AFTER A LONG LEGISLATIVE PROCESS, FRANCE IMPLEMENTS A MAJOR BROKERAGE REFORM

After a legislative process of almost 3 years, France implemented last April a regulatory new regime of supervision of the brokerage sector, which will come into force in spring 2022 for more than 24 000 insurance brokers and their representatives. This reform – designed to address regulatory failures in the marketing and distribution of contracts – is of major importance to French brokers, as it aims to reorganise the conditions of access to the profession, their activity and to protect clients.

After a chao­tic legis­la­tive pro­cess, punc­tua­ted by the health cri­sis, the reform of the bro­ke­rage sec­tor, which affects more than 50,000 bro­ke­rage pro­fes­sio­nals (30 000 ban­king inter­me­dia­ries on the one hand, and 24 000 insu­rance inter­me­dia­ries on the other hand, as well as their repre­sen­ta­tives), seems to have final­ly come to frui­tion. In its annual report for 2019, the ACPR noted short­co­mings in regu­la­to­ry com­pliance and stres­sed the need to streng­then vigi­lance and control of the condi­tions under which insu­rance pro­ducts are dis­tri­bu­ted, as well as the super­vi­sion of the bro­ke­rage busi­ness in gene­ral. In order to address these concerns, this reform, cal­led for by the govern­ment, will enable insu­rance bro­kers to be bet­ter sup­por­ted in mee­ting the many chal­lenges they face, in par­ti­cu­lar regu­la­to­ry changes (IDD, GDPR, etc.) and tech­no­lo­gi­cal changes (digi­tal, new players, etc.). This is the­re­fore a major struc­tu­ral reform for bro­kers, aimed at ensu­ring that the sec­tor can effec­ti­ve­ly regu­late itself, and that the sector’s pro­fes­sio­nal orga­ni­sa­tions can effec­ti­ve­ly contri­bute to a moder­ni­sa­tion of the profession’s role and mis­sions. The govern­ment and pro­fes­sio­nal orga­ni­sa­tions are now wor­king on the draft imple­men­ting decree, which should be publi­shed by sum­mer 2021. The high­lights of this long awai­ted reform in the inter­me­dia­tion sec­tor will be :

– the crea­tion of a sys­tem of “self-regu­la­tion” for the bro­ke­rage pro­fes­sion by set­ting up pro­fes­sio­nal asso­cia­tions appro­ved by the Auto­ri­té de Contrôle Pru­den­tiel et de Réso­lu­tion (“ACPR”), the French wat­ch­dog. These asso­cia­tions will be res­pon­sible for making sure that bro­kers are cor­rect­ly imple­men­ting the new regu­la­tions, but also for control­ling com­pliance with the trai­ning requi­re­ments and good prac­tices of the profession.

– an exten­sion of the pro­vi­sions on consu­mer pro­tec­tion in the case of cold cal­ling for insu­rance contracts.

A NEW SELF-REGULATION FRAMEWORK FOR THE BROKERAGE PROFESSION

The new reform makes it man­da­to­ry for eve­ry insu­rance bro­ker licen­sed in France to join a pro­fes­sio­nal asso­cia­tion. Indeed, the Act of 8 April 2021 on bro­ke­rage reform now requires the 24,000 or so insu­rance bro­kers and their repre­sen­ta­tives to join an appro­ved pro­fes­sio­nal asso­cia­tion before they can regis­ter with the regis­ter of French inter­me­dia­ries (Orias) and car­ry out their acti­vi­ties. 30,000 inter­me­dia­ries in ban­king and pay­ment ser­vices (IOBSP) will also be affec­ted by this new law. The esti­ma­ted cost of an annual sub­scrip­tion to a pro­fes­sio­nal asso­cia­tion would be in the order of €100 to €500.

The pro­fes­sio­nal asso­cia­tions which will be acting under the autho­ri­ty of the French regu­la­tor, ACPR, will be res­pon­sible for moni­to­ring the acti­vi­ty and sup­por­ting their mem­bers. In this context, these asso­cia­tions will be able to :

  • veri­fy the condi­tions of access and exer­cise of the bro­ke­rage acti­vi­ty as well as com­pliance with pro­fes­sio­nal and orga­ni­sa­tio­nal requirements ;
  • offer bro­kers a media­tion service ;
  • create a ser­vice of sup­port and obser­va­tion of pro­fes­sio­nal acti­vi­ty and prac­tices, in par­ti­cu­lar through the col­lec­tion of sta­tis­ti­cal data ;
  • issue recom­men­da­tions on the pro­vi­sion of advice, sales prac­tices and the pre­ven­tion of conflicts of interest ;
  • impose sanc­tions against bro­kers, except in the case of breaches fal­ling within the exclu­sive com­pe­tence of the ACPR ;
  • ter­mi­nate the mem­ber­ship of one of its members.

In addi­tion, pro­fes­sio­nal asso­cia­tions will have to pre­pare an annual report on their acti­vi­ties and those of their mem­bers in aggre­gate form, which they send to the ACPR, in order to bet­ter unders­tand the French bro­ke­rage sec­tor through qua­li­ta­tive and quan­ti­ta­tive studies.

Note : only the imple­men­ting decree will make it pos­sible to know all the powers confer­red on the asso­cia­tions in order to cir­cum­scribe its mate­rial scope of application.

INTRODUCTION OF A REGULATION OF DISTANCE SELLING

The French Regu­la­tor has high­ligh­ted that in the context of dis­tance sel­ling, the pro­tec­tion of consent is not always gua­ran­teed, as the prac­tices of some insu­rance pro­fes­sio­nals do not always res­pect cus­to­mer pro­tec­tion rules, and often tar­get vul­ne­rable pros­pects, such as the elder­ly. This is why the Reform brings ano­ther major contri­bu­tion to the bro­ke­rage sec­tor, in that it regu­lates cold cal­ling.

In this context, new rules will come into force for bro­kers, who – when contac­ting a poten­tial poli­cy­hol­der by tele­phone with a view to sel­ling an insu­rance contract – will now have to :

  • Obtain at the begin­ning of the conver­sa­tion the prior agree­ment of the pros­pec­tive poli­cy­hol­der to conti­nue the com­mu­ni­ca­tion. Other­wise, they shall ter­mi­nate the call and not contact him or her again.
  • If the offer concerns a risk alrea­dy cove­red : ensure that the pros­pec­tive poli­cy­hol­der can ter­mi­nate his or her cur­rent contract at the same time as the pro­po­sed contract comes into force ;
  • Ensure, prior to the conclu­sion of the contract, that the pros­pec­tive poli­cy­hol­der has recei­ved the requi­red pre-contrac­tual docu­ments and infor­ma­tion requi­red for the conclu­sion of the insu­rance contract. The dis­tri­bu­tor must res­pect a mini­mum per­iod of 24 hours bet­ween the receipt of the docu­ments and infor­ma­tion by the pros­pec­tive poli­cy­hol­der and any fur­ther contact by tele­phone (the so-cal­led “two-step sale”, which is now man­da­to­ry);
  • Obtain the signa­ture of the poli­cy­hol­der, either by hand or elec­tro­ni­cal­ly. Fol­lo­wing the signa­ture of the contract, the bro­ker shall inform the poli­cy­hol­der, in wri­ting or by ano­ther durable medium, of his com­mit­ment, the dates of conclu­sion and com­men­ce­ment of the contract, his pos­sible right of renun­cia­tion and the pro­ce­dures for exer­ci­sing this right.
  • Dis­tri­bu­tors are requi­red to record for two years tele­phone com­mu­ni­ca­tions made prior to the conclu­sion of the insu­rance contract.

Non-com­pliance with these new rules may be sanc­tio­ned by the ACPR.

This Reform will cer­tain­ly consti­tute a miles­tone in the French bro­ke­rage land­scape, impo­sing new obli­ga­tions on insu­rance bro­kers. It should be noted that in the rest of Europe, mem­ber­ship of an asso­cia­tion of insu­rance inter­me­dia­ries is most of the time optio­nal, or is no lon­ger man­da­to­ry. Indeed, Spain had impo­sed a simi­lar obli­ga­tion on insu­rance inter­me­dia­ries in the past, but the law was amen­ded in 1992 and since then this obli­ga­tion no lon­ger exists.

FRANCE – BI LOSSES AND COVID-19 : AXA IS TRYING TO PUT AN END TO THE LONG-RUNNING DISPUTE WITH ITS RESTAURANT CLIENTS

More than a year after the beginning of the health crisis, AXA is trying to get out of the legal battle in which it is embroiled against its clients, by means a €300 million settlement offer to 15,000 restaurant owners who took out its “standard policy” with extended coverage for business interruption losses linked to administrative closure in France. This policy contains an exclusion clause, which has given rise to a legal debate widely commented on by the media in France for over a year.

A long tug of war bet­ween AXA and its clients 

Axa has been in the cros­shairs of French res­tau­rant owners for over a year, and has seen a num­ber of law­suits brought against it by hotel and res­tau­rant owners who have not been indem­ni­fied for busi­ness inter­rup­tion losses ari­sing from the pan­de­mic. Taken to task in spring 2020 by Sté­phane Mani­gold, a famous French res­tau­rant owner, AXA ack­now­led­ged that some contracts were not clear­ly wor­ded and agreed to set­tle with some insu­reds. Howe­ver, AXA was deter­mi­ned to defend one of its other poli­cies cove­ring some 15,000 res­tau­rant owners, exclu­ding cove­rage for losses when at least two esta­blish­ments based in the same depart­ment are sub­ject to admi­nis­tra­tive clo­sure for the same rea­son. The­re­fore, the judges of the merits were sei­zed to decide on the vali­di­ty of the contrac­tual clauses of the contract sold by AXA. As a result, since the sum­mer of 2020, deci­sions have been han­ded down by seve­ral courts of first ins­tance, often diver­ging from one ano­ther. These deci­sions have all been appea­led, high­ligh­ting the extent of the tug of war bet­ween French poli­cy­hol­ders and insurers.

A legal mara­thon bet­ween AXA and the poli­cy­hol­ders ensued, and various deci­sions were han­ded down by seve­ral Courts of appeal, some­times in favour of the insu­rer, some­times against it. Indeed, after a first wide­ly com­men­ted deci­sion favou­rable to poli­cy­hol­ders, issued on 25 Februa­ry, ano­ther cham­ber of the same Court of Appeal of Aix-en-Pro­vence ruled on 20 May 2021 in three cases concer­ning three res­tau­rant owners. All three deci­sions were favou­rable to poli­cy­hol­ders. Axa com­men­ted on these deci­sions by sta­ting that it was awai­ting the out­come of other deci­sions, as this contract was still being deba­ted before seve­ral other Courts of appeal. Axa was far-sigh­ted in making this announ­ce­ment as more recent­ly, in a ruling han­ded down on 7 June 2021, the Bor­deaux Court of Appeal agreed with the insu­rer, consi­de­ring that the insu­rance poli­cy should not respond.

A “coup de theatre” to end a long legal battle

Each side having won its case before the judges, AXA then sei­zed the oppor­tu­ni­ty and deci­ded on June 10th to make an offer of 300 mil­lion euros to 15,000 clients “who wish to receive a fixed and defi­ni­tive indem­ni­ty”, the com­pa­ny says. The pro­po­sed set­tle­ment indem­ni­ty is inten­ded to cover an amount equi­va­lent to 15% of the tur­no­ver of cate­ring acti­vi­ty, over the per­iods cove­red by the admi­nis­tra­tive mea­sures pre­clu­ding admis­sion of the public, announ­ced on 14 March 2020 and 29 Octo­ber 2020, and sub­ject to dura­tion and amount limits pro­vi­ded for by the contract.

The set­tle­ment offer is expec­ted to be open from 21 June until 30 Sep­tem­ber 2021, with clients invi­ted to liaise with their usual AXA repre­sen­ta­tive

“AXA has played its role and acted in a res­pon­sible man­ner during the pan­de­mic, sup­por­ting hun­dreds of thou­sands of cus­to­mers, and making a signi­fi­cant contri­bu­tion to the finan­cing of the eco­no­mic reco­ve­ry. We regret the misun­ders­tan­dings with some of our res­tau­rant clients, espe­cial­ly given this sec­tor was par­ti­cu­lar­ly hard hit during the sani­ta­ry cri­sis.” said Patrick Cohen, Chief Exe­cu­tive Offi­cer (CEO) of AXA France

“This amount is equi­va­lent on ave­rage to 50% of the res­tau­rant owners’ BI loss over the lock­downs per­iod”. It should be noted that this finan­cial pro­po­sal concerns all Axa France clients who hold a stan­dard poli­cy inclu­ding an exten­sion for BI losses fol­lo­wing an admi­nis­tra­tive clo­sure, “whe­ther or not they have issued legal pro­cee­dings, whe­ther or not they are still clients, and whe­ther or not they have alrea­dy bene­fi­ted from soli­da­ri­ty aid from our com­pa­ny”, empha­sises Patrick Cohen.

Insu­rance inter­me­dia­ries lit­tle affec­ted by this long legal battle 

This pro­po­sal should have lit­tle impact on claims against insu­rance inter­me­dia­ries, which remain gene­ral­ly rare in France. Indeed, the pro­blem ari­sing from the above-men­tio­ned liti­ga­tion bet­ween AXA and its clients is essen­tial­ly cen­tred on the inter­pre­ta­tion of an exclu­sion clause and the­re­fore can­not rea­so­na­bly be lin­ked to a breach of the inter­me­dia­ries’ duty to advise its clients.

This trend can be confir­med in figures, as French inter­me­dia­ries would be sued in less than 10% of the cases only. Prior to today’s announ­ce­ment, some poli­cy­hol­ders were some­times temp­ted to sue their insu­rance inter­me­dia­ry in order to maxi­mise their chances of obtai­ning indem­ni­ty, arguing that the inter­me­dia­ry should have advi­sed them to take out busi­ness inter­rup­tion cover, or more exten­sive BI cover. Howe­ver, judges sys­te­ma­ti­cal­ly reject claims against insu­rance inter­me­dia­ries whose lia­bi­li­ty is indi­rect­ly affec­ted by liti­ga­tion bet­ween the insu­rer and dis­sa­tis­fied customers.

ITALY – CESIA GATHERED MORE THAN 300 KEY PLAYERS OF THE DISTRIBUTION MARKET IN ITALY

CGPA Europe Italy organized CESIA’s annual meeting — which was held through a videoconference and gathered more than 300 attendees.

CESIA is an ins­ti­tu­tion crea­ted by CGPA Europe to pro­mote the pre­ven­tion of pro­fes­sio­nal indem­ni­ty risks. It is inten­ded to bring toge­ther inter­me­dia­ries, insu­rance com­pa­nies, but also Ita­lian regu­la­tors, uni­ver­si­ty pro­fes­sors and magis­trates around the issue of good pro­fes­sio­nal prac­tice and the pro­fes­sio­nal indem­ni­ty of insu­rance inter­me­dia­ries. CESIA’s work, which is the sub­ject of public mee­tings and publi­ca­tions, has led through the years to the emer­gence of prac­ti­cal solu­tions desi­gned to reduce the risk of claims and contri­bute to streng­the­ning the pro­fes­sio­na­lism of intermediaries.

This new CESIA annual mee­ting was focu­sed on the imple­men­ta­tion of all the pro­duct over­sight and gover­nance (POG) requi­re­ments issued by IVASS (Ita­lian Ins­ti­tute for Insu­rance Super­vi­sion) on August 4th, 2020, as contai­ned in the IDD. These new mea­sures, in line with the pri­ma­ry Ita­lian legal framework :

  • iden­ti­fy the roles and res­pon­si­bi­li­ties of the enti­ties invol­ved in the dis­tri­bu­tion pro­cess of insu­rance products ;
  • iden­ti­fy the ele­ments to be taken into account regar­ding the iden­ti­fi­ca­tion of the tar­get market ;
  • define infor­ma­tion flows bet­ween insu­rers and distributors ;
  • regu­late the dis­tri­bu­tion mecha­nisms of insu­rance products ;
  • and pres­cribe spe­ci­fic control obli­ga­tions on the part of the enti­ty res­pon­sible for insu­rance dis­tri­bu­tion for dis­tri­bu­tors of insu­rance pro­ducts regis­te­red in Sec­tions A (agents), B (bro­kers) and F (ancil­la­ry insu­rance inter­me­dia­ries) of the Single Regis­ter of intermediaries.

This pre­sen­ta­tion, made by Ita­lo Par­ten­za, Foun­der at ITC Law, focu­sed on the conse­quences of this new regu­la­tion for insu­rance inter­me­dia­ries, and the changes that this will bring about for their profession.

The video­con­fe­rence ended with a round table around the expec­ted beha­viour of insu­rance Inter­me­dia­ries faced to the new regu­la­tion, mode­ra­ted by Mas­si­mo Michaud and with the par­ti­ci­pa­tion of Ele­na Bel­liz­zi (IVASS), Nidia Bignot­ti (Foun­der BdA Bignot­ti e d’Ac­qua­rone), Sara Lan­di­ni, and Pier­pao­lo Mara­no (mem­bers of the CESIA scien­ti­fic committee).

This annual mee­ting, crea­ted by CGPA Europe Ita­ly in 2015, has always been a great suc­cess in the Ita­lian insu­rance sec­tor, and contri­butes eve­ry year to the evo­lu­tion of thin­king around the Ita­lian inter­me­dia­tion sec­tor, thanks to the rich inter­ven­tions of its eminent participants.

For more infor­ma­tion, click here (Ita­lian ver­sion): https://www.cgpa-europe.it/che-cosa-cambiera-per-gli-intermediari-con-la-nuova-normativa/

SPAIN – CGPA EUROPE FURTHER STRENGTHENS ITS PRESENCE IN SPAIN THROUGH A VIDEO CONFERENCE WITH KEY PLAYERS IN THE SPANISH INTERMEDIATION MARKET

CGPA Europe organised last week a much-anticipated video conference in Spain to celebrate the 40th anniversary of the Spanish Insurance Contract Law, which was a great success, and gathered about 400 attendees

CGPA Europe and the main orga­ni­sa­tions of the sec­tor — UNESPA, the Conse­jo Gene­ral de Media­dores de Segu­ros (the Gene­ral Coun­cil of the Col­leges of Insu­rance Inter­me­dia­ries), FECOR, ADECOSE, CIAC and AUNNA — pre­sen­ted their views on the deve­lop­ment of the Law during these last four decades.

This video­con­fe­rence, wide­ly com­men­ted on by the Spa­nish press, was an oppor­tu­ni­ty for the key players in the Spa­nish insu­rance mar­ket to ana­lyse the contri­bu­tions of this law from a prac­ti­cal point of view.  From the various court rulings ari­sing out from this law, to the neces­si­ty to adapt it to the cur­rent insu­rance indus­try : various aspects of this law were ana­ly­sed by the spea­kers, who out­li­ned the cru­cial impor­tance and contri­bu­tions of this law for the sector. 

Final­ly, it was poin­ted out that the inclu­sion of arbi­tra­tion as a means of redu­cing dis­putes in the sec­tor would be a signi­fi­cant oppor­tu­ni­ty for the Spa­nish insu­rance sec­tor, if this law were to be amended.

This mee­ting is the­re­fore a step for­ward in terms of the thin­king around the contri­bu­tions of this law to the Spa­nish insu­rance indus­try over the last 40 years, and fur­ther anchors CGPA Euro­pe’s pre­sence in the Spa­nish inter­me­dia­tion market. 

Click here to read the press release (in Spanish):

https://www.cgpa-europe.es/nota-de-prensa-cgpa-europe-ha-organizado-y-patrocinado-una-jornada-para-celebrar-las-cuatro-decadas-de-la-lcs-50 – 80/

IN ITALY, IVASS BEGINS MYSTERY SHOPPING

On 19 March 2021, IVASS (the supervisory authority for insurance intermediaries) published a press release stating that the first visits by mystery shoppers had already begun earlier this month. Indeed, in 2020, IVASS initiated “mystery shopping” in connection with its consumer protection role, and launched two pilot projects to verify directly whether the commercial practices of insurance distributors, as well as on the internet, were correct. In Italy, internet sales of insurance products are increasing, and IVASS aims to perform its duties while adapting to the changes in Italians’ purchase of insurance.

What is Mystery Shopping ?

Mys­te­ry shop­ping — the Ins­ti­tute explains in a memo­ran­dum — is a veri­fi­ca­tion tech­nique to check the qua­li­ty of their goods and ser­vices, and which uses people pre­ten­ding to be customers.

Wide­ly used in various com­mer­cial acti­vi­ties, this tool is consi­de­red a means of “pre­ven­tion” and not only a method of control. It can also be applied in online shop­ping, in which case it is cal­led “Mys­te­ry Sur­fing”. Mys­te­ry shop­ping, which is being deve­lo­ped with the sup­port of EIOPA (the Euro­pean Insu­rance Super­vi­so­ry Autho­ri­ty) and finan­ced by the Euro­pean Union’s Struc­tu­ral Reform Sup­port Pro­gramme, aims to pro­vide the Ita­lian insu­rance regu­la­tor with new tools and metho­do­lo­gies for car­rying out its acti­vi­ty of moni­to­ring the acti­vi­ty of insu­rance distributors.

How does it work ?

The Mys­te­ry Shop­per is a trai­ned pro­fes­sio­nal who acts ano­ny­mous­ly as a poten­tial buyer : in prac­tice, he or she goes to the insu­rance agen­cy, bro­ker, bank or post office and asks for all the infor­ma­tion nee­ded to take out an insu­rance pro­duct. This pro­ce­dure is also valid online : the Mys­te­ry Shop­per surfs ano­ny­mous­ly on the inter­me­dia­ry’s web­site and tries to gather all the infor­ma­tion nee­ded to make an infor­med choice. The­re­fore, the Mys­te­ry Shop­per ascer­tain how insu­rance pro­ducts are offe­red and then sub­mit a report to IVASS.

Unlike tra­di­tio­nal moni­to­ring tools, such as ins­pec­tions, which can unco­ver events and prac­tices that have alrea­dy occur­red, Mys­te­ry Shop­ping mecha­nism is a before-the-event control, and is par­ti­cu­lar­ly use­ful in stop­ping beha­viour that does not com­ply with an inter­me­dia­ry’s obli­ga­tions, such as the requi­re­ment that a pro­duct cor­res­ponds to a customer’s demands and needs.

This mecha­nism must be com­pa­tible with all other pre-exis­ting control tools. To do so, IVASS was ins­pi­red by a stu­dy of other Euro­pean coun­tries that have alrea­dy used this prac­tice in the insu­rance sec­tor, such as the Uni­ted King­dom and Bel­gium and is deve­lo­ping a regu­la­to­ry fra­me­work to allow this.

What do Mystery shoppers check ?

The Mys­te­ry Shop­per should check that insu­rance inter­me­dia­ries com­ply with their obli­ga­tions, such as :

  • Pro­vi­ding com­plete infor­ma­tion to cus­to­mers before and during the sale of an insu­rance pro­duct, and deli­ve­ring spe­ci­fic infor­ma­tion docu­ments to them ;
  • Com­plying with the requi­re­ment that a pro­duct cor­res­ponds to a customer’s demands and needs (the mys­te­ry shop­per will check whe­ther insu­rance inter­me­dia­ries ask their cus­to­mer for the neces­sa­ry information).

Faced with these new control mea­sures and an increa­sin­gly digi­tal and regu­la­ted insu­rance mar­ket,  insu­rance dis­tri­bu­tors must now be more vigi­lant than ever.

What’s next ?

If this expe­rience is suc­cess­ful, it may be exten­ded to other areas and sec­tors it supervises.

Howe­ver, seve­ral issues still need to be addres­sed, such as the inter­play bet­ween mys­te­ry shop­ping and other inves­ti­ga­tive tech­niques or how much weight to give to the mys­te­ry shop­per’s conclusions.

Indeed, other coun­tries as Bel­gium also use mys­te­ry shop­ping as a control method. The FSMA (the Bel­gian wat­ch­dog) has deve­lo­ped this before-the-event control method since 2013, and the conclu­sions of mys­te­ry shop­pers are not suf­fi­cient to jus­ti­fy the adop­tion of concrete mea­sures or the impo­si­tion of sanc­tions on insu­rance inter­me­dia­ries. Never­the­less, they may lead to fur­ther exa­mi­na­tion. It will the­re­fore be up to IVASS to decide whe­ther or not it is appro­priate to use the same model as Bel­gium. It is impor­tant to under­line the fact that mys­te­ry shop­ping was stron­gly cri­ti­ci­sed when the FSMA star­ted using it in Bel­gium. Indeed, some poin­ted out that other means as effec­tive as this method exist, such as tests, exa­mi­na­tions, unco­ve­red on-site ins­pec­tions, etc. Fur­ther­more, mys­te­ry shop­pers can be FSMA staff mem­bers or exter­nal col­la­bo­ra­tors, but the law does not pro­vide for any par­ti­cu­lar pro­fes­sio­nal or ethi­cal qua­li­fi­ca­tion for these third par­ties. Final­ly, mys­te­ry shop­ping has rai­sed some concerns about the conclu­sions uni­la­te­ral­ly drawn by the mys­te­ry shop­pers, or the fact that this method implies that FSMA is both judge and par­ty – which is accor­ding to them a fun­da­men­tal infrin­ge­ment of the sub­jec­tive rights of individuals.

Click here to see the press release : https://www.ivass.it/media/comunicati/documenti/2021/ivcs473.pdf

FIRST COURT RULING REGARDING BUSINESS INTERRUPTION INSURANCE IN SPAIN

The Provincial Court of Girona has ruled on appeal on a case in which the insurer was sued for refusing business interruption cover to a restaurant that was forced to close its business during the pandemic (59/2021 Section Nº1 Civil Court of Girona). The court confirmed that the insurance policy should respond in this case, following a 30 day-closure which was imposed by Covid-related State legislation. In this respect, several insurance associations (Adecose, Aunna, Cojebro, Consejo General, Espabrok and Fecor) have shared their views with their members, advising them to be careful about the conclusions to be drawn from this judgment.

In Spain, BI cover deri­ved from busi­ness clo­sures due to deci­sions of public autho­ri­ties and ari­sing from state of alarm are gene­ral­ly not avai­lable on the mar­ket. When they do, they are not desi­gned for “mass” poli­cy­hol­ders, but for spe­cial risks, most of the time on Anglo-Saxons mar­kets, and are asso­cia­ted with very high costs.

Background

In this case, the insu­red owned a piz­ze­ria, and was for­ced to stop its acti­vi­ties because of the pan­de­mic during 30 days. The owner made a claim to his insu­rer, based on his BI cover. The insu­rance com­pa­ny denied cover, sta­ting that the poli­cy didn’t men­tion the fact that the costs ari­sing from Busi­ness Inter­rup­tion — resul­ting from a govern­men­tal deci­sion in the event of a pan­de­mic — would be cove­red. The insu­red brought the case in front of the Court of First Ins­tance of Giro­na, which dis­mis­sed his request, in a ruling han­ded down on 20 Novem­ber 2020.. That’s why he filled an appeal, and on Februa­ry 2021, the Pro­vin­cial Court over­tur­ned the first ins­tance jud­ge­ment. The court found in favour of the Insu­red, relying on a broad inter­pre­ta­tion of a poli­cy clause, which was consi­de­red by the magis­trate as limi­ting the rights of the insu­red, and – accor­ding to him — should have been typo­gra­phi­cal­ly dis­tinct from the rest of the clauses, and express­ly accep­ted by the insu­red. It is impor­tant to note that the jud­ge­ment, from a cham­ber of the pro­vin­cial court, won’t create a pre­cedent, and takes the oppo­site side of a simi­lar judg­ment, which was han­ded down in 2013. 

This deci­sion ini­tia­ted a debate in the Spain insu­rance indus­try. Indeed, many sta­ke­hol­ders out­li­ned the fact that, for a Busi­ness Inter­rup­tion cover to respond, the occur­rence of a mate­rial damage is neces­sa­ry, as recalls Maciste Argente, CEO of Argente Ges­tión de Ries­gos Cor­re­duría de Segu­ros, S.L.: “Not lin­king the acti­va­tion of the gua­ran­tee to the exis­tence of prior mate­rial damage could lead us, fol­lo­wing the spi­rit of this judg­ment, to incom­pre­hen­sible situa­tions, such as […] the inabi­li­ty to open a busi­ness due to air­port clo­sures that prevent employees from acces­sing it after a trip (remem­ber the pro­blems cau­sed in 2010 by the ash from an erup­tion of a vol­ca­no in Ice­land, which can­cel­led more than 6 000 flights in Europe)”.From a more “legal” point of view, José Anto­nio Badillo Aria, Direc­tor de ‘R.C. Revis­ta de Res­pon­sa­bi­li­dad Civil, Cir­cu­la­ción y Segu­ro’, out­lines that this deci­sion will give rise to some contro­ver­sy in the coming months. Indeed, it seems clear to him that where insu­rance contracts link a BI to the exis­tence of direct mate­rial damage cove­red by the poli­cy, poli­cy­hol­ders are dea­ling with a deli­mi­ta­tion of risk clause. This type of clause is dif­ferent from the clauses limi­ting the rights of the insu­red, which the magis­trate iden­ti­fied in our case, as they do not need to be typo­gra­phi­cal­ly dis­tinct from the rest of the clauses in the contract, nor does it need to be express­ly accep­ted by the insu­red by means of his signa­ture. The­re­fore, the argu­ment of the nature/typography of this type of clause will no doubt be rai­sed in the future, and will be sub­ject to debate. Anto­nio Badillo Aria also high­lights the fact that, in order to resolve simi­lar cases in the future, it will be neces­sa­ry to ana­lyse on a case-by-case basis how such clauses are draf­ted. The­re­fore, there will be no single rule, but the out­comes of future cases will depend on the draf­ting of the clauses.

This court deci­sion is like­ly to ini­tiate a wider move­ment in Spain, which seems to have been ger­mi­na­ting in recent weeks. Indeed, 200 Spa­nish hotel and res­tau­rant owners are now clai­ming to be indem­ni­fied for their BI losses ari­sing from the pan­de­mic, through a class action. They claim a total of 8 mil­lion euros from seven insu­rance com­pa­nies. 

What does it mean for insurance brokers ?

In some ins­tances, poli­cy­hol­ders with poli­cies that do not respond could be temp­ted to sue their insu­rance inter­me­dia­ry for not advi­sing them to take out a poli­cy that could have cove­red BI losses rela­ted to a pan­de­mic. This move­ment is alrea­dy begin­ning to take shape in the Uni­ted-King­dom, Ire­land or France, whe­reas we are not seeing any such claims in Spain or Ita­ly. Never­the­less, Insu­rance asso­cia­tions recall that the court’s inter­pre­ta­tion of the clause does not cor­res­pond to the “spi­rit” of the cover when gran­ted as, when the insu­rance contract was taken out in Februa­ry 2020, “nobo­dy in any sec­tor, nei­ther in the Insu­reds nor insu­rance com­pa­nies, had the objec­tive of cove­ring a pan­de­mic”. Indeed, most of insu­rance poli­cies were not desi­gned to tar­get this type of risk, which wasn’t even consi­de­red by poli­cy­hol­ders. Bla­ming insu­rance inter­me­dia­ries for not having fore­seen a risk that nobo­dy thought of would the­re­fore be a nonsense.

Fur­ther­more, insu­rance asso­cia­tions empha­si­zed the fact that : “pan­de­mic can­not be cove­red by the insu­rance sec­tor in its enti­re­ty. There are no enough reserves or pre­miums to cover it”. Indeed, Maciste Argente under­lines the fact that – when insu­rance poli­cies were incep­ted, before the onset of the pan­de­mic — the pre­mium char­ged by insu­rers for BI covers were not inten­ded to be cal­cu­la­ted in contem­pla­tion of the risk of a glo­bal pan­de­mic “It is both unfair and dan­ge­rous to expect cove­rage to go fur­ther. This is the rea­son why Spa­nish insu­rance asso­cia­tions are cur­rent­ly pro­po­sing solu­tions in public sta­te­ments, such as the crea­tion of a public-pri­vate part­ner­ship at Spa­nish and Euro­pean level, to pro­vide a means of bet­ter mana­ging a future pan­de­mic. Howe­ver, this solu­tion was alrea­dy stu­died in other coun­tries, but seems quite dif­fi­cult to imple­ment. For ins­tance, France was plan­ning to set up a new com­pul­so­ry insu­rance scheme cal­led “CATEX” to cover busi­ness inter­rup­tion ari­sing from a future pan­de­mic. That’s why a wor­king group was set up and qui­ck­ly pro­po­sed a sce­na­rio aimed at offe­ring a lump sum “resi­lience capi­tal” to VSEs and SMEs in the event of an admi­nis­tra­tive clo­sure due to a pan­de­mic (but also due to a natu­ral disas­ter, an act of ter­ro­rism or popu­lar riots). This idea was recent­ly drop­ped by the French govern­ment, because it would have meant impo­sing new com­pul­so­ry contri­bu­tions on SMEs, which may not be able to afford them. Fur­ther­more, rein­su­rers sha­red their views on the dif­fi­cul­ty they would have in relea­sing capa­ci­ty if a mul­ti-per­il scheme were adop­ted. Pla­nète CSCA, the pro­fes­sio­nal bro­ke­rage union, has also expres­sed some reser­va­tions, wishing to limit its cove­rage to pan­de­mic risk. As no consen­sus was rea­ched, the pro­ject was dropped.

In Europe, unprecedented growth in rulings in favor of policyholders

This deci­sion is in line with other coun­tries whose courts have ruled on pan­de­mic-rela­ted BI losses, but is like­ly to have a more limi­ted impact. Indeed, UK regu­la­tor, the Finan­cial Conduct Autho­ri­ty (FCA), took the ini­tia­tive to bring the case against a sample of over 60 insu­rers because it felt that a large num­ber of com­mer­cial package poli­cy wor­dings would cover claims ari­sing from the pan­de­mic, whe­ther deli­be­ra­te­ly or not. After a first ins­tance jud­ge­ment in favour of poli­cy­hol­ders, this test case was fast tra­cked to the Supreme Court for a final deci­sion, which was han­ded down on 15th Janua­ry 2021, and gene­ral­ly found in favour of the FCA. It is the ‘final reso­lu­tion’ of the test case and there is no fur­ther recourse through the English courts.In Ire­land, a simi­lar deci­sion was han­ded down by the High Court, a few weeks after the UK Supreme Court’s deci­sion, in a test case oppo­sing the insu­rance com­pa­ny, FBD, to four publi­cans. This deci­sion pro­vides cla­ri­ty to poli­cy­hol­ders see­king indem­ni­ty for busi­ness inter­rup­tion as a result of the Covid-19 pan­de­mic. FBD announ­ced that it won’t be appea­ling the deci­sion. This deci­sion is quite dif­ferent from the FCA’s Test Case though, as unlike the UK wat­ch­dog, the Cen­tral Bank of Ire­land did not take the ini­tia­tive to bring such a test case to Court, cer­tain­ly due to sta­tu­to­ry res­tric­tions, and let the mar­ket liti­gate the case. Des­pite its absence in the test case pro­cee­dings, the Cen­tral Bank is appa­rent­ly willing to super­vise this issue, as it announ­ced that it “wel­comes the judg­ment of the High Court” and that it will be “clo­se­ly exa­mi­ning the poten­tial impact of this judg­ment for cus­to­mers in the context of its sus­tai­ned and ongoing enga­ge­ment with insurers”.

Unlike the Spa­nish deci­sion, these two deci­sions are like­ly to set pre­ce­dents in the Irish and UK mar­kets, and reflect a broa­der move­ment, due to the inter­ven­tion of the watchdogs.Therefore, there is no single approach to this pro­blem at Euro­pean level, due to the spe­ci­fi­ci­ties of each market.

IRELAND : COVID-19 — A FEW WEEKS AFTER THE UK SUPREME COURT’S FINAL DECISION IN THE FCA TEST CASE, THE IRISH HIGH COURT RULES IN FAVOUR OF POLICYHOLDERS

The Dublin High Court handed down a landmark decision in favour of policyholders on February 5, 2021, in four test cases brought by publicans against FBD Insurance (“FBD”), providing clarity to policyholders seeking indemnity for business interruption as a result of the Covid-19 pandemic. FBD announced that it won’t be appealing the decision, and that the judgment “provided clarity to all parties concerned”.

A few weeks after the UK Supreme Court issued its final deci­sion in the FCA test case, the Irish High Court ruled in favour of poli­cy­hol­ders. The FBD insu­rance deci­sion will be a miles­tone in the Irish busi­ness inter­rup­tion insu­rance land­scape. Note­wor­thy point, the Irish High Court delayed its deci­sion in order to consi­der the par­ties’ sub­mis­sions on the poten­tial impact of the FCA test case. This deci­sion is quite dif­ferent from the FCA’s Test Case though, as unlike the UK wat­ch­dog, the Cen­tral Bank of Ire­land did not take the ini­tia­tive to bring such a test case to Court, cer­tain­ly due to sta­tu­to­ry res­tric­tions, and let the mar­ket liti­gate the case. Des­pite its absence in the test case pro­cee­dings, the Cen­tral Bank is appa­rent­ly willing to super­vise this issue, as it announ­ced that it “wel­comes the judg­ment of the High Court” and that it will be “clo­se­ly exa­mi­ning the poten­tial impact of this judg­ment for cus­to­mers in the context of its sus­tai­ned and ongoing enga­ge­ment with insu­rers”. The CBI also issued a super­vi­so­ry fra­me­work for insu­rers last August, set­ting out its expec­ta­tions on how insu­rers should assess Busi­ness Inter­rup­tion claims and how sys­te­mic issues of cus­to­mer harm should be iden­ti­fied and addressed.

Back­ground

The Irish test case invol­ved four pubs that held insu­rance poli­cies with FBD. The insu­rer refu­sed to indem­ni­fy the publi­cans for losses ari­sing from dis­rup­tion cau­sed to their busi­nesses by Covid-19, sta­ting that their poli­cies did not cover these types of claims.

Indeed, FBD’s poli­cies contai­ned a clause confir­ming that pubs would be indem­ni­fied if they were clo­sed by order of the govern­ment autho­ri­ty in rela­tion to “out­breaks of conta­gious or infec­tious diseases on the pre­mises or within 25 miles of same”. The publi­cans argued that :

- the fai­lure to cover their claims was a breach of contract ;

- and that under their poli­cies of insu­rance with FBD, they were entit­led to have their conse­quen­tial losses cove­red by an insu­rable risk.

FBD contes­ted this, and argued that the impo­sed clo­sure could not be said to have been cau­sa­ti­ve­ly lin­ked to an out­break of Covid-19 which occur­red within the 25-mile radius sur­roun­ding the publi­can’s res­pec­tive premises.

Howe­ver, the High Court dis­mis­sed FBD’s argu­ments and ruled in favour of the pub owners, sta­ting that the BII poli­cies respon­ded where the clo­sure was cau­sed by natio­nal disease out­break, as long as :

  • there was an out­break within the 25 mile radius of the business,
  • the out­break was one of the causes of the closure.

In its ope­ning sta­te­ment, the High Court sta­ted that “It is hoped that the ulti­mate out­come of these cases will assist in the reso­lu­tion of a large num­ber of simi­lar claims”, with the hope that this deci­sion will ensure that simi­lar busi­ness inter­rup­tion claims are resol­ved without recourse to litigation.

What’s next ?

FBD said that it was com­mit­ted to paying valid BII claims and will endea­vour to pro­cess claims as qui­ck­ly as pos­sible and in accor­dance with the court’s judg­ment. It also indi­ca­ted that it will make inter­im pay­ments to affec­ted poli­cy­hol­ders while wai­ting final cla­ri­ty from the court on issues of quan­tum. Indeed, test actions to deter­mine how much FBD must pay out will be heard in the High Court after April.

As the FCA’s test case, the Irish test case jud­ge­ment is posi­tive news for many cus­to­mers but - as for UK bro­kers – it will create an expo­sure for insu­rance inter­me­dia­ries, as explai­ned in an article writ­ten by Richard Webb.

Sources : https://www.pinsentmasons.com/out-law/news/business-interruption-insurance-ruling-favours-irish-hospitality-businesses

https://www.mondaq.com/ireland/insurance-claims/1036510/covid-19-business-interruption-insurance – takeaways-from-the-fbd-insurance-decision

CGPA EUROPE UNVEILS NEW WEBSITES ENTIRELY DEDICATED TO INSURANCE INTERMEDIARIES

CGPA Europe, the European specialist of Professional Indemnity Insurance for Insurance Intermediaries, is pleased to announce that its websites have been given a new look and are now available on the internet. 

Our new web­sites, ergo­no­mic and intui­tive, allow our clients and pros­pects to get an over­view of the main fea­tures of our offers by coun­tries. Each mar­ket where CGPA Europe is present has its own web­site, pre­sen­ting our local offers, gua­ran­tees and asso­cia­ted services.

Our main web­site, which can now be acces­sed by cli­cking here www.cgpa-europe.com allows users to get an over­view of CGPA Europe and its acti­vi­ties in Europe. 

Since its crea­tion, CGPA Europe has deve­lo­ped its image around two main cha­rac­te­ris­tics : spe­cia­li­sed and tai­lor-made insu­rance pro­ducts, and the varie­ty of its ser­vices, which make CGPA Europe a lit­tle more than an ordi­na­ry insurer.

These new web­sites, regu­lar­ly enri­ched with content, allows insu­rance inter­me­dia­ries to focus their jour­ney on the latest news or publi­ca­tions, enti­re­ly dedi­ca­ted to their pro­fes­sion. A Euro­pean map­ping of claims is also inte­gra­ted into our main web­site, allo­wing users to easi­ly find out more about the most signi­fi­cant claims against insu­rance inter­me­dia­ries, sor­ted out by country. 

Click here to see our Euro­pean web­site : www.cgpa-europe.com

Click here to see our Ita­lian web­site : www.cgpa-europe.it

Click here to see our Spa­nish web­site : www.cgpa-europe.es

Click here to see our Ger­man web­site : www.vermittlerdeckung.de

Click here to see our UK web­site : www.cgpa-europe.co.uk

Click here to see our Irish web­site : www.cgpa-europe.ie

Click here to see our Luxem­bourg web­site : www.cgpa-europe.lu

Since its crea­tion, CGPA Europe has expan­ded its acti­vi­ties to seve­ral coun­tries and brings to Europe near­ly 90 years of expe­rience dedi­ca­ted sole­ly to pro­vi­ding Pro­fes­sio­nal Indem­ni­ty Insu­rance for Insu­rance Inter­me­dia­ries. In a context of increa­sing har­mo­ni­sa­tion for the dis­tri­bu­tion of insu­rance pro­ducts within Europe, CGPA Europe creates tai­lor-made insu­rance poli­cies, adap­ted to the spe­ci­fi­ci­ties of each market.

UK INSURANCE BROKERS AND THE FCA TEST CASE

Covid-19 has impac­ted the UK in many ways. The topic of insu­rance has made its way into the natio­nal media and not in a good way. Much of this is the issue around the cover being pro­vi­ded for busi­ness inter­rup­tion. Insu­rers never inten­ded to cover a pan­de­mic but loo­se­ly wor­ded poli­cies led to a court case that was fast tra­cked to the Supreme Court for a final deci­sion, which was han­ded down very recently.

Richard Webb is Direc­tor at Man­ches­ter Under­wri­ting Mana­ge­ment (MUM), exclu­sive part­ner of CGPA Europe in the Uni­ted-King­dom. MUM is a spe­cial­ty under­wri­ting agen­cy whose cur­rent pro­ducts include Bro­kers’ Pro­fes­sio­nal Indem­ni­ty Insu­rance, and is a lea­der on this mar­ket. This Pro­fes­sio­nal Indem­ni­ty insu­rance faci­li­ty, insu­red by CGPA Europe and under­writ­ten and mana­ged by Man­ches­ter Under­wri­ting Mana­ge­ment Limi­ted has been accre­di­ted by the Bri­tish Insu­rance Bro­kers’ Asso­cia­tion (BIBA) to pro­vide cover to its members. 

Richard has over 30 years’ insu­rance expe­rience : he star­ted his career with Gene­ral Acci­dent, before spe­cia­li­sing in the Pro­fes­sio­nal Indem­ni­ty Mar­ket. In this article, he high­lights the dan­ger for Insu­rance Bro­kers with the UK PI mar­ket : indeed not only a hard mar­ket is a hard envi­ron­ment to work in, but it could also create higher risks of claims against Insu­rance Brokers. 


The case was brought by the UK regu­la­tor, the Finan­cial Conduct Autho­ri­ty (FCA) against a sample of insu­rers because it felt that a large num­ber of com­mer­cial package poli­cy wor­dings would cover claims ari­sing from the pan­de­mic, whe­ther deli­be­ra­te­ly or not. The Court deci­sion is gene­ral­ly in favour of the FCA and it is esti­ma­ted that over 60 insu­rers and 700 wor­dings are affec­ted by the jud­ge­ment. Most of these poli­cies are for small and medium-sized enter­prises (SME). 

The jud­ge­ment means that insu­rers are having to review claims that had been made and decli­ned as well as making it pos­sible for new claims to be made. This means contac­ting their insu­reds to make them aware that the claim is being revie­wed. This has crea­ted a lot of addi­tio­nal work for insu­rers, bro­kers and clients. It has also rai­sed expec­ta­tions of clients who pre­vious­ly had had their claim rejec­ted or had been told that they could not make a claim – most of these cus­to­mers will be insu­red on wor­dings that are not affec­ted by the test case but the care­less repor­ting in the media has rai­sed expec­ta­tions that won’t be fulfilled.

Bro­kers will be expo­sed to com­plaints whe­re­ver there are unful­filled expectations. 

First­ly, those clients who now have a valid claim that will be asses­sed and set­tled. This is an easy task and made even easier by insu­rance com­pa­nies having to contact their insu­reds to make them aware they are revie­wing the file. Many of the affec­ted wor­dings car­ry very low sub-limits for busi­ness inter­rup­tion and even cus­to­mers that receive a pay­ment might be disappointed.

Second­ly, there are those clients who had not made a claim but may now be entit­led to. The advice to bro­kers is to contact those clients to make them aware that they can make a claim if they so wish and that time is tight.

This leaves those clients who made a claim which was not cove­red and so has been cor­rect­ly decli­ned. They might argue that the pos­si­bi­li­ty of a glo­bal pan­de­mic should have been dis­cus­sed when bro­kers were revie­wing their needs, which would have invol­ved crys­tal balls and cus­to­mers paying mate­rial pre­miums even if spe­ci­fic cover had been avai­lable (and would they have paid?). Or they might argue that the bro­ker should have sold them a poor­ly draf­ted poli­cy that took dozens of lawyers, the High Court and the Supreme Court to unders­tand. In the UK, cus­to­mers can make a com­plaint to the Finan­cial Ombuds­man without expense to them­selves, who can make final deci­sions on com­plaints up to a value of £355,000 that are bin­ding on bro­kers and insu­rers. And they can still go to the courts.

Hand­ling claims is often made more com­pli­ca­ted by the emo­tio­nal fac­tors that can creep into any dis­pute. Life is tough in the mid­st of a pan­de­mic. People have suf­fe­red berea­ve­ment of fami­ly and friends and serious finan­cial losses. Hand­ling clients who are faced by such chal­lenges is not easy, espe­cial­ly when the media has incor­rect­ly rai­sed expectations. 

This has left bro­kers in the UK facing a lot of addi­tio­nal work in revie­wing a myriad of dif­ferent poli­cies, hand­ling and advi­sing clients on what to do next and, in the worst case, having to deal with com­plaints against them or, worse still, legal action. Bro­kers are having to under­take this work whil­st we are in a lock­down in the UK with most people wor­king from home. 

And this has affec­ted the pro­fes­sio­nal indem­ni­ty mar­ket in the UK mas­si­ve­ly. Here, bro­kers are always expo­sed to claims any­way – the UK is a liti­gious socie­ty where unful­filled expec­ta­tion often leads to legal action at the best of times – and this is the oppo­site of the best of times. Very few insu­rers will quote for new busi­ness and rates have rough­ly tre­bled in the last year.

The FCA Test case jud­ge­ment is posi­tive news for many cus­to­mers but it has crea­ted an expo­sure for bro­kers. The like­li­hood of an SME client suc­cess­ful­ly suing their bro­ker for not pro­vi­ding them with a poli­cy that covers pan­de­mic is still fair­ly remote – they will need to show that there was a duty to look at insu­ring pan­de­mic, that the bro­ker brea­ched that duty and that the breach led to finan­cial loss (i.e. that cover would have been avai­lable and pur­cha­sed). As is well docu­men­ted in the court case, insu­rers were not kno­win­gly offe­ring pan­de­mic cover for SME cus­to­mers who in turn were unli­ke­ly to buy such cover even if it had been avai­lable. But it has left bro­kers facing a group of unhap­py clients who now feel their claims should be cove­red, right­ly or wron­gly. Whil­st the claims and com­plaints can be defen­ded, it will take time and enor­mous legal expense. It will take many years to res­tore the insu­rance profession’s reputation.

SPAIN SETS UP ITS FIRST FINANCIAL AND INSURANCE MEDIATION BODY

Member States have sought to encourage alternative dispute resolution methods in an effort to relieve the workload congestion in the Courts and longer time of legal proceedings. In addition to the “traditional” tools of arbitration, mediation and conciliation, the financial sector in several Member States has set up its own dispute resolution system. Their powers, jurisdiction and resources vary from one Member State to another. After several countries such as Ireland, the United Kingdom, Belgium or France, Spain is creating a new mediation authority to resolve disputes in the banking, investment and insurance sectors.

Its crea­tion was actual­ly deci­ded in 2018, but was momen­ta­ri­ly hal­ted for poli­ti­cal rea­sons and because of the health cri­sis. After seve­ral months of laten­cy, this pro­ject is about to be imple­men­ted “immi­nent­ly” by the Minis­try of Eco­no­my, accor­ding to some sources.

The Inde­pendent Admi­nis­tra­tive Autho­ri­ty for the Pro­tec­tion of Finan­cial Cus­to­mers (Auto­ri­dad Admi­nis­tra­ti­va Inde­pen­diente de Pro­tec­ción del Cliente Finan­cie­ro), will have as its main mis­sion to resolve dis­putes bet­ween the finan­cial sec­tor – inclu­ding insu­rance inter­me­dia­ries — and cus­to­mers, and will be able to issue bin­ding deci­sions up to a cer­tain amount. This thre­shold could be set at 50,000 euros, accor­ding to some sources, but this would not have been deci­ded yet.

Cur­rent­ly, Spa­nish insu­rance com­pa­nies and bro­ke­rage firms have two options for dea­ling with com­plaints against them : they can either set up their own “Cus­to­mer Ser­vice Depart­ment”, or out­source this ser­vice to a “Defen­sor del Cliente” (“an inde­pendent enti­ty or an inde­pendent expert, res­pon­sible for dea­ling with and resol­ving com­plaints and claims). Dis­sa­tis­fied consu­mers must go to court if they do not agree with the solu­tions pro­po­sed to resolve their complaint.

Most of the time, insu­rance com­pa­nies have a “cus­to­mer ser­vice depart­ment” to deal with the large num­ber of com­plaints filed against them. Bro­kers gene­ral­ly opt for a “Defen­sor del Cliente”, often through the use of law firms, and this ser­vice is most of the time free of charge. Thus, in the event of a claim, consu­mers may be offe­red one of these chan­nels to resolve their com­plaint : either the cus­to­mer ser­vice depart­ment or the Defen­sor del Cliente, depen­ding on the ser­vice set up by the bro­ker or the insu­rance company.

With the crea­tion of the Ombuds­man, these media­tion chan­nels will still exist, but consu­mers will now have a “second option” to resolve their com­plaint before suing their insu­rance bro­ker. The two sys­tems will the­re­fore work toge­ther, since consu­mers will still have to first lodge a com­plaint with the bro­ker, before refer­ring the mat­ter to the ombuds­man if their com­plaint is rejec­ted or has not been dealt with within one month.

Note :

  • In some other coun­tries (Ire­land and UK) as well, the deci­sions issued by Ombuds­men are legal­ly bin­ding on both par­ties, while in some other coun­tries (Bel­gium, France), they have a more “moral authority”.
  • Unlike courts, Euro­pean Ombuds­men can issue their deci­sions on a “fair and rea­so­nable” test. Indeed, Ombuds­men are not strict­ly bound to apply the legal prin­ciples or case law deve­lo­ped by courts. This makes it pos­sible to avoid strict appli­ca­tion of the terms of the contract or the rule of law when it would lead to a solu­tion that is contra­ry to com­mon sense or mani­fest­ly unfair. Thus the solu­tions pro­vi­ded by Ombuds­men occa­sio­nal­ly turn out to be dif­ferent from a judi­cial decision.
  • In Com­mon law coun­tries, the powers of Ombuds­men have recent­ly been increa­sed so that they can now direct a finan­cial ser­vices pro­vi­der or dis­tri­bu­tor of insu­rance pro­ducts to pay com­pen­sa­tion up to €500,000 in Ire­land, and £350,000 in the Uni­ted Kingdom.

This new autho­ri­ty will have exten­sive powers, such as the power to declare abu­sive condi­tions null and void. Accor­ding to the sources consul­ted, the new body will be able to rely on the com­plaints ser­vices of the three other finan­cial super­vi­sors : the Bank of Spain, the Natio­nal Secu­ri­ties Mar­ket Com­mis­sion (Comi­sión Nacio­nal del Mer­ca­do de Valores, CNMV), and the Direc­to­rate Gene­ral for Insu­rance and Pen­sion Funds (Direc­ción Gene­ral de Segu­ros y Fon­dos de Pen­siones, DGSFP). The dif­fe­rence is that the deci­sions of the Inde­pendent Admi­nis­tra­tive Autho­ri­ty for the Pro­tec­tion of Finan­cial Cus­to­mers will be binding.

Accor­ding to avai­lable sources, the new media­tor will lack the capa­ci­ty to impose sanc­tions on par­ties. Never­the­less, if it becomes aware of facts that could consti­tute infrin­ge­ments, it will com­mu­ni­cate the infor­ma­tion in its pos­ses­sion to the Bank of Spain, or the rele­vant super­vi­so­ry authority.

In addi­tion, accor­ding to some sources, filing a com­plaint with the future Ombuds­man will gene­rate a cost of €200 to be paid by the insu­rance com­pa­ny or the inter­me­dia­ry, which can only encou­rage them to try to offer accep­table solu­tions to their clients on their own.

Sources : Las deci­siones del nue­vo super­vi­sor de clientes de segu­ros y finan­zas serán vin­cu­lantes has­ta 50.000 euros — Segu­ros News

Eco­nomía ulti­ma la crea­ción del cuar­to super­vi­sor finan­cie­ro para defen­der al cliente | Mer­ca­dos | Cin­co Días (elpais.com)

THE 7th EDITION OF THE OBSERVATORY IDENTIFIES A POSITIVE TREND IN FAVOUR OF INSURANCE INTERMEDIARIES IN EUROPEAN CASE LAW

CGPA Europe conti­nues its efforts to pro­vide the pro­fes­sion with accu­rate stu­dies on the evo­lu­tion of Euro­pean case law affec­ting the pro­fes­sio­nal indem­ni­ty of insu­rance inter­me­dia­ries. The 7th edi­tion of the Obser­va­to­ry also focuses on regu­la­to­ry deve­lop­ments in Europe and key figures of the Euro­pean inter­me­dia­tion market.

CGPA Europe has once again col­lec­ted signi­fi­cant legal deci­sions across 7 coun­tries to enrich its data­base of Euro­pean case law. This data­base, dedi­ca­ted to the pro­fes­sio­nal indem­ni­ty of insu­rance inter­me­dia­ries, focuses this year on the scope of an intermediary’s duty to pro­vide infor­ma­tion and advice. In a posi­tive sign for the pro­fes­sion, the trend of the Euro­pean courts is to set rea­so­nable limits on the duties of inter­me­dia­ries. Indeed, from a French deci­sion spe­ci­fying that the duties impo­sed on inter­me­dia­ries do not require them to take any par­ti­cu­lar action if — mere­ly by rea­ding the poli­cy or endor­se­ment he signs — the insu­red is able to unders­tand for him­self the scope of the condi­tions of the poli­cy taken out, to an Irish deci­sion out­li­ning that the bro­ker does not have a duty to check the infor­ma­tion pro­vi­ded by his client and is the­re­fore not liable for any omis­sions or mis­re­pre­sen­ta­tions : this move­ment is to be applau­ded although dif­fe­rences in assess­ment and concepts conti­nue to exist in dif­ferent jurisdictions.

The “dos­sier” part deals with regu­la­to­ry deve­lop­ments in Europe, and in par­ti­cu­lar with the role of Euro­pean ombuds­men in dea­ling with claims against insu­rance inter­me­dia­ries ; sanc­tions by natio­nal control autho­ri­ties against insu­rance inter­me­dia­ries ; as well as the impact of the GDPR on the pro­fes­sion. CGPA Europe has com­mit­ted to a stu­dy of each of these sub­jects with the aim of pro­vi­ding a clea­rer unders­tan­ding of the envi­ron­ment in which Euro­pean insu­rance inter­me­dia­ries ope­rate on a day-to-day basis.

CGPA Europe also com­pletes its stu­dy on the changes in the dis­tri­bu­tion work­force in Europe, high­ligh­ting the vita­li­ty of the inter­me­dia­tion sec­tor faced to the gro­wing deve­lop­ment of direct sales and bank-insu­rance players. It is impor­tant to note that the Covid-19 pan­de­mic has affec­ted the figures usual­ly publi­shed by natio­nal super­vi­so­ry autho­ri­ties, most of which have had to post­pone their annual reports. The­re­fore, this new ver­sion of the Obser­va­to­ry focuses on five Euro­pean coun­tries for which data for which infor­ma­tion was avai­lable at the time of this report.

Click here to read the 7th edi­tion of the Observatory :

COVID-19 PANDEMIC IN FRANCE, UK AND SPAIN : WHAT IMPACT ON INSURANCE INTERMEDIARIES ?

The Financial Conduct Authority (FCA) published early January the results from its survey of firms to determine their financial resilience and assess the potential impact of the Coronavirus (Covid-19) pandemic on their business activities. Meanwhile, in France, French insurance intermediaries are showing resilience, despite growing fears about the consequences of the pandemic.

UK – FCA REVEALS THE IMPACT OF THE COVID-19 PANDEMIC ON INSURANCE INTERMEDIARIES THROUGH A RECENT SURVEY

Through its sur­veys, the FCA tried to assess the real-time effect of the pan­de­mic on the finances of the firms that the wat­ch­dog pru­den­tial­ly regu­lates. The sur­veys were sent to 23,000 regu­la­ted firms, and show that, bet­ween Februa­ry (pre-lock­down) and May-June (during the impact of the first lock­down), firms across the sec­tors expe­rien­ced signi­fi­cant change in their total amount of liqui­di­ty. The watchdog’s sur­vey did not include the 1,500 lar­gest firms in the UK finan­cial sec­tor, which are regu­la­ted by the Bank of England.
The results from the sur­vey bro­ken down by indi­vi­dual ques­tion can be found by cli­cking here :
The coro­na­vi­rus (Covid-19) finan­cial resi­lience sur­vey data | FCA.

Here are the key fin­dings of this survey :

  • Up to 4,000 finan­cial ser­vices firms in the UK are at risk of fai­ling due to the coro­na­vi­rus pandemic ;
  • Three sec­tors saw an increase in liqui­di­ty bet­ween the two repor­ting per­iods : Retail Invest­ments (8%), Retail Len­ding (8%) and Who­le­sale Finan­cial Mar­kets (83%), the lat­ter seeing the grea­test increase.
  • The other 3 sec­tors saw a decrease in avai­lable liqui­di­ty : Insu­rance Inter­me­dia­ries & Bro­kers (30%), Pay­ments & E‑Money (11%) and Invest­ment Mana­ge­ment (2%).
  • Howe­ver, the wat­ch­dog said stron­ger mar­kets and a return to eco­no­mic growth would sup­port UK finan­cial ser­vices firms.

The area of insu­rance inter­me­dia­ries and bro­kers saw a decline in terms of avai­lable liqui­di­ty : from £16.2 bil­lion in Februa­ry 2020 to £11.4 bil­lion in May/June – their total liqui­di­ty resources went down because of the coro­na­vi­rus cri­sis. Never­the­less, data on insu­rance inter­me­dia­ries can be put into pers­pec­tive, as, in both Total and Median data, insu­rance inter­me­dia­ries’ cash inflow was suf­fi­cient to cover cash needs.

Accor­ding to the FCA, 44% of the sur­veyed insu­rance inter­me­dia­ries and bro­kers have fur­lou­ghed staff and 19% have recei­ved a govern­ment-backed loan. The FCA urged cau­tion about using the sur­vey data to make pre­dic­tions. In addi­tion, it was also points out that the sur­vey was conduc­ted prior to the exten­sion of the fur­lough scheme, deve­lop­ments in COVID-19 vac­cines, and the announ­ce­ment of new restrictions.

IN FRANCE, INSURANCE INTERMEDIARIES ARE SHOWING RESILIENCE, DESPITE GROWING FEARS ABOUT THE CONSEQUENCES OF THE PANDEMIC.

A stu­dy conduc­ted by the invest­ment bank Cam­bon Part­ners last May shows that a drop in tur­no­ver and pro­fi­ta­bi­li­ty is anti­ci­pa­ted by the whole sec­tor. 26% of insu­rance inter­me­dia­ries fore­cast a drop in tur­no­ver of around 20% and 23%, and expect a drop in pro­fi­ta­bi­li­ty of around 10%. Faced with these rather gloo­my eco­no­mic fore­casts, 75% of bro­kers and agents never­the­less state that they have adap­ted their deve­lop­ment stra­te­gy (31% iden­ti­fied new activities/products to com­pen­sate for the drop in acti­vi­ty) and adop­ted defen­sive mea­sures (25% froze ongoing recruitment).

For its part, AGEA, the natio­nal fede­ra­tion of gene­ral agents’ unions, conduc­ted its own sur­vey on the Covid-19 cri­sis among its mem­bers last sum­mer. It emer­ged that more than half of the agents expres­sed fears about their future. Can­cel­la­tions of poli­cies, a drop in col­lec­tions of pre­mium, as well as com­pe­ti­tion from bank-insu­rance are their main causes for concern. Here are the key points of this survey :

  • 52% of agents expres­sed fears for their future.
  • 48.4% of Non-life agents noted, during the coro­na­vi­rus cri­sis, a drop in col­lec­tions of pre­mium and the­re­fore in commissions.
  • 36.8% of Life agents noted a drop in col­lec­tions during the coro­na­vi­rus crisis.

Accor­ding to this sur­vey, agents expe­rien­ced a drop in col­lec­tion of pre­mium of bet­ween 1% and 10%. This decrease lea­ded to a drop in com­mis­sions. “Our ana­ly­sis is that this drop in com­mis­sions is cor­re­la­ted with the com­pa­nies’ sup­port plans for pro­fes­sio­nal cus­to­mers. For example, when two months of pre­miums are refun­ded to a client, it is 20% less on the agent’s com­mis­sions,” explains Gré­goire Dupont, AGEA’s CEO.

As for bro­ker, PLANETE CSCA, the Union of insu­rance bro­kers in France, publi­shed a report last May , high­ligh­ting the fact that insu­rance bro­kers have shown resi­lience in their mana­ge­ment of the cri­sis. Accor­ding to this publi­ca­tion, they were able to adapt their wor­king methods and their rela­tion­ships with their clients, which were streng­the­ned during the lock­down per­iod. Des­pite these posi­tive fin­dings for the pro­fes­sion, the report states that insu­rance bro­ke­rage firms could also face eco­no­mic dif­fi­cul­ties if the eco­no­my as a whole were to expe­rience dif­fi­cul­ties due to the health cri­sis. It also points out that the eco­no­mic cri­sis has not yet revea­led all its effects.

IN SPAIN, THE TURNOVER OF THE SECTOR FALLS BY 8.30% IN 2020

Some lines of busi­ness, such as motor insu­rance, have been dee­ply affec­ted by the pan­de­mic, although non-life insu­rance as a whole is expe­rien­cing growth in its pre­mium volume. Pre­mium income at the end of 2020 amoun­ted to 58,850 mil­lion euros, 8.3% less than the pre­vious year, as recent­ly announ­ced by the Spa­nish Union of Insu­rance and Rein­su­rance Com­pa­nies (Unión Españo­la de Enti­dades Ase­gu­ra­do­ras y Rea­se­gu­ra­do­ras, UNESPA). The asso­cia­tion explains this drop main­ly by “the eco­no­mic para­ly­sis gene­ra­ted by the out­break of the Covid-19 pan­de­mic and the mea­sures taken to contain it”. Never­the­less, the asso­cia­tion empha­sises the “high” levels of sol­ven­cy in the sec­tor, “which far exceed the requi­re­ments of the regu­la­tions “. From the begin­ning of the pan­de­mic, a large num­ber of insu­rance com­pa­nies have taken very favou­rable mea­sures for their clients, such as :

  • The crea­tion of an eco­no­mic fund of soli­da­ri­ty of 37,000,000 euros to indem­ni­fy health professionals ;
  • The exclu­sions rela­ted to epidemics/pandemics inclu­ded in Life poli­cies were not applied.

As for insu­rance inter­me­dia­ries, it is impor­tant to high­light their com­mit­ment to their clients, hel­ping them both to recon­fi­gure their insu­rance pro­grams (par­ti­cu­lar­ly in the event of an increase or decrease in insu­red risks), agreeing on new contrac­tual terms and condi­tions, as well as defer­ring the pay­ment of pre­miums. Insu­rance inter­me­dia­ries, either in per­son and/or wor­king from home, have redou­bled their efforts to conti­nue advi­sing and atten­ding to their clients adequately.

CGPA Europe Under­wri­ting under­lines the fact that, in Spain, there have been no claims against insu­rance inter­me­dia­ries for BI losses ari­sing from the Covid-19 pandemic.

Never­the­less, the last few months, dif­fi­cul­ties have emer­ged in the rene­wal pro­cess of some accounts – most­ly for indus­trial acti­vi­ties – as insu­rance com­pa­nies are often willing to include a Covid-19 clause in their wor­dings, while their finan­cial capa­ci­ties are redu­cing and eco­no­mic condi­tions tigh­te­ning. As a result, inter­me­dia­ries and insu­rers are concer­ned about the deve­lop­ments that will take place in 2021, due in par­ti­cu­lar to the disap­pea­rance of a large num­ber of com­pa­nies and a slow­down in the Spa­nish economy.

EIOPA RELEASES ITS FIRST REPORT ON ADMINISTRATIVE SANCTIONS AND OTHER MEASURES IMPOSED UNDER THE IDD BY NCAS

This report enables players in the European Insurance industry to identify for the first time the sanctions adopted by National Competent Authorities (NCAs) against insurance distributors throughout the European Union, from the application of the IDD in 2018 until the end of 2019.

Under Article 36 (2) of the IDD, NCAs shall pro­vide EIOPA annual­ly with infor­ma­tion regar­ding all admi­nis­tra­tive sanc­tions and other mea­sures impo­sed, and EIOPA shall publish that infor­ma­tion in an annual report, in order to have an over­view of these sanc­tions. The publi­ca­tion of this report is a novel­ty ; howe­ver, it has not allo­wed EIOPA to draw gene­ral trends from it. Here are the key fin­dings of this first report :

  • The vast majo­ri­ty of sanc­tions (around 75%) were for breaches of the pro­fes­sio­nal and orga­ni­sa­tio­nal requirements.
  • In 8 Mem­ber States ((Bel­gium, Bul­ga­ria, Den­mark, France, Ger­ma­ny (1588 sanc­tions), Hun­ga­ry, Lithua­nia and Mal­ta), NCAs impo­sed a total of 1,923 sanc­tions.
  • Of the sanc­tions that were admi­nis­tra­tive pecu­nia­ry sanc­tions, these were of an aggre­ga­ted value of 945,710 EUR.
  • The most frequent sanc­tio­ning mea­sure was to with­draw the regis­tra­tion of the inter­me­dia­ry (around 50% of cases) fol­lo­wed by the use of admi­nis­tra­tive pecu­nia­ry sanc­tions (around 40% of cases).

Cer­tain aspects of the IDD sanc­tio­ning regime are sub­ject to natio­nal law, and require Mem­ber States to ensure that NCAs have the power to impose sanc­tions. Actual­ly, NCAs are not obli­ged to impose sanc­tions in all cases where an insu­rance dis­tri­bu­tor fai­led to com­ply with the natio­nal pro­vi­sions imple­men­ting IDD. Mem­ber States must apply a “gene­ral prin­ciple” which is that the use of sanc­tions must be ‘effec­tive, pro­por­tio­nate and dis­sua­sive’. The­re­fore, cer­tain types of breaches may result in a for­mal sanc­tion being impo­sed in one Mem­ber State, whe­reas the mea­sure may be com­ple­te­ly dif­ferent in ano­ther Mem­ber State.

The table below shows the num­ber of sanc­tions impo­sed for dif­ferent types of breaches of the IDD :

IDD PROVISION

NUMBER OF BREACHES

Regis­tra­tion requirements

394

Exer­cise of the free­dom to pro­vide services

1

Pro­fes­sio­nal and orga­ni­sa­tio­nal requirements –

appro­priate know­ledge and ability

64

Pro­fes­sio­nal and orga­ni­sa­tio­nal requirements –

conti­nuing pro­fes­sio­nal trai­ning and development

473

Pro­fes­sio­nal and orga­ni­sa­tio­nal requi­re­ments – good repute

107

Pro­fes­sio­nal and orga­ni­sa­tio­nal requirements –

pro­fes­sio­nal indem­ni­ty insurance

458

Pro­fes­sio­nal and orga­ni­sa­tio­nal requi­re­ments – other

499

Other orga­ni­sa­tio­nal requirements

18

Infor­ma­tion requi­re­ments and conduct of busi­ness rules

40

Addi­tio­nal requi­re­ments for IBIPs

51

Other (e.g. natio­nal spe­ci­fic provisions)

11

Total

2116

This report high­lights the fact that “Ove­rall, it is clear that the vast majo­ri­ty of sanc­tions were impo­sed for infrin­ge­ments rela­ting to the pro­fes­sio­nal and orga­ni­sa­tio­nal requi­re­ments in Article 10. Within this, infrin­ge­ments rela­ted to the trai­ning and deve­lop­ment requi­re­ments and the requi­re­ments for pro­fes­sio­nal indem­ni­ty insu­rance played a very signi­fi­cant part”.

With a total of 458 sanc­tions, this table can only remind inter­me­dia­ries of the impor­tance of taking out pro­fes­sio­nal indem­ni­ty insu­rance in order to limit the impact of poten­tial claims on their cash flow, and to avoid the risk of sanc­tions from their NCA.

Click here to read the report : EIO­PA’s first Annual Report on admi­nis­tra­tive sanc­tions and other mea­sures under the Insu­rance Dis­tri­bu­tion Direc­tive — EN.pdf

BUSINESS INTERRUPTION AND COVID-19 : A FRENCH COURT OF APPEAL RULES IN FAVOUR OF INSURERS, WHILE UK SUPREME COURT’S DECISION IS STILL EXPECTED

As a result of the coro­na­vi­rus pan­de­mic, many cus­to­mers have made claims for losses ari­sing from the clo­sure of their busi­ness under their BI insu­rance poli­cies. Indeed, some poli­cies offer cover for BI ari­sing from infec­tious or noti­fiable diseases and non-damage denial of access and public autho­ri­ty clo­sures or res­tric­tions. In some cases, insu­rance com­pa­nies have accep­ted to indem­ni­fy their clients, but others have refu­sed to do so, lea­ding to wides­pread concern about this lack of cla­ri­ty in Europe. In this context, a French Court of Appeal ruled for the first time in favor of an Insu­rer last week, while UK Supreme Court’s deci­sion is still expected.

FRANCE : FRENCH COURT OF APPEAL RULES FOR THE FIRST TIME ON COVID-19

This deci­sion, deli­ve­red by the Court of Appeal of Aix-en-Pro­vence on 3 Decem­ber 2020, is in favor of the insu­rance com­pa­ny (AXA), whe­reas the juris­pru­den­tial line drawn by the lower courts on Busi­ness Inter­rup­tion losses rela­ted to Covid-19 is not yet well esta­bli­shed in France. Indeed, while some French courts of first ins­tance orde­red seve­ral insu­rers to indem­ni­fy poli­cy­hol­ders’ Busi­ness Inter­rup­tion losses ; others took the oppo­site posi­tion, making the situa­tion somew­hat complex.

In the abo­ve­men­tio­ned case, the Com­mer­cial Court of Mar­seille ruled on 23 July 2020 on the claim of a res­tau­rant owner who was see­king to be indem­ni­fied for his BI losses fol­lo­wing the clo­sure of his esta­blish­ment due to the pan­de­mic. Axa was orde­red to pay 66,385 euros to the lat­ter, and appea­led the deci­sion. The Aix-en-Pro­vence Court of Appeal rever­sed the order of the pro­vi­sio­nal relief judge, ruling in favour of Axa.

The Court of Appeal based its deci­sion on two elements : 

- it empha­si­zed the absence of ambi­gui­ty in the exclu­sion clause. “The exclu­sion clause does not contain any term which could have a contra­ry mea­ning, […] it is une­qui­vo­cal­ly unders­tood as exclu­ding cover in cases where ano­ther esta­blish­ment, wha­te­ver its acti­vi­ty, is sub­ject to an admi­nis­tra­tive mea­sure of clo­sure in the same area, for the same rea­son as that which cau­sed the clo­sure of the insu­red establishment”.

- the Court of Appeal also consi­de­red that this claim excee­ded the powers of the pro­vi­sio­nal relief judge : “the ques­tion whe­ther or not an epi­de­mic may or may not, by its very defi­ni­tion, lead to the admi­nis­tra­tive clo­sure of a single esta­blish­ment in a cer­tain area […] does not fall within the powers of the pro­vi­sio­nal relief judge”.

The owner of the res­tau­rant may take this case to the “Cour de Cas­sa­tion”, the highest court in France.

UK : BUSINESS INTERRUPTION TEST CASE HEADS TO SUPREME COURT

In the UK, the High Court has deli­ve­red its judg­ment in the Finan­cial Conduct Authority’s (FCA) test case over dis­pu­ted UK Busi­ness Insu­rance cove­rage in light of the Covid-19 pan­de­mic. The Court found in favour of the argu­ments rai­sed by the FCA on most of the key issues. That’s the rea­son why most of the test case’s par­ti­ci­pants deci­ded to file for an appeal. On 2 Octo­ber, the High Court appro­ved an appeal to be heard at the Supreme Court directly.

The appel­lant insu­rers were Arch Insu­rance (UK) Ltd, Argen­ta Syn­di­cate Mana­ge­ment Ltd, MS Amlin Under­wri­ting Ltd, His­cox Insu­rance Com­pa­ny Ltd, QBE UK Ltd, and Royal & Sun Alliance Insu­rance Plc (RSA). Eccle­sias­ti­cal Insu­rance Office Plc and Zurich Insu­rance Plc did not par­ti­ci­pate in the ‘leap­frog’ appeal as the High Court’s Sep­tem­ber 15 jud­ge­ment was to their favour.

To the latest news, the test will be put to rest in the coming weeks after appeal hea­rings were heard in the Supreme Court for four days until Novem­ber 19. The regu­la­tor sta­ted in its latest update : “Lord Reed reco­gni­sed the impor­tance of an ear­ly jud­ge­ment for the busi­nesses affec­ted. He said that the Jus­tices would do what they could to pro­vide jud­ge­ment as qui­ck­ly as pos­sible, but could not com­ment on whe­ther that would be before Christ­mas or in January.”

The Supreme Court’s deci­sion will affect around 700 types of poli­cies and 400 000 poli­cy­hol­ders, and will be cru­cial, as the Finan­cial Ombuds­man Ser­vice (FOS) and courts in Scot­land and Nor­thern Ire­land are expec­ted to use this judg­ment to rule on simi­lar cases.

These two deci­sions are like­ly to have broad impact on future court rulings on this mat­ter. They could also play a role in pos­sible future lia­bi­li­ty claims brought against insu­rance inter­me­dia­ries by their clients. Indeed, depen­ding on the final out­come of these pro­cee­dings, num­ber of poli­cy­hol­ders will be temp­ted to sue their insu­rance bro­ker, in order to obtain an indem­ni­ty when a poli­cy wor­ding does not pro­vide cover or does not pay out enough. Never­the­less, it might be dif­fi­cult for poli­cy­hol­ders to prove that the bro­ker acted negli­gent­ly, as explai­ned in our article INSURANCE BROKERS AND THE COVID-19 PANDEMIC : PROBABLE RISKS OF CLAIMS, BUT UNCERTAIN SUCCESS FOR POLICYHOLDERS — CGPA EUROPE 

UK – EMERGING IMPACTS OF A HARDENING MARKET ENVIRONMENT FOR INSURANCE BROKERS

As explai­ned in our article, The dan­ger for insu­rance bro­kers with the UK Pro­fes­sio­nal Indem­ni­ty mar­ket, the UK mar­ket has been har­de­ning since 2018, which could gene­rate risks for insu­rance bro­kers. This situa­tion can be explai­ned by a series of para­me­ters, as natu­ral disas­ter losses, low prices, low inter­est rates, and the COVID-19 pandemic. 

This is a chal­lenge for all players invol­ved : under­wri­ters are res­tric­ting their appe­tite and increa­sing pre­miums ; SMEs are facing higher pre­miums than they bud­ge­ted for, and bro­kers are caught in the cross­fire, trying to meet the demands and needs of their clients in a mar­ket where insu­rance capa­ci­ty is in decline. 

CASH-STRAPPED SMEs CUT BACK ON INSURANCE

Accor­ding to an article from the Insu­rance Times, 51% of UK SMEs cut back on busi­ness insu­rance poli­cies, as Employers’ lia­bi­li­ty insu­rance, busi­ness pro­per­ty cover, pro­fes­sio­nal indem­ni­ty or cyber insurance.

Indeed, the Insu­rance Index research from Pre­mium Cre­dit high­lights the fact that 19% SMEs have stop­ped paying for busi­ness inter­rup­tion (BI) insu­rance ; 42% of them said they had suf­fe­red damage or losses in the past five years, but they could not make a claim because of not being insu­red or being unde­rin­su­red ; and around 24% said they were unde­rin­su­red, while 18% did not have the appro­priate insu­rance. The Insu­rance Times Pre­mium Credit’s chief sales and mar­ke­ting offi­cer Owen Tho­mas explai­ned to the Insu­rance Times that : “SMEs have had to bat­tle to stay afloat during the pan­de­mic, which makes it unders­tan­dable that they have cut back on insu­rance and taken out more credit.

Neces­sa­ry, often legal cover such as employers’ lia­bi­li­ty is like­ly [to be] cut as firms reduce num­bers of staff and wage rolls as a result of Covid-19. Cut­ting back on cri­ti­cal insu­rance can, howe­ver, be a mis­take as not having the appro­priate cover or being unde­rin­su­red can be a serious risk for SMEs. We would advise SME owners to speak to their insu­rance bro­kers for advice on how best to fund the appro­priate level of cover for their busi­ness”.

THE FCA CALLS ON INSURANCE BROKERS TO EXPLAIN AND EDUCATE CLIENTS ON THE IMPACTS OF A HARDENING MARKET ENVIRONMENT

This situa­tion could gene­rate risks for cus­to­mers, and for insu­rance bro­kers. That’s why the UK’s Finan­cial Conduct Autho­ri­ty (FCA) has recent­ly publi­shed a ‘Dear CEO’ let­ter addres­sed to Lloyd’s and Lon­don Mar­ket inter­me­dia­ries and MGAs, high­ligh­ting the key risks of a har­de­ning mar­ket envi­ron­ment for cus­to­mers. This let­ter out­lines the impor­tance of the role that insu­rance inter­me­dia­ries must play in this hard mar­ket envi­ron­ment : “Where this is the case, the inter­me­dia­ted mar­ket will need to (re)acquire the skills to explain and edu­cate clients about why their pre­mium is rising, while cover may reduce.

This includes requi­re­ments on asses­sing cus­to­mer demands and needs, pro­duct over­sight and gover­nance, acting honest­ly, fair­ly and pro­fes­sio­nal­ly in the customer’s best inter­est and pro­vi­ding appro­priate pro­duct infor­ma­tion to address the risk of cus­to­mer harm that may arise from a har­de­ning mar­ket.”

WHAT DOES IT MEAN FOR INSURANCE BROKERS ?

The­re­fore, as explains Richard Webb, Direc­tor at Man­ches­ter Under­wri­ting Mana­ge­ment (MUM), exclu­sive part­ner of CGPA Europe in the Uni­ted-King­dom, Bro­kers will need to take cer­tain steps to reduce the risk of being confron­ted with dis­sa­tis­fied clients : “Mana­ging clients’ expec­ta­tions is the first step and that involves mana­ging time and com­mu­ni­ca­tion. Steps such as iden­ti­fying the risks that will be pro­ble­ma­tic to place. If high limits of indem­ni­ty are requi­red or if the expi­ring mar­ket is with­dra­wing, then access to capa­ci­ty is key. That may require access to the who­le­sale mar­ket in Lon­don. So the rene­wal pro­cess needs to start ear­lier and the retail bro­ker needs to form a good wor­king rela­tion­ship with their who­le­sale bro­ker. Lea­ving it late sim­ply means the cur­rent poli­cy will expire and then it becomes a much har­der posi­tion for the bro­ker and posi­ti­ve­ly dan­ge­rous for the client.

Being open and rea­lis­tic with a client about the cover avai­lable in the mar­ket is the best pro­tec­tion for a bro­ker. Clients who receive bad news late in the day will never react well. The client may not be keen to hear that their pre­mium is going up or limits are coming down but it is bet­ter to be open with a client about the rea­li­ty rather than pre­tend that the mar­ket hasn’t changed”.


Sources : https://www.insurancetimes.co.uk/news/51-of-smes-cut-back-on-business-insurance-policies-amid-pandemic-says-premium-credit/1435250.article?adredir=1

https://www.reinsurancene.ws/brokers-need-to-explain-the-hardening-market-to-clients-fca-warns/

SPAIN : CGPA EUROPE SHARES ITS VIEWS ON THE PROFESSIONAL INDEMNITY OF EUROPEAN INSURANCE INTERMEDIARIES

On Octo­ber 27th, The Gene­ral Coun­cil of the Col­leges of Insu­rance Inter­me­dia­ries (El Conse­jo Gene­ral de los Cole­gios de Media­dores de Segu­ros) and CGPA Europe held an online confe­rence to ana­lyse both the evo­lu­tion of the pro­fes­sio­nal indem­ni­ty of insu­rance inter­me­dia­ries in Europe and the situa­tion ari­sing from the Covid-19 pan­de­mic, as well as its impact for insu­rance inter­me­dia­ries. This video-confe­rence brought toge­ther around a hun­dred par­ti­ci­pants.

This video­con­fe­rence was an oppor­tu­ni­ty for Spa­nish inter­me­dia­ries to get an over­view of the situa­tion in the rest of Europe and to enable them to bet­ter unders­tand the risks they face in car­rying out their activity

Eric Evian, Pre­sident and CEO of CGPA Europe, out­li­ned the main sources of claims that insu­rance inter­me­dia­ries are facing in Europe : “Our expe­rience in Europe allows us to know the nature of the claims that insu­rance inter­me­dia­ries are facing,” he explai­ned. He repor­ted a “sharp increase” in claims ari­sing “from a lack of writ­ten advice from insu­rance intermediaries”.

He also out­li­ned the impact of the pan­de­mic on insu­rance inter­me­dia­ries : “In Janua­ry 2020, no com­pa­ny or ana­lyst pla­ced a pan­de­mic in its risk baro­me­ters”. Howe­ver, the Covid-19 has become the grea­test risk and eve­ry­thing points to 2020 being the year with the highest losses for insu­rance. Many Insu­rance com­pa­nies refu­sed to cover Busi­ness Inter­rup­tion claims ari­sing from the pan­de­mic, because their poli­cy wor­dings were unclear. As a result, Insu­rance inter­me­dia­ries are often “caught in the middle” bet­ween the insurer’s refu­sal to indem­ni­fy and their client, clai­ming for an indem­ni­ty. This confe­rence pro­vi­ded an oppor­tu­ni­ty to share ideas to enable insu­rance inter­me­dia­ries to adopt good prac­tices in dea­ling with this risk, as well as indi­ca­tions on the right reac­tions to adopt in such cases.

Gon­za­lo Itur­men­di, part­ner and direc­tor of G. Itur­men­di y Aso­cia­dos and gene­ral secre­ta­ry of Agers,  (Aso­cia­ción Españo­la de Geren­cia de Ries­gos y Segu­ros) , out­li­ned the impor­tance to iden­ti­fy, ana­lyse and eva­luate the risks lin­ked to the acti­vi­ty of insu­rance inter­me­dia­ry : “pro­fes­sio­nals have deal with two risk control and pre­ven­tion sys­tems, com­pliance and qua­li­ty,” he said. During his pre­sen­ta­tion, Gon­za­lo Itur­men­di explai­ned how to apply these tools and ana­ly­sed the rules that must be com­plied with to avoid claims.

This video-confe­rence was also an oppor­tu­ni­ty to high­light the impor­tance of new tech­no­lo­gies and inno­va­tion for insu­rance inter­me­dia­ries : Rei­nei­ro Sarasúa, Pre­sident of the Gene­ral Coun­cil, poin­ted out that “inter­me­dia­ries have to lead pro­fes­sio­nal deve­lop­ment through tech­no­lo­gi­cal growth, the conti­nuous trai­ning of our teams, inves­ting in inno­va­tion and deve­lop­ment of tech­no­lo­gy and the digi­ta­li­sa­tion of our companies”.

Before clo­sing the event, Car­los Mon­te­si­nos, Mana­ging Direc­tor of CGPA Europe Under­wri­ting in Spain, stres­sed that know­ledge of the ori­gin of claims helps to prevent situa­tions that could lead to a claim, and that action must be taken on two fronts : “Ensu­ring com­pliance with the legal fra­me­work and having action pro­to­cols that allow inter­me­dia­ries to com­bine res­pect and protection”.

Click here to find out more : https://www.inese.es/el-consejo-general-y-cgpa-europe-analizan-el-papel-de-la-rc-profesional/ 

INSURANCE BROKERS AND THE COVID-19 PANDEMIC : PROBABLE RISKS OF CLAIMS, BUT UNCERTAIN SUCCESS FOR POLICYHOLDERS

Accor­ding to a recent article publi­shed by S&P, “Bro­ker law­suits are inevi­table in virus claims war, but their suc­cess is not”. The coro­na­vi­rus pan­de­mic has led to wides­pread dis­rup­tion and busi­ness clo­sures resul­ting in sub­stan­tial finan­cial loss. Many cus­to­mers have made claims for these losses under their BI insu­rance poli­cies. For this type of claim, many Euro­pean insu­rers have so far decli­ned cover, lea­ding poli­cy­hol­ders to sue their bro­ker in order to be indem­ni­fied. Howe­ver, it will be dif­fi­cult for them to prove that their insu­rance bro­ker has not met his duties

A major pro­blem ari­sing from the Covid-19 pan­de­mic is that of the poli­cy wor­dings in place. Indeed, most SME poli­cies only cover pro­per­ty damage and have basic cover for BI as a conse­quence of pro­per­ty damage. Never­the­less, some poli­cies also offer cover for BI ari­sing from infec­tious or noti­fiable diseases (a noti­fiable disease is any disease that is requi­red by law to be repor­ted to govern­ment autho­ri­ties) and non-damage denial of access and public autho­ri­ty clo­sures or res­tric­tions. In some cases, insu­rance com­pa­nies have accep­ted lia­bi­li­ty under these poli­cies, but others have refu­sed to do so, lea­ding to wides­pread concern about this lack of clarity.

In France and the UK, local super­vi­sors under­took various ini­tia­tives to remove doubt as to whe­ther insu­rance poli­cies were inten­ded to pro­vide cove­rage for finan­cial losses resul­ting from the Covid-19 pandemic :

  • In the UK, the High Court has deli­ve­red its judg­ment in the Finan­cial Conduct Autho­ri­ty’s (FCA) test case over dis­pu­ted UK Busi­ness Insu­rance cove­rage in light of the Covid-19 (coro­na­vi­rus) pan­de­mic. This test case marks an attempt to pro­vide more cla­ri­ty and reduce the amount of liti­ga­tion around this issue. The test case is not inten­ded to encom­pass all pos­sible dis­putes, but to resolve some key contrac­tual uncer­tain­ties. The FCA’s role was to put for­ward poli­cy­hol­ders’ argu­ments to their best advan­tage, and the regu­la­tor selec­ted a repre­sen­ta­tive sample of poli­cy wor­dings writ­ten by eight insu­rers. The Court found in favour of the argu­ments rai­sed by the FCA on most of the key issues. That’s the rea­son why most of the test case’s par­ti­ci­pants deci­ded to file for an appeal. On 2 Octo­ber, the High Court appro­ved an appeal to be heard at the Supreme Court directly.
  • In France, on 6 May, the Auto­ri­té de contrôle pru­den­tiel et de réso­lu­tion (ACPR) – the French Super­vi­so­ry Autho­ri­ty — ini­tia­ted a the­ma­tic sur­vey on Busi­ness Inter­rup­tion cove­rage due to the pan­de­mic cri­sis and its conse­quences. On May 23rd, the ACPR made public the fin­dings of its inves­ti­ga­tion : Covid-19 is, for 93.3% of poli­cy­hol­ders, not cove­red by their insu­rance poli­cy, either because they only cover busi­ness inter­rup­tion in the event of direct mate­rial damage (fire, water damage), or “more rare­ly” because insu­rance com­pa­nies have expli­cit­ly exclu­ded the pan­de­mic from their contracts. The ACPR thus iden­ti­fied doubts about the appli­ca­tion of poli­cy gua­ran­tees for 4% of the poli­cy­hol­ders : “In this case, only a jud­ge’s inter­pre­ta­tion would remove any uncer­tain­ty if the insu­rers concer­ned do not inter­pret the contract in favour of the insu­red”, it points out.

The­re­fore, num­ber of poli­cy­hol­ders will be temp­ted to sue their insu­rance bro­ker, in order to obtain an indem­ni­ty when a poli­cy wor­ding does not pro­vide cover or does not pay out enough. Aaron Le Mar­quer, a part­ner at Fen­church Law, said in an inter­view quo­ted by S&P’s article that there would “inevi­ta­bly” be legal claims against bro­kers, because “whe­re­ver poli­cy­hol­ders are left with no cove­rage and don’t get their claims paid, bro­kers are always next in the firing line and the tar­get for poten­tial reco­ve­ry.” One can easi­ly ima­gine the case of an insu­red sta­ting that the bro­ker should have recom­men­ded a poli­cy that could have enabled him to be indem­ni­fied, while the poli­cy in place is not inten­ded to do so.

Never­the­less, it might be dif­fi­cult for poli­cy­hol­ders to prove that the bro­ker acted negli­gent­ly. Indeed, S&P’s article high­lights the fact that in the UK, “To find a bro­ker liable, poli­cy­hol­ders have to show not only that the bro­ker brea­ched its duty of care, but also that this breach cau­sed them a loss. Bro­kers could not have known which of the poli­cy wor­dings the High Court would deem res­pon­sive to the coro­na­vi­rus pan­de­mic, given insu­rers’ conten­tion that such poli­cies were not desi­gned to cover pan­de­mics at all”. Ben Har­di­man, a part­ner at law firm Mil­ls & Reeve, said in S&P’s article that : “The fact that these par­ti­cu­lar insu­rers are before the High Court with the FCA is because their wor­dings are poor, not because they ever inten­ded to pro­vide cover”.

This article under­lines the fact that in rea­li­ty, claims num­bers are so far small in Europe, and quotes Eric Evian, chair­man at CGPA Europe, explai­ning that busi­ness inter­rup­tion dis­putes were main­ly confi­ned to the U.K, Ire­land, France, Ger­ma­ny and Swit­zer­land. In Ire­land, CGPA Europe has recei­ved nine cir­cum­stance noti­fi­ca­tions that were “nothing serious for the time being,” while in France there were 35 cases “that we are fol­lo­wing very clo­se­ly,” of which a third were tur­ning into liti­ga­tion, but where insu­rance agents were “not the main tar­gets of the liti­ga­tion.” In Ger­ma­ny and Swit­zer­land, he added, there were no cases where inter­me­dia­ries were invol­ved. But he stres­sed that this was the situa­tion “as of today” and that there could be “a total­ly dif­ferent reac­tion,” if courts reject most poli­cy­hol­der claims.

Source : https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/broker-lawsuits-are-inevitable-in-virus-claims-war-but-their-success-is-not-60580911

THE DANGER FOR INSURANCE BROKERS WITH THE UK PROFESSIONAL INDEMNITY MARKET

THE DANGER FOR INSURANCE BROKERS WITH THE UK PROFESSIONAL INDEMNITY MARKET

Richard Webb is Direc­tor at Man­ches­ter Under­wri­ting Mana­ge­ment (MUM), exclu­sive part­ner of CGPA Europe in the Uni­ted-King­dom. MUM is a spe­cial­ty under­wri­ting agen­cy whose cur­rent pro­ducts include Bro­kers’ Pro­fes­sio­nal Indem­ni­ty Insu­rance, and is a lea­der on this mar­ket. This Pro­fes­sio­nal Indem­ni­ty insu­rance faci­li­ty, insu­red by CGPA Europe and under­writ­ten and mana­ged by Man­ches­ter Under­wri­ting Mana­ge­ment Limi­ted has been accre­di­ted by the Bri­tish Insu­rance Bro­kers’ Asso­cia­tion (BIBA) to pro­vide cover to its members. 

Richard has over 30 years’ insu­rance expe­rience : he star­ted his career with Gene­ral Acci­dent, before spe­cia­li­sing in the Pro­fes­sio­nal Indem­ni­ty Mar­ket. In this article, he high­lights the dan­ger for Insu­rance Bro­kers with the UK PI mar­ket : indeed not only a hard mar­ket is a hard envi­ron­ment to work in, but it could also create higher risks of claims against Insu­rance Brokers. 

The UK pro­fes­sio­nal indem­ni­ty mar­ket has chan­ged over the last 24 months. It began to har­den during 2018 but frus­tra­tin­gly not for all pro­fes­sions. The mar­ket star­ting to har­den was no great sur­prise, espe­cial­ly for those in the indus­try who have been through the insu­rance cycle before. But there are plen­ty of under­wri­ters and bro­kers in the UK pro­fes­sio­nal indem­ni­ty mar­ket that have been wor­king for over 15 years and only known a soft mar­ket. This change of envi­ron­ment has thrown up new situa­tions for many, which are com­pli­ca­ted fur­ther by the mar­ket har­de­ning being pat­chy. This has crea­ted dan­gers for insu­rance bro­kers.

Hard mar­kets are chal­len­ging for all invol­ved. Clients face sub­stan­tial­ly higher pre­miums than they bud­ge­ted for and the cover avai­lable may be res­tric­ted and not meet the demands set out in the contracts they have ente­red into with their clients or requi­red by their pro­fes­sio­nal body or regulator. 

Under­wri­ters with­draw from the mar­ket enti­re­ly or pull back by res­tric­ting their appe­tite, limi­ting their expo­sure by wri­ting smal­ler line sizes, res­tric­ting cover, increa­sing pre­miums and deductibles. 

This leaves the bro­ker in the middle, faced with unhap­py clients and a mar­ket place that is contrac­ting and no lon­ger pro­vi­ding the cover their clients need. In the worst case, bro­kers have been unable to obtain cover and their clients have ended up going out of business.

Added to this is the issue of those bro­kers and under­wri­ters who have only wor­ked in a soft mar­ket envi­ron­ment. In the UK, the soft mar­ket has been around for a long time and many bro­kers and under­wri­ters have spent the for­ma­tive years of their career sel­ling on price with poli­cies that offer wide cover. This is not the best trai­ning ground for when the mar­ket begins to turn. Clients who buy pro­fes­sio­nal indem­ni­ty have become used to bro­kers pro­mi­sing a saving on their rene­wal pre­mium and so they allow for that in their own bud­gets. Under­wri­ters have become used to top line growth and so redu­cing pre­miums, for­get­ting about the rate they need to achieve to be profitable. 

It has led the UK PI mar­ket to where it is now. Construc­tion pro­fes­sio­nals, in par­ti­cu­lar desi­gn and construc­tion risks, have been hit the har­dest with sharp rate increases and cover being limi­ted. ‘Any one claim’ limits have been repla­ced by aggre­ga­ted limits and the total limits of indem­ni­ty avai­lable are lower.

The PI mar­ket has become some­thing of a mine­field for insu­rance bro­kers as a result of these changes. The lower hazard risks, such as those into IT, media and busi­ness consul­tan­cy can be pla­ced fair­ly easi­ly. Accoun­tants and Insu­rance Bro­kers have seen an increase in rates but now­here close to those expe­rien­ced by the construc­tion pro­fes­sio­nals. So, for now, many are yet to expe­rience that issues faced by the construc­tion industry. 

Bro­kers need to adapt to cope with the chan­ging mar­ket. There are cer­tain steps that they can take to reduce fric­tion with their client and the PI mar­ket. These steps are nothing new but skills that may have been lost during the soft market.

Mana­ging clients’ expec­ta­tions is the first step and that involves mana­ging time and com­mu­ni­ca­tion. Steps such as iden­ti­fying the risks that will be pro­ble­ma­tic to place. If high limits of indem­ni­ty are requi­red or if the expi­ring mar­ket is with­dra­wing then access to capa­ci­ty is key. That may require access to the who­le­sale mar­ket in Lon­don. So the rene­wal pro­cess needs to start ear­lier and the retail bro­ker needs to form a good wor­king rela­tion­ship with their who­le­sale bro­ker. Lea­ving it late sim­ply means the cur­rent poli­cy will expire and then it becomes a much har­der posi­tion for the bro­ker and posi­ti­ve­ly dan­ge­rous for the client. 

Being open and rea­lis­tic with a client about the cover avai­lable in the mar­ket is the best pro­tec­tion for a bro­ker. Clients who receive bad news late in the day will never react well. The client may not be keen to hear that their pre­mium is going up or limits are coming down but it is bet­ter to be open with a client about the rea­li­ty rather than pre­tend that the mar­ket hasn’t chan­ged. I have had seve­ral conver­sa­tions recent­ly with bro­kers who found the first rene­wal in the hard mar­ket tough but led their client to believe the next rene­wal would be easier, when, in fact, the terms got har­der and so did the message.

Many clients have ente­red into contracts with terms rela­ting to the insu­rance cover they hold. It may not be pos­sible to pur­chase such cover in the cur­rent UK PI mar­ket. Insu­rance bro­kers and their clients’ soli­ci­tors should have advi­sed the client to have a caveat in the contract dea­ling with the pos­si­bi­li­ty of future una­vai­la­bi­li­ty of cover. 

Final­ly, frus­tra­tions arise and clients, insu­rers and insu­rance bro­kers can all get exci­ted and things can get lost in com­mu­ni­ca­tion. Recor­ding conver­sa­tions on file and confir­ming any ver­bal agree­ments or sta­te­ments in wri­ting can pro­vide key evi­dence should any chal­lenges arrive. The lack of the piece of evi­dence can be the dif­fe­rence bet­ween a claim against an insu­rance bro­ker and a pro­blem sim­ply being resolved.

A hard mar­ket is not just a hard place to trade but it can create a dan­ge­rous envi­ron­ment for a broker.

S&P CONFIRMS A — RATING OF CGPA GROUP

S&P CONFIRMS A- RATING OF CGPA GROUP

S&P has recent­ly confir­med CGPA Group’s rating with the award of a Finan­cial Rating of A- (Stable). CGPA Europe bene­fits from the same rating.

The rating agen­cy has nota­bly high­ligh­ted CGPA Group’s strengths, such as its “well-esta­bli­shed posi­tion in pro­fes­sio­nal lia­bi­li­ty insu­rance, its sizable capi­tal buf­fer at the excellent level as per [S&P’s] risk-based model, and its pru­dent reser­ving and pri­cing poli­cies”. The rene­wal of this rating high­lights the finan­cial soli­di­ty of CGPA Group.

This rating is lin­ked to the Group’s lea­ding posi­tion in its tar­get mar­ket, the pro­fes­sio­nal indem­ni­ty of insu­rance inter­me­dia­ries, as well as its inter­na­tio­nal growth in Europe. Indeed, CGPA Europe — based in Luxem­bourg — has deve­lo­ped its acti­vi­ties across Europe, and has recent­ly ente­red the Spa­nish and Ger­man markets.

CGPA Group has been dedi­ca­ted to pro­tec­ting insu­rance inter­me­dia­ries for 90 years, and has is always shown stable pro­fi­ta­bi­li­ty. With its 531% Sol­ven­cy II mar­gin, a “very strong” risk pro­file and this finan­cial rating, CGPA Group shows signi­fi­cant finan­cial strength, which is a gua­ran­tee of sta­bi­li­ty and trust for its policyholders.

Business interruption insurance : the High Court has handed down its judgment in the Financial Conduct Authority’s (FCA) test case

The High Court has delivered its judgment in the Financial Conduct Authority’s (FCA) test case over disputed UK Business Insurance coverage in light of the Covid-19 (coronavirus) pandemic. The Court found in favour of the arguments raised by the FCA on most of the key issues.

The coro­na­vi­rus pan­de­mic has led to wides­pread dis­rup­tion and busi­ness clo­sures resul­ting in sub­stan­tial finan­cial loss. Many cus­to­mers have made claims for these losses under their BI insu­rance poli­cies. Most SME poli­cies only cover pro­per­ty damage and have basic cover for BI as a conse­quence of pro­per­ty damage. Never­the­less, some poli­cies also offer cover for BI ari­sing from infec­tious or noti­fiable diseases (a noti­fiable disease is any disease that is requi­red by law to be repor­ted to govern­ment autho­ri­ties) and non-damage denial of access and public autho­ri­ty clo­sures or res­tric­tions. In some cases, insu­rance com­pa­nies have accep­ted lia­bi­li­ty under these poli­cies, but others have refu­sed to do so, lea­ding to wides­pread concern about this lack of clarity. 

This test case marks an attempt to pro­vide more cla­ri­ty and reduce the amount of liti­ga­tion around this issue. The test case is not inten­ded to encom­pass all pos­sible dis­putes, but to resolve some key contrac­tual uncer­tain­ties. The FCA’s role was to put for­ward poli­cy­hol­ders’ argu­ments to their best advan­tage, and the regu­la­tor selec­ted a repre­sen­ta­tive sample of poli­cy wor­dings writ­ten by eight insu­rers : Arch, Argen­ta, Eccle­sias­ti­cal, His­cox, QBE, MS Amlin, RSA and Zurich. At stake is an esti­ma­ted £9bn to £18bn of claims, and 370,000 poli­cy­hol­ders were iden­ti­fied as hol­ding poli­cies that may be affec­ted by the out­come of the test case. 

“Most, but not all, of the disease clauses in the test-case sample pro­vide cover for losses trig­ge­red by the coro­na­vi­rus pandemic”.

The regu­la­tor explains in a sum­ma­ry of the ruling that “the court found that most, but not all, of the disease clauses in the test-case sample pro­vide cover for losses trig­ge­red by the coro­na­vi­rus pan­de­mic. It also says that cer­tain denial of access clauses in the sample pro­vide cover, but this depends on the detai­led wor­ding of the clause and how the busi­ness was affec­ted by the Govern­ment res­ponse to the pan­de­mic, inclu­ding for example whe­ther the busi­ness was sub­ject to a man­da­to­ry clo­sure order and whe­ther the busi­ness was orde­red to close com­ple­te­ly. The test case has also cla­ri­fied that the Covid-19 pan­de­mic and the Govern­ment and public res­ponse were a single cause of the cove­red loss, which is a key requi­re­ment for claims to be paid even if the poli­cy pro­vides cover”. 

Chris­to­pher Woo­lard, Inter­im Chief Exe­cu­tive of the FCA, com­men­ted : “We are plea­sed that the Court has sub­stan­tial­ly found in favour of the argu­ments we pre­sen­ted on the majo­ri­ty of the key issues. 

Insu­rers will the­re­fore need to take the out­come of this test case into account and, irres­pec­tive of any pos­sible appeals, consi­der the steps they can take to pro­gress claims such as those tar­ge­ted by the judg­ment. Poli­cy­hol­ders with affec­ted claims can expect to hear from their insu­rance com­pa­ny within the next 7 days. 

What is the scope of this judgement ?

It is impor­tant to note that this judg­ment does not say that the eight defen­dant insu­rers are liable across all of the 21 dif­ferent types of poli­cy wor­ding in the repre­sen­ta­tive sample consi­de­red by the judges. The regu­la­tor under­lines that “each poli­cy needs to be consi­de­red against the detai­led judg­ment to deter­mine its impact on that poli­cy”. Besides, this test case is not inten­ded to set the amount payable under indi­vi­dual poli­cies, but will pro­vide much of the basis for doing so.

The regu­la­tor noted that the judg­ment may be appea­led, and any appeal does not pre­clude poli­cy­hol­ders see­king to set­tle their claims with their insu­rer before the out­come of any appeal is known.

A last point is high­ligh­ted by the FCA, which states that is impor­tant that “poli­cy­hol­ders, action groups, insu­rance inter­me­dia­ries and their legal repre­sen­ta­tives are pro­per­ly enga­ged throu­ghout the test case pro­cess. That’s why the regu­la­tor has arran­ged an oppor­tu­ni­ty for them to talk to its legal team indi­vi­dual­ly on Mon­day 21 Sep­tem­ber or Tues­day 22 September”.

Source : https://www.fca.org.uk/news/press-releases/result-fca-business-interruption-test-case

CGPA EUROPE ITALY AND CESIA : AUTUMN AGENDA

CGPA EUROPE ITALY AND CESIA : AUTUMN AGENDA

2020 repre­sents a pivo­tal year for the insu­rance indus­try and will mark an impor­tant struc­tu­ral change in demand, sup­ply and the way insu­rance poli­cies are dis­tri­bu­ted. The violent impact of the glo­bal health emer­gen­cy is the rea­son why the struc­ture of the Annual Report publi­shed by CESIA — Cen­tro Stu­di Inter­me­dia­zione Assi­cu­ra­ti­va — changes this year

CESIA is an ins­ti­tu­tion crea­ted by CGPA Europe to pro­mote the pre­ven­tion of pro­fes­sio­nal indem­ni­ty risks. It is inten­ded to bring toge­ther inter­me­dia­ries, insu­rance com­pa­nies, but also Ita­lian regu­la­tors, uni­ver­si­ty pro­fes­sors and magis­trates around the issue of good pro­fes­sio­nal prac­tice and the pro­fes­sio­nal indem­ni­ty of insu­rance inter­me­dia­ries. CESIA’s work, which is the sub­ject of public mee­tings and publi­ca­tions, has led to the emer­gence of prac­ti­cal solu­tions desi­gned to reduce the risk of claims and contri­bute to streng­the­ning the pro­fes­sio­na­lism of intermediaries.

The fourth edi­tion of the annual report, which will be pre­sen­ted during a webi­nar sche­du­led for Mon­day 28 Sep­tem­ber, will be main­ly devo­ted to the events of the cur­rent year and not, as usual, to a stu­dy dedi­ca­ted to the past year.

The publi­ca­tion will be pre­sen­ted in digi­tal for­mat and sent to regis­te­red par­ti­ci­pants. It will contain an in-depth ana­ly­sis of the impact of Covid-19 on the insu­rance media­tion sec­tor, its conse­quences and the solu­tions pro­po­sed by insu­rance com­pa­nies to deal with this unpre­ce­den­ted cri­sis. The pro­tec­tion needs of indi­vi­duals and com­pa­nies will be high­ligh­ted, as well as the busi­ness oppor­tu­ni­ties avai­lable to agents and bro­kers as their risk pro­file evolves.

The fourth edi­tion of the Annual Report will the­re­fore be devo­ted to a stu­dy of this theme with pre­sen­ta­tions by Mas­si­mo Michaud, coor­di­na­tor of CESIA ; Andrea Dal­la Vil­la, CGPA Europe claims mana­ger ; Pro­fes­sor Sara Lan­di­ni (Covid-19 and ade­qua­cy of pro­ducts in Non-Life busi­ness) and Pro­fes­sor Pier Pao­lo Mara­no (EIOPA gui­de­lines and inter­me­dia­ries : the impact on Life insu­rance), both mem­bers of the Scien­ti­fic Com­mit­tee of CESIA.

The Annual Report will also contain a sec­tion dedi­ca­ted to the lia­bi­li­ty of insu­rance inter­me­dia­ries for the inten­tio­nal mis­con­duct of their employees, as well as a report on the acti­vi­ty conduc­ted by CESIA in 2019, pre­sen­ted by Mas­si­mo Michaud.

Euro­pean Obser­va­to­ry on Insu­rance Inter­me­dia­ries : the seventh edi­tion is coming soon

The second event pro­po­sed by CGPA Europe this autumn is the seventh edi­tion Euro­pean Obser­va­to­ry on Insu­rance Intermediaries.

The Obser­va­to­ry’s pre­sen­ta­tion date is set for Thurs­day, Octo­ber 22nd, and will also take place in the form of a webinar. 

The pre­sen­ta­tion of data on the demo­gra­phic evo­lu­tion of inter­me­dia­ries and their per­for­mance in Life and Non-Life sec­tors will be accom­pa­nied by a stu­dy on the use of social media by insu­rance agents and bro­kers, as will high­light how this chan­nel plays a cen­tral role in the deve­lop­ment of busi­ness and cus­to­mer rela­tions. This stu­dy is car­ried out by the Boc­co­ni Uni­ver­si­ty Obser­va­to­ry on the Insu­rance Mar­ket, hea­ded by Patri­zia Contaldo. 

The webi­nar will end with a round table dis­cus­sion, mode­ra­ted by Maria Rosa Alag­gio, Direc­tor of Insu­rance Connect, with the par­ti­ci­pa­tion of repre­sen­ta­tives of agents’ and bro­kers’ associations.

IN SPAIN, CGPA EUROPE UNDERWRITING AND EL CONSEJO GENERAL (GENERAL COUNCIL OF COLLEGES OF INSURANCE INTERMEDIARIES) ENTER INTO A PARTNERSHIP FOR THE PROFESSIONAL INDEMNITY OF INSURANCE AGENTS

IN SPAIN, CGPA EUROPE UNDERWRITING AND EL CONSEJO GENERAL (GENERAL COUNCIL OF COLLEGES OF INSURANCE INTERMEDIARIES) ENTER INTO A PARTNERSHIP FOR THE PROFESSIONAL INDEMNITY OF INSURANCE AGENTS

Thanks to this part­ner­ship agree­ment, CGPA Europe will offer all exclu­sive agents who are mem­bers of El Conse­jo Gene­ral the pos­si­bi­li­ty to take out a poli­cy cove­ring their Pro­fes­sio­nal Indemnity. 

The spo­ke­per­son of the Conse­jo com­men­ted it as “an excellent option that will allow the col­le­giate agents to deve­lop their acti­vi­ty with the neces­sa­ry tran­qui­li­ty to exer­cise their pro­fes­sion in the best pos­sible way”.

This part­ner­ship agree­ment allows agents to bene­fit from the sup­port of spe­cia­lists and gua­ran­tees adap­ted to their acti­vi­ty, as well as the cove­rage of risks rela­ted to their pro­fes­sio­nal acti­vi­ty. This insu­rance is essen­tial for insu­rance inter­me­dia­ries, par­ti­cu­lar­ly since the law imple­men­ting the Insu­rance Dis­tri­bu­tion Direc­tive (IDD) came into force, which focuses on consu­mer protection.

Car­los Mon­te­si­nos, CEO of CGPA Europe Under­wri­ting, explains that it is essen­tial for agents to be able to rely on an insu­rance option in Spain such as that offe­red by CGPA Europe — an insu­rer with more than 90 years’ expe­rience, exclu­si­ve­ly insu­ring risks rela­ted to the pro­fes­sio­nal acti­vi­ty of insu­rance inter­me­dia­ries — thus ensu­ring that there is no conflict of inter­est in the event of a claim.

CGPA has been signing a series of part­ner­ship agree­ments for many years now with various asso­cia­tions of Insu­rance inter­me­dia­ries in seve­ral Euro­pean coun­tries : BIBA (UK), AGEA and Pla­nète CSCA (France), AIBA and many agents’ unions in Ita­ly. This new part­ner­ship with the Gene­ral Coun­cil of Col­leges of Insu­rance inter­me­dia­ries thus streng­thens CGPA Europe’s rela­tion­ship with Euro­pean asso­cia­tions of intermediaries.

Coronavirus Response : the European Commission welcomes ‘Best Practices’ to provide relief for consumers and businesses

Coronavirus Response : the European Commission welcomes ‘Best Practices’ to provide relief for consumers and businesses

The Commission recently organised two roundtable meetings with stakeholders to discuss relief measures where all represented parties declared their openness to cooperation and dialogue. Over 25 organisations participated in both roundtables including from : consumer organisations, business federations and Insurance companies.

On 14 July 2020, the Euro­pean Com­mis­sion has wel­co­med a list of ‘best prac­tices’ agreed by the finan­cial sec­tor, and consu­mer and busi­ness orga­ni­sa­tions, to help fur­ther miti­gate the impact of the coro­na­vi­rus pan­de­mic. It sets out concre­te­ly how dif­ferent mar­ket par­ti­ci­pants can sup­port citi­zens and busi­nesses throu­ghout the crisis.

Today’s ‘best prac­tices’ cover seve­ral issues, including :

  • Pay­ment mora­to­ria for consu­mer and busi­ness loans, and for insu­rance contri­bu­tions : these mea­sures can help those facing finan­cial dif­fi­cul­ties by defer­ring payments ;
  • Enabling safer cash­less pay­ments while ensu­ring cash pay­ments remain avai­lable for those who need them ;
  • Ensu­ring loans aimed at miti­ga­ting the impact of coro­na­vi­rus are pro­vi­ded swift­ly, and that the fees and inter­est rates incur­red are fair ;
  • Legi­ti­mate insu­rance claims are pro­ces­sed and paid out as qui­ck­ly as pos­sible.

The posi­tive role that inter­me­dia­ries have played during this cri­sis is high­ligh­ted by the Euro­pean Com­mis­sion, and “good prac­tices” do not impose fur­ther obli­ga­tions on the inter­me­dia­tion sec­tor that do not com­ply with exis­ting regu­la­tions.

Source : https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/200714-best-practices-mitigate-impact-pandemic_en.pdf

THE EUROPEAN INSURANCE AND OCCUPATIONAL PENSION AUTHORITY (EIOPA) LAUNCHED A PUBLIC CONSULTATION ON A ‘DISCUSSION PAPER ON (RE)INSURANCE VALUE CHAIN AND NEW BUSINESS MODELS ARISING FROM DIGITALISATION’

Technology continues to evolve, bringing new opportunities, social change and new expectations for consumers. That’s why insurance undertakings and intermediaries continue to develop and revise their business models, often in increased co-operation with third parties (e.g. BigTech companies and start-ups), bringing both beneficial innovation and a new set of emerging risks that have to be taken into account. The objective of this consultation is to understand the advantages, opportunities and risks of market players’ dependence on the outsourcing of innovative projects.

These changes in firms’ reliance on out­sour­cing and third par­ties bring poten­tial bene­fits and opportunities. 

The dis­cus­sion paper  gives examples of co-ope­ra­tion with third par­ties, high­ligh­ting the fact that Insur­Tech start-ups are often part­ne­ring with incum­bents (both insu­rers and inter­me­dia­ries). This part­ner­ship is bene­fi­cial to both sides : it allows incum­bents to bene­fit from cut­ting edge tech­no­lo­gy while star­tups can bene­fit from incum­bents’ cus­to­mer-base – this is par­ti­cu­lar­ly impor­tant for insu­rance inter­me­dia­ries as they often have an esta­bli­shed per­so­nal rela­tion­ship with consu­mers – mar­ket know­ledge, and regu­la­to­ry expertise. 

Fur­ther­more, Insur­Techs acting as inter­me­dia­ries and ini­tial points of cus­to­mer contact, such as com­pa­ri­son por­tals and sites that offer finan­cial advice or contract mana­ge­ment func­tio­na­li­ties, seem to be most favou­red co-ope­ra­tion part­ners. Incum­bents are also increa­sin­gly part­ne­ring with autho­ri­zed insu­rance inter­me­dia­ries to dis­tri­bute pro­ducts in new ways (e.g. via mobile apps and chatbots). 

Never­the­less, co-ope­ra­tion with third par­ties also create new risks, as conduct and pru­den­tial risks, legal and com­pliance issues or even concen­tra­tion risk if a large num­ber of under­ta­kings and inter­me­dia­ries become dependent on a small num­ber of domi­nant out­sour­ced or third par­ty ser­vice pro­vi­ders. In this context, a pos­sible frag­men­ta­tion of the insu­rance value chain could occur, inclu­ding, most per­ti­nent­ly, a poten­tial for a redu­ced regu­la­to­ry and super­vi­so­ry ‘grip’ on the rele­vant acti­vi­ties in the value chain. The goal of the public consul­ta­tion is the­re­fore to get a bet­ter pic­ture on pos­sible frag­men­ta­tion of the Euro­pean Union’s insu­rance value chain and super­vi­so­ry chal­lenges rela­ted to that in order to plan for next steps. 

As a conse­quence, super­vi­sion requires more atten­tion to dif­ferent com­pa­nies invol­ved throu­ghout the value chain.

The dead­line for sub­mis­sion of feed­back in EU Sur­vey Tool is 7 Sep­tem­ber 2020.


Source : https://www.eiopa.europa.eu/content/discussion-paper-reinsurance-value-chain-and-new-business-models-arising-digitalisation_en