Defining legal relationships under electronic ‘insurance card’ policies

Q: What is an insurance card?

A: Insurance cards sold by many insurance companies are electronic policies. The purchaser may activate the card on the insurance company’s website by following the appropriate steps, and the electronic policy may be consulted online, or printed, or downloaded. No written application or paper policy is required. At present, such insurance cards only cover household property insurance and comprehensive personal injury insurance.

Q: How is the time at which the policy is formed and enters into effect, and at which insurance coverage begins, determined?

A: With respect to a paper insurance policy, an offer is constituted once the proposer completes the application and hands it to the insurer, and acceptance is constituted once the insurer reviews the application and agrees to provide coverage, at which point the insurance contract is formed. However, a paperless electronic policy lacks the procedure whereby the proposer signs an application.

With respect to the issue of the formation and entry into effect of an insurance card, there are currently three different opinions: (1) the insurer should be deemed to have agreed to provide coverage once it accepts the premiums, that the contract is formed and enters into effect upon the insurer accepting the premiums, at which point the insurer commences to bear the insurance risk and that, during the term of the insurance card, whose name in which the card is activated and when it is activated are simply rights of the cardholder; (2) the proposer should be deemed to have made an offer once he or she pays the premiums, with such charges being premiums paid in advance, and that once the online activation procedure is completed, i.e. the insurance card has been activated, the insured and the coverage term are determined and the contract is formed and enters into effect; (3) the formation and entry into effect of the insurance contract and commencement of the coverage period are two separate concepts, and the times for both do not necessarily coincide. The insurance contract is formed and enters into effect once the insurer receives the premiums, and activation of the insurance card determines the specific insured and the time at which coverage begins.