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European Court of Justice clarifies rules around voluntary group insurance programmes

A judgement on September 29, 2022 from the European Court of Justice (ECJ) has ruled on regulatory requirements for policyholders distributing voluntary group insurance programmes to their customers, clarifying what was a previously grey area of the Insurance Distribution Directive (IDD).

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A judgement on September 29, 2022  from the European Court of Justice (ECJ) has ruled on regulatory requirements for policyholders distributing voluntary group insurance programmes to their customers, clarifying what was a previously grey area of the Insurance Distribution Directive (IDD).

The judgement states that an ‘insurance intermediary’ or ‘insurance distributor’, also can be a legal person who distributes to its customers, on a voluntary basis, membership to a group insurance policy for payment, where that membership entitles those customers to insurance benefits. 

Two key elements are:

  1. The legal person (this can be an organisation), receives remuneration for offering access to the group insurance policy to which it has subscribed previously with an insurance company.
  2. This judgement only covers voluntary policies; mandatory policies are not directly affected by the courts decision.

What is the difference between voluntary and mandatory group insurance policies?

The difference between voluntary and mandatory group insurance policies are that voluntary group insurance policies are ones that a customer can choose to opt into such as insurance protection  for sickness or accident abroad. These products can add value to a merchants proposition and extra protection for customers who choose to purchase them.

Examples of mandatory group insurances include employer based schemes that cover some health or retirement benefits and where every employee belonging to the target group of the group insurance is automatically affiliated to it.

What does this mean for your insurance schemes?

Policyholders of group insurance within the mentioned above scope should consider if their current insurance offering would potentially result in a requirement for them to be licensed as insurance intermediaries. This is particularly true for Germany, which was the EU Member State requesting the ECJ to look into this and where so far the prevailing interpretation had been that policyholders were never insurance distributors. However, as the role of the ECJ is to ensure a consistent interpretation of European law across member states, and preliminary rulings like this are binding on all courts in the EU, we recommend all our European Affinity sponsors to see this as an opportunity to review with Marsh how their Affinity programme is structured and if there are improvements that could be made. Impacted clients should also discuss potential legal consequences with their in-house lawyer and/or external counsel.

If you are a policyholder of a voluntary group insurance which you offer to your customers for remuneration, you should work with your legal advisor to assess your current legal risk and what actions can be taken for your set up to be compliant with the new interpretation of the IDD. Depending on your specific situation, options can include for examples:

  • Registration as an ancillary intermediary.
  • Registration as a fully licensed intermediary.
  • Redesign your insurance programme, for example, so you are not receiving remuneration for helping to facilitate voluntary insurance to your customers.

These are just few examples, Marsh can assist you with redesigning your insurance programme, based on your local regulations and your organisation scheme needs, bringing its own experience with customers in different EU countries.  

As more consumers are transitioning to digital purchases another option to consider is to upgrade your offerings by introducing a digital solution or creating a smoother experience on an existing digital platform for the end user. 

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