ALLEN & OVERY – Clarifications from the european court of justice and the CAA on the concept of insurance intermediary when dealing with collective insurance contracts (contrats d’assurance groupe)

Article written by Allen & Overy as part of the sponsorship of ACA Insurance Days 2023, whose content is the sole responsibility of its author.

Context

The European Court of Justice (ECJ or the Court) recently ruled on the legal status of persons who offer their clients, in exchange for a fee, membership to a group insurance policy, considering that, in a judgment of 29 September 2022 (C-633/20)[1] (the Decision), such persons provide insurance distribution within the meaning of the insurance distribution directive (EU) 2016/97 (IDD)[2].

As a reminder, the IDD defines insurance distribution as “the activities of advising on, proposing, or carrying out other work preparatory to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim, including the provision of information concerning one or more insurance contracts in accordance with criteria selected by customers through a website or other media and the compilation of an insurance product ranking list, including price and product comparison, or a discount on the price of an insurance contract, when the customer is able to directly or indirectly conclude an insurance contract using a website or other media” (Article 2(1)(1) of the IDD). For their part, insurance intermediaries are defined as “any natural or legal person, other than an insurance or reinsurance undertaking or their employees and other than an ancillary insurance intermediary, who, for remuneration, takes up or pursues the activity of insurance distribution” (Article 2(1)(3) of the IDD).

The ECJ was faced with the situation where a legal entity in Germany had taken out a group insurance policy as the policyholder (the Policyholder), with the intention of enabling third parties to sign up to this policy as insured persons. Each time a new insured person would sign up to the insurance policy, the Policyholder would receive a payment from the third party insured. The Policyholder entrusted advertising companies with the task of offering consumers, by way of door-to-door sales, membership to the group insurance contract in return for a fee, to obtain as many enrolments as possible. Neither the Policyholder nor the advertising companies had a licence as an insurance intermediary in Germany and an action was brought before the German courts to ask for the activities of the Policyholder to cease. The question was ultimately brought before the ECJ in order to determine whether an undertaking that maintains, as the policyholder, foreign travel medical insurance and insurance covering foreign and domestic repatriation costs as a group insurance policy for its customers with an insurance undertaking, distributes to customers memberships entitling them to claim insurance benefits in the event of illness or accident abroad, and receives a fee from recruited members for the insurance cover that it purchased is an insurance intermediary within the meaning of the IDD.

After an analysis of the facts at hand and the provisions of the IDD, the ECJ considered in its Decision that i.a. Article 2(1)(1), (3) and (8) of the IDD “must be interpreted as meaning that the concept of ‘insurance intermediary’ and, therefore, that of ‘insurance distributor’, within the meaning of those provisions, covers a legal person whose activity consists in offering its customers membership on a voluntary basis in return for payment which it receives from them, of a group insurance policy to which it has subscribed previously with an insurance company, where that membership entitles those customers to insurance benefits in the event, in particular, of sickness or accident abroad” (point 59 of the Decision).

Criteria to be considered as insurance intermediary under a group insurance contract under the ECJ decision

In its Decision, the Court ruled that in the context of a group insurance contract, the policyholder to said insurance contract may be considered as providing insurance distribution within the meaning of the IDD if the following conditions are met:

• the policyholder offers third parties membership to a group insurance contract to which it has subscribed as policyholder, i.e. it carries out measures to promote the adhesion to the insurance policy;
  
• the policyholder offers membership on a professional basis, i.e. this is its main activity and not incidental to another activity;
  
• the third parties who join the group insurance contract are assimilated to clients, i.e. we consider that this would not be applicable if the policyholder offers membership to its employees; and
  
• the policyholder is remunerated (within the meaning of the IDD) for offering membership to the group insurance contract. The definition of remuneration of Article 2(1)(9) of the IDD is broad and includes “any commission, fee, charge or other payment, including an economic benefit of any kind or any other financial or non-financial advantage or incentive offered or given in respect of insurance distribution activities”, thus any kind of benefit for the policyholder which is derived from the conclusion of the group insurance policy by third parties would be sufficient.
  
• Where all of the above conditions are met, the policyholder would be considered as providing insurance distribution within the meaning of the IDD and must have the appropriate licences in its jurisdiction to carry out these activities.

Where all of the above conditions are met, the policyholder would be considered as providing insurance distribution within the meaning of the IDD and must have the appropriate licences in its jurisdiction to carry out these activities.

Position of the luxembourg insurance regulator and impact for luxembourg actors

The Commissariat aux Assurances (CAA) stated in an information note n°24/1 issued on 24 January 2024 (the Information Note) that the ECJ’s position as set out in the Decision is in line with the CAA’s view that the qualification as policyholder under a group insurance contract does not preclude the group policyholder (the Sponsor) from being considered as providing intermediation activities under the IDD.

In the Information Note, the CAA explains that both the Sponsors and the concerned Luxembourg insurance companies must take precautionary measures to ensure that the relevant parties to the group insurance contract have appropriate authorisations:

• sponsors must assess their status/activities to determine whether they meet the criteria to be considered as acting as insurance intermediaries and, where relevant, obtain the appropriate authorisation/registration in Luxembourg (e.g. insurance agent, broker or ancillary insurance intermediary) and comply with the rules for this activity, as provided for in the law of 7 December 2015 of the insurance sector, as amended (the Insurance Sector Act); and
  
• as, pursuant to article 286(4) of the Insurance Sector Act, Luxembourg insurance companies must only work with registered insurance intermediaries, carry out their own assessment to determine whether a given set-up requires the Sponsor to be authorised as an insurance intermediary and, if so, ensure that the Sponsors they work with have the necessary authorisations/registrations.  

In addition to the four criteria resulting from the Decision, the CAA has set out additional criteria which may be helpful for Sponsors and insurance companies in determining whether a given activity under a group insurance contract could qualify as intermediation within the meaning of the IDD.

The following criteria are viewed by the CAA as elements which may lead to the Sponsor being qualified as an insurance intermediary:

• the insurance coverage is optional and the customer/member has the choice to subscribe to the policy or not and/or the choice between several insurance products available through the Sponsor;
  
• the Sponsor provides other services related to the management of the insurance contract;
  
• the insurable interest exists at the level of the customer/member;
  
• the insurance product is an important or even essential component of the products and services provided by the Sponsor; and
  
• the customer/member is designated as the insurance beneficiary under the insurance contract.

The following criteria are viewed by the CAA as criteria which may, to the contrary, lead to the conclusion that the Sponsor is not acting as an intermediary:

• the insurance is mandatory or automatic for the customer/member;
  
• the Sponsor only signs the insurance contract and does not provide any further services in such respect;
  
• the Sponsor is the only one who has an insurable interest;
  
• the insurance is not a key part of the products/services that the Sponsor offers; and
  
• the customer/member is not named as an insurance beneficiary.

• These criteria are only indicative, and a case-by-case assessment must be carried out by all Sponsors and insurance companies in light of their particular set-up and the particularities of the group insurance policies. The CAA has indicated in the Information Note that it is available to all Sponsors or insurance companies which would like to present their analysis to the CAA.
• The definition of insurance intermediary and insurance distribution is not intended to change with the new EU Retail Investment Strategy which will amend the IDD[3]. Therefore, the Decision and the Information Note will continue to remain relevant for assessments by Sponsors and insurance companies respectively under group insurance contracts.

[1] Judgment of the Court (first chamber), 29 September 2022, case C-633/20 request for a preliminary ruling under Article 267 TFEU from the Bundesgerichtshof (Federal Court of Justice, Germany), made by decision of 15 October 2020, received at the Court on 25 November 2020, in the proceedings Bundesverband der Verbraucherzentralen und Verbraucherverbände – Verbraucherzentrale Bundesverband eV v. TC Medical Air Ambulance Agency GmbH.

[2] Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast)

[3] Proposal for a directive of the European Parliament and of the council amending Directives (EU) 2009/65/EC, 2009/138/EC, 2011/21/EC, 2014/65/EU and (EU) 2016/97 as regards the Union retail investor protection rules.

Authors

Paul Péporté

Partner – Allen & Overy

Biographie

Helena Finn

Counsel – Allen & Overy

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