CJEU: group insurance policyholders can be IDD ‘intermediaries’

The CJEU’s ruling, in response to a 2021 referral by the German courts, means that a group insurance policyholder may be subject to the provisions of the IDD, and require authorisation, even where that policyholder is not itself engaged in activity that seeks the direct conclusion of insurance contracts between insurers and third parties.

Background to the case

TC Medical entrusted advertising companies with offering customers in Germany, by way of door-to-door sales, membership of a collective insurance scheme in return for a fee. It had already subscribed to a group insurance policy with an insurer which provided insurance coverage in the event of sickness or accident abroad and coverage for repatriation costs.

TC Medical was the policyholder, and it paid the insurance premiums due to the insurer. Its customers who joined the group insurance policy were not policyholders. Each customer made a payment to TC Medical and obtained, in return, the right to various insurance benefits covered by the group policy in the event of sickness or accident abroad. The insurance benefits guaranteed to those customers were provided, in particular, by means of claims assigned to them by TC Medical. 

TC Medical is not authorised as an IDD insurance intermediary. The CJEU acknowledged that the purpose of the activity under consideration was not to conclude any insurance contract. However, because TC Medical enabled its customers to join the group insurance policy to which it was the policyholder and to provide them with the opportunity to receive the insured benefits covered by that policy, the CJEU considered if it was engaging in IDD insurance distribution activity.

Relevant provisions of the EU IDD

The IDD governs the taking up and pursuit of insurance distribution in the EU. ‘Insurance distribution’ in this context means advising on, proposing, or carrying out other work preparatory to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim.

An insurance intermediary can be any natural or legal person, other than an insurance or reinsurance undertaking or their employees and other than an ancillary insurance intermediary, who, for remuneration, takes up or pursues the activity of insurance distribution. An ‘insurance distributor’ is any insurance intermediary, ancillary insurance intermediary or insurance undertaking. ‘Remuneration’ is any commission, fee, charge or other payment, including an economic benefit of any kind or any other financial or non-financial advantage or incentive offered or given for insurance distribution activities.

Before an entity or individual can legitimately carry on business as an insurance intermediary in the EU, generally they must be registered with the competent authority in their home EU member state. Failure to be registered may result in sanction.

The CJEU's findings

The CJEU began by noting that in determining whether TC Medical came under the IDD definitions of insurance intermediary and insurance distributor, it had to consider not only the wording of those definitions, but also the context in which they occur and the objectives pursued by the EU rules of which they are part.

The CJEU firstly looked at the IDD's definition of remuneration, which is integral to assessing if a person is an IDD insurance intermediary. It considered the definition to be satisfied. Applying a broad interpretation to that definition, the CJEU said: "the condition relating to the existence of remuneration must be regarded as satisfied where every membership of a customer of the legal person which subscribed [as policyholder] to the group insurance policy with the [insurer] and which pays, on that basis, the insurance premiums to that [insurer], gives rise to a payment to that legal person". Here, in return for payment, TC Medical contributed to the acquisition by its customers of insurance cover provided for under the insurance policy that it had already concluded with the insurer. TC Medical had an economic interest of its own, distinct from the interest of its customers, in obtaining insurance cover under the policy. The CJEU considered it irrelevant that each payment to TC Medical was made by its customers in return for rights to insurance benefits transferred to them by the company and not by the insurer – in the form, for example, of a commission.

Turning to the IDD's definition of insurance distribution, the CJEU said that it had previously held that the activities listed in that definition are presented as “alternatives” such that each of them constitutes, on its own, an insurance distribution activity. The CJEU also considered it to be settled that those activities are formulated in broad terms and that, in particular, they consist not only in the presentation and proposal of insurance contracts, but also in the performance of other work preparatory to the conclusion of insurance contracts and the nature of that preparatory work is not limited in any way whatsoever.

Although the CJEU seemingly acknowledged that the IDD's definition of insurance distribution does not expressly mention an activity such as what TC Medical was doing, it ruled that the definition must be read as encompassing such an activity.

The CJEU was not swayed by the fact that TC Medical was not involved in concluding insurance contracts by which policyholders intended to obtain insurance cover from an insurer in return for the payment of premiums. The company's role was comparable to the paid activity of an insurance agent or a distributor of insurance products which seeks the conclusion, by policyholders, of insurance contracts with an insurer whose business is to cover certain insurable risks in return for insurance premium.

In reaching its conclusion, the CJEU referred to a couple of the IDD's objectives: that insurance products may be distributed by way of different types of organisations and that, in order to ensure equal treatment between operators and customer protection, it is necessary that all of those persons or organisations are covered by the IDD; and that consumers should benefit from the same level of protection despite the differences between the distribution channels. The interpretation that the CJEU applied to TC Medical and its activities in this case was consistent with those objectives.