Online insurance intermediation

(1)

Online insurance intermediation

S y d n e y , 1 8 S e p t e m b e r 2 0 1 3

Protection via an ocean of information

AIDA World - Working Party: “Distribution of Insurance Products”

(2)

Obligation of (off)online insurance intermediaries (IIM)

to proceed with notification in order to work under FoS

in the EU

Obligation of (off)online insurance intermediaries (IIM)

to proceed with

notification

in order to work under FoS

in the EU

_{Criteria for the notification in non online (offline) business}

_{IIM provides marketing, insurance mediation services or when it is actively}

seeking business from a customer resident in that MS

Examples CEIOPS, DOC-15/07:

The IIM asks for and organises, on its own initiative, meetings with clients

established in another MS.

The IIM gives/sends information on specific products, conditions etc to

selected groups of clients established in a given MS / in specific languages of some MS etc (the intention of the intermediary to contact clients in another country is clear)

Online Insurance intermediation

Online Insurance intermediation Online Insurance intermediation

(3)

Obligation of (off)online insurance intermediaries (IIM)

to proceed with notification in order to work under FoS

in the EU (cont.)

Obligation of (off)online insurance intermediaries (IIM)

to proceed with

notification

in order to work under FoS

in the EU (cont.)

_{Criteria for the notification in online business}

_{Website evidencing IIM’ s intention to direct its activities in that MS –}

Luxemburg Protocol

Indications:

The international nature of IIM’ s activity

Use of foreign language/currency with the possibility to conclude a contract in

that language/currency

Mentioning of itineraries from other MS for going to the place where the

merchant is established

Mentioning of telephone numbers with an international code

The outlay of expenditure on an internet referencing service to facilitate access

to the merchant’s site of consumers domiciled in other MSs

Use of a top-level domain name other than that of the merchant’s home MS Mentioning of international clientele from various MS

(4)

Obligation of an IIM to establish in a host MS

_{Criteria for the obligation to establish (FoE) in offline business}

_{According to ECJ case law}

Lasting duration and/or Regularity and/or

Periodicity and/or Continuity

_{OR According to EU Commission}

If IIM cumulative meets the characteristics of a branch/agent, i.e. if IIM representative in

the host MS:

_{Is subject to the direction and control of the parent IIM} _{Receives a permanent brief from the parent IIM}

Is able to commit the parent IIM

_{Criteria to establish in online business}

_{EU does not accept establishment for activities conducted exclusively online}

Fixed ATM type machines/servers do not suffice Needs human management

However, applicable rules for establishment could analogically apply if criteria to establish

in offline business are met

(5)

Third Country IIM (off)online business in the Union

_{Criteria distinguishing offline services as solicited/unsolicited}

_{Offline IIM services are identified as solicited, 3rd country IIMs included}

under almost the same criteria applicable under FoS transactions in

another MS

The IIM asks for and organises, on its own initiative meetings with clients

established in another MS.

The IIM gives/sends information on specific products, conditions etc to

selected groups of clients established in a given MS / in specific languages of some MS etc (the intention of the intermediary to contact clients in another country is clear)

(6)

Third Country IIM (off)online business in the Union

(cont.)

Third Country IIM (off)online business in the Union

(cont.)

_{Criteria distinguishing online services as solicited/unsolicited}

_{Online IIM services are identified as}

_solicited

If the transaction is not conducted under the customer’s exclusive initiative

_Unsolicited

_{services are identified}

If the transactions are conducted under the customer’s exclusive initiative

(OECD Guidelines/GATS/MiFID 2,recital 74). However IT evolution impedes a more clear distinguishment between solicited and unsolicited transactions: further criteria should be developed

(7)

_{Precontractual information which insurers have to provide}

(insurer is also regulated by IMD 2 if he provides direct sales)

_{Information to be given by the insurer - in its capacity as insurer}

In life insurance (information provided in Solvency II, art. 185)

In non life insurance (information provided in Solvency II, art. 183-184)

_{Information to be given by the insurer - in its capacity as direct seller of}

insurances

In insurance products without investment element (IMD 2, art. 15-21)

Marketing (sales) of insurance investment products. Insurer has to draw up

(according to PRIPs, art. 5-11) key information in its capacity as

manufacturer of the product and to provide it to the insured (PRIPs, art. 12-13) and additionally information has to be given (IMD 2, art. 22-25)

_Additional

_information

_{for the online services}

_Additional

_information

_{for distance marketing of consumer financial}

services

From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information

From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information

(ECD, art. 5,6,10)

(DMD, art. 3-5)

Online Insurance intermediation - Protection via an ocean of information

(8)

From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information (cont.)

From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information (cont.)

_{Precontractual information which (off)online professional intermediaries}

other than insurers

_{Additional information for all DIP: a) in online services}

b) in distance marketing of insurance products

_{Combined application of precontractual info included in IMD 2, PRIPs,}

ECD, DMD, MiFID 2

_{A simple insurance subagent who in the same time is an investment company according to}

MiFID 2 is subject to all the above regulations

_{Entities which undertake the reception and transmission of orders constitute investment}

companies and can at the same time work as an insurance intermediaries

_{According to greek law IIMs are not qualified to sell insurance investment products unless}

they possess the same qualitative requirements as professionals who sell investment

products and are governed by MiFID (among others to have passed the relevant exams

organised by the supervisory Authority - Central Bank of Greece).

(IMD 2, art. 15-21) have to provide and additional info. for sales of insurance investment products (IMD 2, art. 22-25, as well as to

provide the KID as manufacturer of such products, PRIPs, art. 12-13)

(ECD, art. 5,6,10)

(DMD, art. 3-5)

(9)

_{Six pieces of EU legislation introducing partially overlapping,}

partially asymmetric information:

From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information (cont.)

From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information (cont.)

_{Pieces of information: 22 for intermediaries, additionally 10 in case of insurance}

investment products, 11 for insurers additionally 10 in case of insurance investment products. Altogether 53 pieces! (art. 15-25).

_{26 pieces of information (art. 5, 6, 10).}

_{7 pieces of information (art. 183-184)}

_{36 pieces of information (art. 185)}

_{26 pieces of information (art. 5-11, 12-13}

₎

_{IMD 2}

_ECD

_{Solvency II}

(non life insurance)

_{Solvency II}

(life insurance)

_DMD

_PRIPs

_{MiFID 2}

(10)

Results:

Customer is protected by valuable information but is overloaded

partly with asymmetric and overlapping information

By provision of this information the customer is not protected as

to the content of the terms and conditions of the insurance

product

Not all customers are benefited by the same information

(fragmentation)

Customers remain responsible to take advantage and to evaluate

the multitude of information. Legislator should ensure that

customers have taken in fact the benefits of this information

rather than inserting more information duties

Results:

_{Customer is protected by valuable information but is overloaded}

partly with asymmetric and overlapping information

_{By provision of this information the customer is not protected as}

to the content of the terms and conditions of the insurance

product

_{Not all customers are benefited by the same information}

(fragmentation)

_{Customers remain responsible to take advantage and to evaluate}

the multitude of information. Legislator should ensure that

customers have taken in fact the benefits of this information

rather than inserting more information duties

Reaching the coast

(11)

Special issues: Comparison websites

_{Example of a Greek aggregator:}

http://www.insurancemarket.gr/

_{Aggregators which provide IIM}

_{Criteria have not been completely formed yet, but characterisation}

depends on the activities provided via the website

According to EIOPA-CP-13/017, if the visitor of the website has the possibility to choose

insurance products based on price/features and to conclude the contract online or is diverted via a hyperlink to the insurer’s website and then conclude the contract, the comparison website owner might be regarded as an IIM if:

The customer is driven to a result, which includes the characteristic of advising i.e. the

possibility by means of comparison websites to find out the cheapest/most suitable products

_{Aggregators which do not provide IIM}

If their activities constitute „mere conduit“ according to ECD (art 12): The service provider does not initiate the transmission

The service provider does not select the receiver of the transmission

The service provider does not select/modify the information contained in the transmission

(12)

Special issues: The bank as tied intermediary

_{The bank as tied intermediary can sell the main financial}

product which it has manufactured and ancillary insurance

investment product manufactured by the insurer:

C r o s s i n g a n o c e a n o f i n f o r m a t i o n

_{Information for its main financial product (art. 24-25 MiFID 2, total number of information pieces: 15)}

and key information as manufacturer of the product (art. 5-11,12-13 PRIPs, total number of information pieces: 26)

_{Information to be given according to IMD 2 in its capacity as tied intermediary (art. 15-21 total number}

of information pieces: 22) and additionally information on investment insurance products (art. 22-25, total number of information pieces: 10)

_{Information on investment insurance products according to PRIPs (art. 5-11, 12-13 total number of}

information pieces: 26) whereby the manufacturer in this case is the insurer

_{Additional information for the online services (ECD, art. 5,6,10, total number of information pieces: 26)} _{Additional information for distance marketing of consumer financial services (Directive on distance}

marketing of consumer financial services, art. 3-5 total number of information pieces: 49)

(13)

Special issues: The bank as tied intermediary (cont.)

_{Lack of special information in particular in online sales! Risk of}

misleading clients!

_{E.g. a bank should warn its clients that it sells insurance products under the}

liability of the insurer or an other intermediary, as the case may be and not under

its liability

_{Bank does not have to rely on confidence clients have to its activities as}

safeguard of their savings!

_{A bank selling insurance products in its capacity as tied intermediary should warn}

its clients that the product is not manufactured by the bank!

_{It should not be allowed to banks to title the insurance investment}

products of the insurer which it sells as “bancassurance products” of the

bank or similar misleading/confusing expressions.

_{A bank selling insurance products/investment insurance products of an insurer}

must put emphasis to the name of the insurer by using capital and bold letters.

Small letters should be used for the name of the bank and emphasise its capacity

Particulars not included in the ocean of information!

(14)

Special issues: What distinguishes the border of the online market?

Geographical, technological and regulatory means

Special issues: What distinguishes the border of the online market?

Geographical, technological and regulatory means

_{EU/EEA regulation: Insurance intermediaries providing cross-border services}

in the Internal Market fall under the passporting rules

_{registration in the home country-MS is the passport}

The register shall indicate the MS/MSs in which the intermediary conducts cross

border business

_{The IMD does not:}

_{apply to insurance mediation}

_services

_{provided in relation to}

_risks

_and

commitments

located outside the EU

(1st case)

_{regulate mediation}

_{activities carried out in 3rd countries}

_{(2nd case)}

In both cases, geography and technology are the borders as to the conduct of the

business, but regulation is the border as to the qualification of the insurance

intermediary in the 1st case, taking into consideration that only then the intermediary

provides services in risk located both inside and outside the EU.

(15)