It doesn’t matter whether it’s accident insurance through the sports club, an additional health policy through the employer or securing a bank loan: Many people are part of a so-called group insurance without knowing it. A company or an association concludes a framework agreement with an insurer and offers employees, customers or members to join it.
This contractual structure, which is widespread in Germany, has now been dampened by a judgment by the European Court of Justice (ECJ). The judges have decided that the top group, i.e. the company or the association, is to be regarded as an insurance intermediary under certain conditions. According to experts, the judgment (file number C 633/20) will have wide repercussions.
How willing are you to get involved? That is the question
“The consequences of the current ECJ decision for practice are far-reaching,” says insurance lawyer Martin Karwatzki from the law firm Heuking Kühn Lüer Wojtek. Because the companies and associations thus fall under the requirements of the EU Mediation Directive IDD. They must obtain a permit for insurance brokerage from the Chamber of Industry and Commerce responsible for them and register there. To do this, they need proof of expertise and a liability policy in the event that they make a mistake in advising and demand compensation from customers. In addition, they have to fulfill extensive information and advice obligations and undergo regular further training. “It remains to be seen whether the group leaders will be willing to take on the associated effort,” doubts Karwatzki.
Group insurance was originally created to enable employers and associations to offer their employees insurance cover in the most uncomplicated way possible. It only affects the ECJ judgment if you offer people voluntary membership, for which they pay the premium themselves. This means that an employer who pays the premiums for their employees’ supplementary health insurance policy is just as off the hook as an association where membership of the group accident insurance policy is mandatory for members.
Until now, group insurance has been a convenient matter
“When it comes to the free inclusion of their own employees in a group contract for occupational accident, health or term life insurance, companies could be less affected by the ECJ ruling than with group policies in which employees or third parties join part of the business,” explains Knut Bruckhaus from the General Association of Insurance Companies, which represents the industry on insurance issues.
Since group insurance was previously a convenient matter – the company was able to avoid the strict brokerage obligations, the insurer only had to manage a single framework agreement – the model has also established itself in business with private customers. “You actually find it everywhere,” explains Gunbritt Kammerer-Galahn, head of the insurance law practice at the law firm Taylor Wessing in Düsseldorf. Many residual debt policies that banks sell to customers to secure loans are organized as group insurance.
The same often applies to electronics insurance that customers purchase when they buy their mobile phone, glass breakage insurance that they take out together with new glasses, or travel policies that are offered to them when they book a flight. Car rental companies that also offer passenger accident insurance in addition to car rental are also happy to use the group policy instrument for this purpose.
Policies could now become more expensive
It is questionable whether companies are willing to set up their own brokerage company for these ancillary businesses if they do not already have such a company. Alternatively, they would have to stop their insurance sales or in future they can only be active as so-called tipsters. However, the activities of a tipster are strictly defined by law. The companies are only allowed to give the customer the address of the insurer, but no longer broker contracts. The customer must then independently take care of concluding an individual contract with the provider.
This could make policies more expensive. It means more administrative work for insurers if they have to take care of many individual contracts instead of just one framework contract. It is also questionable whether many customers still bother to contact the insurer recommended by the retailer after purchasing their actual product.
However, companies and associations could also help insurers. “It is also possible for the insurer concerned to register as a tied insurance intermediary, who then has to assume full liability for the intermediary activity,” says lawyer Kammerer-Galahn. Whether the insurers are willing to do this is uncertain.
In any case, the judgment will also bring the insurers into an explanation. “It is to be expected that the financial supervisory authority BaFin will inquire with the insurers whether all partners with whom they have taken out group insurance with voluntary membership also have an intermediary license,” she says.