You signed the proposal with your broker – from when are you covered?

Proposal, contract, policy – three different moments

You make the proposal on the insurer's form; at that point, only you have made a statement. Under the Hungarian Civil Code (Ptk.), an insurance contract is concluded by agreement between the parties, and under Section 6:443 of the Civil Code, if the contract was not concluded in writing, the insurer must issue a document certifying the cover – in practice, this is the policy. The insurer assesses the proposal: it may accept it, reject it, or accept it with modifications. Until this has happened, there is no contract. The broker's role here is the one I described in the article on how I work: after the needs assessment and the competitive quotation I prepare the proposal, you sign it, and I forward it to the insurer – but the broker's signature or receipt of the proposal does not create the contract, because the broker acts on the client's behalf, not on the insurer's.

The 15 (60)-day rule – for whom, and from when?

Under Section 6:444(1) of the Civil Code, if the contracting party is a consumer, the contract also comes into being if the insurer does not respond to the proposal within fifteen days of its receipt – or within sixty days if a medical examination is needed to assess the proposal – provided that the proposal was made in possession of the information required by law, on the proposal form issued by the insurer and in line with its tariff. Under subsection (2), in such a case the contract comes into being with the content of the proposal, on the day after the underwriting period ends, with retroactive effect to the time the proposal was handed over to the insurer. Two things follow from this. First, the insurer's silence creates a contract only where the contract is a consumer contract; for a business contract, the insurer's express acceptance is needed. Second, the deadline runs from the receipt of the proposal – its arrival at the insurer – not from the day you signed it. Brokers' terms of business state this explicitly: the 15-day underwriting deadline is to be counted from the day the proposal arrives at the insurer. Subsection (4) adds one more twist: if a contract that came into being through silence differs materially from the insurer's general terms and conditions, the insurer may propose an amendment within 15 days of the contract coming into being, and if you do not accept it, the insurer may terminate the contract in writing with 30 days' notice.

How a proposal signed with a broker reaches the insurer

Because the broker acts on your behalf, a proposal signed with the broker only “exists” for the insurer once it has arrived there. As a broker, this places an obligation on me: I forward the proposal without delay – under Section 402 of the Insurance Act (Bit.), the broker is liable for the incorrect or late forwarding of statements, so this is not a courtesy but a responsibility. Today most proposals are prepared electronically, in the insurer's own system, so receipt is often instant and logged; for paper proposals, the date of receipt is shown by the insurer's registration of the document. You have one thing to do: ask for confirmation of receipt or for the proposal number, and keep it. If you hear nothing for days, ask – this is the point at which a hold-up can mean a period without cover.

The days in between: what if a loss occurs then?

Under Section 6:445 of the Civil Code, the insurer's cover begins at the time specified by the parties in the contract or, failing that, at the time the contract comes into being. Hungarian policy conditions typically treat the date indicated on the proposal as the start of cover, and under many conditions this cannot be earlier than the day after the proposal is made – this varies from insurer to insurer. The key point, however, is the condition: all this applies only if the contract comes into being. If the insurer rejects the proposal within the 15 (60) days, no contract comes into being, and there is no cover for losses occurring in the days in between either – the insurer refunds the premium paid, but it does not pay for the loss. For consumer contracts, however, there is an important protective rule: under Section 6:444(3) of the Civil Code, if the insured event occurs during the underwriting period, the insurer may reject the proposal only if it expressly drew attention to this possibility on the proposal form and it is evident from the nature of the cover or the circumstances of the risk that accepting the proposal requires an individual assessment of the risk – so it is worth reading this warning on the proposal form as well. If, on the other hand, the insurer accepts or remains silent, cover exists from the stated start date – in the case of silence, with retroactive effect to the time of handover – so a loss that occurred in the days in between can be reported in accordance with the policy conditions. The insurer pays only for what is an insured event under your contract, and this rule applies to the days in between as well. From a broker's point of view, the solution is not promises but timing: cancel the old contract only once you have confirmation of the new one, and it is worth aligning the start of cover with the end of the old contract. If a loss nevertheless occurs in the interim period, report it on the insurer's claims line – as I wrote in the article on my role in a claim, the primary route for reporting is the insurer; if a case gets stuck or disputed, I help where I can.

Business contracts and MTPL: where the rules differ

If the policyholder is not a consumer – a company, or a sole trader acting in the course of their business – the silence rule does not apply: the contract comes into being with the insurer's acceptance – in practice, typically when the policy or the confirmation of cover is issued – and until then there is no cover either, so for business risks it is particularly important to wait for the policy or the confirmation of cover to arrive. Compulsory motor third-party liability insurance (MTPL) has its own act (Act LXII of 2009, the Gfbt.), which contains separate rules on the conclusion of the contract and the start of cover – so for MTPL, the Gfbt. and the insurer's conditions govern instead of the general rules described here. The position of a proposal submitted to a tied agent may also be different: the agent acts for the insurer, so under the insurer's conditions and the rules of the Insurance Act a proposal received by the agent may count as having reached the insurer earlier – but that is not the broker route.

What to do in practice: after signing, ask for confirmation that the proposal has reached the insurer, or for the proposal number; check the start of cover on the proposal; cancel the old contract only after the new one has been confirmed; if neither a policy nor a rejection arrives within 15 days, ask – and report any loss that occurs in the days in between on the insurer's claims line.