EU organisations with voluntary affinity schemes likely to need broker licence after ECJ ruling

Companies that distribute group voluntary insurance schemes to customers in Europe, such as optional extended warranties, are being urged by Marsh to keep an eye on changing regulations across the continent after the European Court of Justice (ECJ) ruled these organisations can be classed as intermediaries and will need the appropriate licences.

A judgment at the end of September by the ECJ ruled that a company or person distributing a voluntary group insurance policy, either to customers or members, can be deemed an insurance intermediary and therefore need a licence to operate.

Marsh said the ruling clarified what was previously a grey area and will feed into the soon to be upgraded EU Insurance Distribution Directive that governs insurance distribution. This review is expected to launch next year and conclude in 2025. Implementation is likely to start from 2025 onwards.

Following the ruling, Cristiano Dalgrosso, Marsh’s affinity leader in continental Europe, urged risk managers to check whether their organisation’s current voluntary affinity offering requires an intermediary licence.

And he told Commercial Risk that regulators across Europe will now need to consider the ECJ’s ruling and adapt regulations. This may take time and there will remain a myriad of different rules across the EU, but it means risks managers need to keep an eye on this tricky subject, he added.

“The judgment is not a change in the regulations and the rules per se but all the regulators have to understand that their legislation must adapt to the ruling. Our perception is regulation will change but we don’t have any firm idea yet on timing or the concrete changes in each country. All EU members will now need to work out how the regulators will apply this ruling to the different legislation in their country,” said Dalgrosso.

“For example, in Italy the need for a licence is already in place, and the situation is similar now in Germany too. But the legislation is different in every country. In some countries you will need a licence straight away but in other countries this will likely be the case over time,” he continued.

“So my message for clients is: stay alert,” he added.

Dalgrosso said the process of getting a licence to operate as an intermediary, and the penalties for not doing so, are different in each EU member state. He said this process is further complicated by the number of licences you may need for dealerships or in-house brokers, for example.

But he said Marsh can lend its support to customers as they navigate this important issue and believes it is vital that risk managers, who often aren’t involved in affinity programmes, lend a hand.

“We want to create more awareness and educate clients about affinity programmes because there is a great opportunity for them to review their affinity programme and adapt their structures. Marsh can redesign affinity programmes based on the local regulation, because in some cases these organisations have a distribution model that is applied across different countries with different regulations,” said Dalgrosso.

“And of course we recommend clients discuss any potential legal consequences of their programmes with their in-house lawyer or external counsel,” he added.

“My last message is sometimes the people working on affinity programmes with clients are not typically in the risk management department, so risk managers are probably not hugely aware of this ruling and issue. So we want to get risk managers’ attention and ensure they are working with the marketing department to come up with suitable solutions that ensure compliance and benefit clients,” he concluded.

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