Two kinds of letter typically cause uncertainty around home insurance. In one, the insurer informs you that it does not wish to continue the contract from the renewal date; in the other, the premium for the new year is considerably higher than indexation alone would justify. As a broker, I see the same problem in both cases: the client does not know what the insurer is entitled to do and how much room for manoeuvre they themselves have. Yet the framework can be described clearly. The insurance chapter of the Hungarian Civil Code (Ptk.) sets out when and how either party may cancel, and the policy conditions set out for what reasons and under what procedure the insurer may change the premium or the content of the contract.
- The insurer, too, can cancel a home insurance policy concluded for an indefinite term, but as a general rule only with effect from the end of the insurance period, with written notice given at least 30 days in advance – so many claims typically lead to cancellation at the renewal date or a proposal to change the premium, not to the contract ending mid-year.
- If the risk increases significantly – for example because the home is let or undergoes a major renovation – the insurer may, within 15 days of becoming aware of it, propose an amendment or cancel with 30 days' notice; if you do not respond to the proposal within 15 days, the contract may end on the 30th day after the proposal was communicated.
- Indexation is the value adjustment laid down in the contract; a premium increase or change in conditions beyond it is an amendment, which the insurer communicates before the renewal date and which you can accept – or you can cancel the contract with effect from the renewal date (and, for home insurance, in March as well).
Can the insurer cancel the contract if there have been many claims?
Home insurance is typically a contract for an indefinite term, and the right to cancel is not one-sided: under Section 6:466 of the Ptk., either party may cancel a contract concluded for an indefinite term in writing, with effect from the end of the insurance period, giving thirty days' notice. The Home Insurance Guide of MABISZ (the Hungarian insurers' association) describes the same thing from the practical side: notice of cancellation must be given to the other party in writing at least 30 days before the policy's renewal date, and no reason needs to be given. This applies to the insurer as well. In other words, if a contract has had several claims over a few years, the insurer may decide not to continue it from the next renewal date – but the general rule does not allow cancellation in the middle of the year, at the same time as a claim.
Some policy conditions also provide for a right to cancel after a claim has been settled – this varies from insurer to insurer, and in a consumer contract the rules of the insurance chapter of the Ptk. may be departed from to the client's detriment only to a limited extent. It is therefore worth checking two things in your own policy conditions: the chapter on ‘termination of the contract’, and how the no-claims discount behaves after a claim. In Hungarian practice, the consequence of many claims is typically not cancellation but the loss of the discount at the next renewal date, or the insurer notifying a higher premium. The number of claims reported does not in itself give grounds for ending the contract mid-year, unless the policy conditions contain such a clause – so this is something to check in your own policy conditions.
Increase in risk: 15 days for a proposal, 30 days for cancellation
The other situation in which the insurer can act during the year is a significant increase in risk. If, after the contract has been concluded, the insurer learns of a material circumstance, or you report a change – you let the flat, use it as paid guest accommodation, start a business in it, begin a major renovation – and this significantly increases the insured risk, then under the insurance chapter of the Ptk. and the MABISZ guide the insurer may, within 15 days of becoming aware of it, propose an amendment to the contract or cancel the contract in writing with 30 days' notice. If you do not accept the amendment proposal, or do not respond to it within 15 days, the contract ends on the 30th day after the proposal was communicated – provided that the insurer drew your attention to this consequence in the proposal.
Two practical lessons follow from this. First: it is worth responding to an amendment proposal, because silence here is not neutral – it can lead to the contract ending, and taking out a new contract in place of one that has ended is not necessarily straightforward with a claims history or a changed use. Second: concealing a change is a worse route than a higher premium. The duty of disclosure and of reporting changes is yours, and if the insurer discovers at the time of a claim a circumstance that should have been reported, it may be released from paying. The article on changes in your details lists which changes to report and how.
Can the insurer change the conditions unilaterally and raise the premium above indexation?
Here it is worth separating three things. Indexation is not a unilateral amendment: it is a value adjustment laid down in advance in the contract, under which the sum insured, and with it the premium, changes by the rate of an announced index – the article on indexation describes how it works. The second is a change in the policy conditions: the insurer may introduce new conditions for its new contracts, but it can apply them to your existing contract only if you accept them, or if the contract itself provides for the way it may be amended. The third is a premium increase above indexation, which in practice appears in the renewal notice: citing the loss ratio, a change in its tariff or the end of a discount, the insurer notifies a higher premium for the next period.
The legal logic is similar in all three cases: the parties amend the contract by mutual agreement, and the insurer is entitled to amend it unilaterally only if the policy conditions give a valid reason and a procedure for doing so. Under the rules of the Ptk. on consumer contracts – based on a list that until 2014 was set out in a separate government decree and has since been included in the Ptk. – a clause is presumed unfair until the contrary is proven if it allows the business to amend the contract unilaterally without a valid reason, in particular to raise the price, or if it does not give the consumer the right to cancel alongside the amendment. This is why Hungarian policy conditions are typically structured so that the insurer communicates a change in the premium or the conditions at renewal in advance and in writing, and you can do one of two things: if you pay the new premium, you have accepted the amendment; if you do not agree, you can cancel the contract with effect from the renewal date. Whether a particular premium increase was lawful is decided in an individual dispute by the Financial Arbitration Board (PBT) or a court – the MNB (Hungary's central bank and financial supervisor) does not decide individual disputes, and the question of unfairness cannot be answered in general terms without knowing the policy conditions.
What room for manoeuvre do you have if you disagree?
The first and most important tool is time. The renewal notice is sent by the insurer, typically a few weeks before the renewal date; if the letter contains a premium increase or a change in the conditions, your cancellation must reach the insurer in writing at least 30 days before the renewal date. If you put the letter aside and pay the new premium, then under the typical clause of policy conditions you have accepted the amendment. For home insurance there is a second window as well: the March cancellation option, which opens up switching free of charge, independently of the renewal date – so if you have missed the renewal date, you do not have to wait a whole year either.
Check two things before you cancel. If the contract carries a long-term discount, the insurer may claim repayment of the discount – the article on the loyalty period shows the calculation. And if there is a mortgage on the property, the new contract needs the bank's mortgagee clause, and the old one should end only when the new one is already in force. A premium increase is not in itself a reason to switch: if, because of the claims history or the changed use, another insurer would also quote a similar premium, keeping the contract with the higher premium but known content can also be a reasonable decision.
If the insurer has cancelled: the next steps
If the cancellation came from the insurer, the goal is continuity: the new contract's cover should follow on from the last day of the old one, otherwise a gap in cover arises and neither insurer pays for a loss in between. When requesting new quotes, the claims history and the fact of the cancellation must be disclosed – these are material circumstances, and concealing them carries the risk that the insurer will be released from paying in a later claim. Expect the claims history and the increased risk to show up in the premium as well: the insurer makes its offer according to its own risk assessment, and the premium cannot be stated in advance.
If your situation is complex – many claims, letting, a mortgage and a loyalty period all at once – I help where I can: if you let me know, I prepare the comparison of quotes and the paperwork; the decision and the signature remain yours. I cannot, however, take over the cancellation, the reporting of changes or the reply to an amendment proposal: these are your own statements, each with a deadline.
Practical summary:
- Read the renewal letter, and look separately at the indexation and at any premium or condition change beyond it.
- Respond to an amendment proposal within 15 days of receiving it – silence can lead to the contract ending.
- If you do not accept the change, send your cancellation in writing at least 30 days before the renewal date; for home insurance, the March window is also open.
- Before cancelling, check the long-term discount and the mortgagee clause of your loan.
- Report any change in use – a higher premium is a smaller risk than the insurer being released from paying.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) – insurance contract, Section 6:466 (cancellation), unfair terms in consumer contracts
- MABISZ (Hungarian insurers' association) Home Insurance Committee – Home Insurance Guide (cancellation, increase in risk, amendment proposal)
- MNB (Hungary's central bank and financial supervisor) – Questions and answers on the March home insurance switching option (2024)
