Note d’information 23/6 du Commissariat aux Assurances relative aux indexations automatiques contractuelles et augmentations tarifaires

The CAA has released Information note 23/6 regarding automatic contractual indexation and tariff increases in Luxembourg.
The note highlights the inflationary pressures caused by the COVID-19 crisis and the Russian attack on Ukraine, which have led to increases in the cost of living in Europe. The CAA notes that insurance companies have various mechanisms to reflect these changes in the cost of living in the insurance coverage they offer.
The note clarifies that it does not cover cases where the insured party voluntarily modifies the coverage of their insurance contract. The CAA also explains how Article 42 of the amended Law of 27 July 1997 on insurance contracts applies to tariff adjustments for insurance contracts subject to the law. The article states that insurance companies can only increase tariffs at the next annual due date of the contract and must communicate the change to the insured party at least 30 days before the effective date of the tariff adjustment.
The note distinguishes between three cases in which those aforementioned mechanisms reflect the evolution of the cost of living on the insurance coverage insurance companies offer:
In the first case, which concerns most building insurance coverage in Luxembourg, the coverage and premiums of the insurance contract are subject to automatic indexation. The value of the building is indexed according to the construction price index, while the contents (furniture, equipment, and goods) follow the consumer price index. The note states that if these automatic indexations are contractually provided for, there is no need to consider the evolution of premiums related to index movements as a tariff increase under Article 42 of the law.
In the second case, the insurance company can unilaterally adjust the base tariff to reflect the observed or projected cost of its claims. The note explains that these tariff increases give the insured party the right to terminate the insurance contract under the conditions of Article 42, paragraph 3 of the law, referring to Article 38, paragraphs 2, 3, and 4 of the law.
Finally, in the third case, the insurance company can simultaneously apply automatic indexation and unilaterally increase the base tariff. In this case, the portion of the premium increase related to the increase in the base tariff is subject to the provisions of Article 42 of the law.
The CAA expects insurance companies to provide clear and non-misleading information to their clients regarding any changes in tariffs or coverage.