The Reconstruction Of The Explanation Obligation System

The rampant unfair transaction in insurance market makes the explanation obligation system necessary for the reality. In China, relevant provisions could be seen in articles 17, 18 of Insurance Law and other official replies thereof. However, these provisions are so vague and simple that academia and practices have controversy on the application of the system, which would hamper the insurer from carrying out the explanation obligation. After analyzing drawbacks in current insurance law and problems occurred in practice, this article, from two perspective of the foundation of the system, calls for reconstruct of the performing subject, the object, the manners, the standard, and the legal responsibility of the system.This article is divided into seven chapters.The first chapter outlines of the explanation obligation system, which introducing the nature, characteristic, origin, function and its differences from notification obligation.The second chapter analyses the current situation of the explanation obligation. The article points out that the traditional idea that the explanation obligation derives from the principle of utmost good faith is publicly questioned, provisions on subject and object of explanation obligation in the existent Insurance Law are irrational, and that the interuse of terms of Explanation and Explicit Explanation even leads to disputes in academia, thus causes various problems in insurer' performance.The third chapter is about reexamination on the system. Since the insurance contract means some kind of contractual relationship, the good faith principle of the contract law should be the foundation of the explanation obligation. Consensus of parties, information asymmetry and the crisis of faith in insurance market request the insurer perform his explanation obligation.The fourth chapter determines the subject of explanation obligation and time for performance. The subject of the explanation obligation should include the insurer, insurance agent and insurance seller. The insurer should perform the explanation obligation prior to the formation of contract, at the time of restitution of contract effect or of the modification of the contract.The fifth chapter is on the object of explanation obligation. As required by the insurer's practice of carrying out business and accepting insurance, the object of the insurer's explanation obligation should be explained restrictively. The insurer should perform special explanation obligation on exemption clauses, liability clauses, contract execution clauses and some terminologies easy to be misunderstood.The sixth chapter is the improvement of manners and standard of explanation. Given the fact that the insurer always fails to commit his explanation obligation strictly in line with current laws, the manners of explanation obligation, namely, combining insurer's active explanation with positive reply, and the modificative common standard should be promulgated in a bid to compromise interests of the insurer and the policy holder.The seventh chapter tells about the liability on violation of explanation obligation. Unfavorable explanation principle and explanation obligation are parallel systems to each other. Insurance Law should clearly define the liability on violation of explanation obligation. The system of calm observation can remedy against the formalistic performance of explanation obligation, but it can't take place of the explanation obligation system. If the insurer fails to fulfill his explanation obligation, the law should entitle the policy holder to modify or cancel the insurance contract, and should combine the disadvantage explanation system to protect the interests of policy holder.