the insurer upon receiving full compensation for total loss.

Article 16 mandates that the insurer must provide the agreed-upon financial compensation or benefit to the insured party upon the occurrence of a covered risk, even if it results from unintentional error by the insured party or those under their supervision.

Articles 17 through 25, also approved, address various aspects of insurance contracts, including disclosure requirements, settlement negotiations, insurable interest, and the nature of covered risks.

Article 17 clarifies that the insured party is not obligated to disclose information that reduces the likelihood of a covered risk, is already known to the insurer, or pertains to excluded risks, unless explicitly requested by the insurer.

Article 18 prohibits the insured party from entering into settlement agreements with third parties without the insurer's consent, unless it benefits the insurer.

Article 19 requires that the insurable interest be legitimate and benefit the insured party at the time of contract inception or the occurrence of the covered risk.

Article 20 states that in personal insurance contracts, the insurable interest lies in preventing the insured party from being exposed to the covered risk, and it must be present at the time of contract inception.

Article 21 grants a creditor an insurable interest in insuring the life of their debtor up to the amount of the debt.

Article 22 addresses insurable interest in property and liability insurance, requiring its presence at both contract inception and the occurrence of the covered risk. It also allows for coverage of lost profits resulting from a covered risk, provided it is stipulated in the contract.

Article 23 allows the insured party in property insurance to enter into a contract on behalf of someone who establishes an insurable interest in those assets.

Article 24 clarifies that the owner of assets has an insurable interest in insuring them, even if a third party has a real or personal right to them, and that the holder of such a right also has an insurable interest in the asset.

Finally, Article 25 states that insurance is not permissible unless the covered risk is likely to occur and that, in cases of multiple risks, the most influential risk is considered, even if it is not direct.

The draft law, approved by the Council of Ministers last November, aims to enhance transparency, fairness, and consumer protection in the insurance sector. It seeks to modernize the legal environment, stimulate investment, and combat negative practices such as insurance fraud.