The European Court of Justice (ECJ) recently ruled that an entity acting as group policyholder under a collective insurance policy and offering optional membership to customers falls under the scope of the Insurance Distribution Directive (IDD) and may need to be licensed as an insurance distributor (subject to any available exemption under IDD, such as the connected contract exemption). Given that insurers must ensure that they deal only with duly licensed distributors, this case law is of relevance to them as well.
The case concerned a legal entity that had subscribed to a collective insurance policy comprising coverage for sickness or accident and coverage for repatriation costs, and offered membership to prospects by way of door-to-door sales, in return for a fee. This entity considered that such activity fell outside the scope of IDD and its definition of insurance distribution.
The ECJ confirmed that the statuses of policyholder and insurance distributor are not mutually exclusive. A person may be both a group insurance policyholder and an insurance intermediary insofar as the policyholder performs insurance distribution activities. Moreover, it considered that the fact that the remuneration of the entity/policyholder was paid directly by the customers (and not by commission retroceded by the insurer) was of no relevance.
As part of its reasoning and to establish a level playing field, the ECJ considered that entities proposing such insurance cover must follow the same rules as other channels of insurance distribution, and offer the same customer protection.
In Belgium, the regulator (the Financial Services and Markets Authority) had already provided some guidance about the possible regulated status of a collective insurance policyholder, and this guidance should now be read in light of this new ECJ case law (in respect of optional membership cover).
The legal status of a group policyholder for embedded insurance (with automatic cover) is yet to be examined on a case-by-case basis (and, insofar as available in Belgium, in light of the regulator’s available guidance).