Irokas - Aida Sydney 2013

AIDA World - Working Party: Distribution of Insurance Products
Sydney, 18 September 2013
Online insurance
intermediation
Protection via an ocean of information
Prof. Dr. I. Rokas

IKRP (Athens) Law Firm
Online Insurance intermediation
Obligation of (off)online insurance intermediaries (IIM)

to proceed with notification in order to work under FoS
in the EU
Criteria for the notification in non online (offline) business
IIM provides marketing, insurance mediation services or when it is actively

seeking business from a customer resident in that MS
Examples CEIOPS, DOC-15/07:
The IIM asks for and organises, on its own initiative, meetings with clients
established in another MS.
The IIM gives/sends information on specific products, conditions etc to
selected groups of clients established in a given MS / in specific languages of
some MS etc (the intention of the intermediary to contact clients in another
country is clear)
Prof. Dr. I. Rokas

AIDA World - Working Party: Distribution of Insurance Products 2
Obligation of (off)online insurance intermediaries (IIM)

to proceed with notification in order to work under FoS
in the EU (cont.)
Criteria for the notification in online business
Website evidencing IIM s intention to direct its activities in that MS
Luxemburg Protocol
Indications:
The international nature of IIM s activity
Use of foreign language/currency with the possibility to conclude a contract in
that language/currency
Mentioning of itineraries from other MS for going to the place where the
merchant is established
Mentioning of telephone numbers with an international code
The outlay of expenditure on an internet referencing service to facilitate access
to the merchants site of consumers domiciled in other MSs
Use of a top-level domain name other than that of the merchants home MS
Mentioning of international clientele from various MS
Prof. Dr. I. Rokas

Obligation of an IIM to establish in a host MS

Criteria for the obligation to establish (FoE) in offline business
According to ECJ case law
Lasting duration and/or
Regularity and/or
Periodicity and/or
Continuity
OR According to EU Commission
If IIM cumulative meets the characteristics of a branch/agent, i.e. if IIM representative in
the host MS:
Is subject to the direction and control of the parent IIM
Receives a permanent brief from the parent IIM
Is able to commit the parent IIM
Criteria to establish in online business

EU does not accept establishment for activities conducted exclusively online
Fixed ATM type machines/servers do not suffice
Needs human management
However, applicable rules for establishment could analogically apply if criteria to
establish in offline business are met
Prof. Dr. I. Rokas
Third Country IIM (off)online business in the Union
Criteria distinguishing offline services as solicited/unsolicited

Offline IIM services are identified as solicited, 3rd country IIMs included
under almost the same criteria applicable under FoS transactions in
another MS
The IIM asks for and organises, on its own initiative meetings with clients
established in another MS.
The IIM gives/sends information on specific products, conditions etc to
selected groups of clients established in a given MS / in specific languages of
some MS etc (the intention of the intermediary to contact clients in another
country is clear)
Prof. Dr. I. Rokas

Third Country IIM (off)online business in the Union

(cont.)
Criteria distinguishing online services as solicited/unsolicited
Online IIM services are identified as solicited
If the transaction is not conducted under the customers exclusive initiative
Unsolicited services are identified

If the transactions are conducted under the customers exclusive initiative
(OECD Guidelines/GATS/MiFID 2,recital 74). However IT evolution impedes a
more clear distinguishment between solicited and unsolicited transactions:
further criteria should be developed
Prof. Dr. I. Rokas

Online Insurance intermediation - Protection via an ocean of information
From a law on insurance intermediation to a law on marketing

of insurance products via an ocean of information
Precontractual information which insurers have to provide
(insurer is also regulated by IMD 2 if he provides direct sales)
Information to be given by the insurer - in its capacity as insurer
In life insurance (information provided in Solvency II, art. 185)
In non life insurance (information provided in Solvency II, art. 183-184)
Information to be given by the insurer - in its capacity as direct seller of
insurances
In insurance products without investment element (IMD 2, art. 15-21)
Marketing (sales) of insurance investment products. Insurer has to draw up
(according to PRIPs, art. 5-11) key information in its capacity as
manufacturer of the product and to provide it to the insured (PRIPs, art. 12-
13) and additionally information has to be given (IMD 2, art. 22-25)
Additional information for the online services (ECD, art. 5,6,10)
Additional information for distance marketing of consumer financial
services (DMD, art. 3-5)
Prof. Dr. I. Rokas


of insurance products via an ocean of information (cont.)
Precontractual information which (off)online professional intermediaries
other than insurers (IMD 2, art. 15-21) have to provide and additional info. for sales of
insurance investment products (IMD 2, art. 22-25, as well as to
provide the KID as manufacturer of such products, PRIPs, art. 12-13)
Additional information for all DIP: a) in online services (ECD, art. 5,6,10)
b) in distance marketing of insurance products(DMD, art. 3-5)
Combined application of precontractual info included in IMD 2, PRIPs,
ECD, DMD, MiFID 2
A simple insurance subagent who in the same time is an investment company according to
MiFID 2 is subject to all the above regulations
Entities which undertake the reception and transmission of orders constitute investment
companies and can at the same time work as an insurance intermediaries
According to greek law IIMs are not qualified to sell insurance investment products unless they
possess the same qualitative requirements as professionals who sell investment products and
are governed by MiFID (among others to have passed the relevant exams organised by the
supervisory Authority - Central Bank of Greece).
Prof. Dr. I. Rokas

of insurance products via an ocean of information (cont.)
Six pieces of EU legislation introducing partially overlapping,
partially asymmetric information:
IMD 2 Pieces of information: 22 for intermediaries, additionally 10 in case of insurance
investment products, 11 for insurers additionally 10 in case of insurance
investment products. Altogether 53 pieces! (art. 15-25).
ECD 26 pieces of information (art. 5, 6, 10).
Solvency II 7 pieces of information (art. 183-184)
(non life insurance)
Solvency II 36 pieces of information (art. 185)
(life insurance)
DMD
49 pieces of information (art. 3-5)
PRIPs
26 pieces of information (art. 5-11, 12-13)
MiFID 2
15 pieces of information (art. 24-25)
In total: = 212 pieces of information!!
Prof. Dr. I. Rokas
Reaching the coast

Results:
Customer is protected by valuable information but is overloaded
partly with asymmetric and overlapping information
By provision of this information the customer is not protected as to

the content of the terms and conditions of the insurance product
Not all customers are benefited by the same information

(fragmentation)
Customers remain responsible to take advantage and to evaluate

the multitude of information. Legislator should ensure that
customers have taken in fact the benefits of this information rather
than inserting more information duties
Prof. Dr. I. Rokas

Special issues: Comparison websites

Example of a Greek aggregator:
http://www.insurancemarket.gr/
Aggregators which provide IIM

Criteria have not been completely formed yet, but characterisation
depends on the activities provided via the website
According to EIOPA-CP-13/017, if the visitor of the website has the possibility to choose
insurance products based on price/features and to conclude the contract online or is
diverted via a hyperlink to the insurers website and then conclude the contract, the
comparison website owner might be regarded as an IIM if:
The customer is driven to a result, which includes the characteristic of advising i.e. the
possibility by means of comparison websites to find out the cheapest/most suitable
products
Aggregators which do not provide IIM
If their activities constitute mere conduit according to ECD (art 12):
The service provider does not initiate the transmission
The service provider does not select the receiver of the transmission
The service provider does not select/modify the information contained in the
transmission
Prof. Dr. I. Rokas
Special issues: The bank as tied intermediary
The bank as tied intermediary can sell the main financial product
which it has manufactured and ancillary insurance investment
product manufactured by the insurer:
Crossing an ocean of information
Information for its main financial product (art. 24-25 MiFID 2, total number of information pieces: 15)
and key information as manufacturer of the product (art. 5-11,12-13 PRIPs, total number of
information pieces: 26)
Information to be given according to IMD 2 in its capacity as tied intermediary (art. 15-21 total number
of information pieces: 22) and additionally information on investment insurance products (art. 22-25,
total number of information pieces: 10)
Information on investment insurance products according to PRIPs (art. 5-11, 12-13 total number of
information pieces: 26) whereby the manufacturer in this case is the insurer
Additional information for the online services (ECD, art. 5,6,10, total number of information pieces: 26)
Additional information for distance marketing of consumer financial services (Directive on distance
marketing of consumer financial services, art. 3-5 total number of information pieces: 49)
Prof. Dr. I. Rokas

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

Particulars not included in the ocean of information!
Lack of special information in particular in online sales! Risk of
misleading clients!
E.g. a bank should warn its clients that it sells insurance products under the
liability of the insurer or an other intermediary, as the case may be and not under
its liability
Bank does not have to rely on confidence clients have to its activities as
safeguard of their savings!
A bank selling insurance products in its capacity as tied intermediary should warn
its clients that the product is not manufactured by the bank!
It should not be allowed to banks to title the insurance investment
products of the insurer which it sells as bancassurance products of the
bank or similar misleading/confusing expressions.
A bank selling insurance products/investment insurance products of an insurer
must put emphasis to the name of the insurer by using capital and bold letters.
Small letters should be used for the name of the bank and emphasise its capacity
as intermediary and not as manufacturer of the product.
Prof. Dr. I. Rokas
Special issues: What distinguishes the border of the online market?

Geographical, technological and regulatory means
EU/EEA regulation: Insurance intermediaries providing cross-border services
in the Internal Market fall under the passporting rules
registration in the home country-MS is the passport
The register shall indicate the MS/MSs in which the intermediary conducts cross
border business
The IMD does not:
apply to insurance mediation services provided in relation to risks and
commitments located outside the EU (1st case)
regulate mediation activities carried out in 3rd countries (2nd case)
In both cases, geography and technology are the borders as to the conduct of the
business, but regulation is the border as to the qualification of the insurance
intermediary in the 1st case, taking into consideration that only then the intermediary
provides services in risk located both inside and outside the EU.
Prof. Dr. I. Rokas

Special issues: Online FoS vs traditional FoS ? Yes

IMD2 specifically submits national restrictions on online passporting intermediaries
to the rules of the ECD
Insurance intermediaries, unlike insurance undertakings, are not included in the Annex of
exceptions to article 3(3) of the ECD
The ECD allows limited exemptions and derogations of the freedom to provide
information society services:
Thus, FoS via traditional means can be subjected to more restrictions than the online
services as long as they are dictated by the scope of the general good
Prof. Dr. I. Rokas
Special issues: Online FoS vs traditional FoS ? Yes
The following areas could fall within the scope of general good as
recognised and interpreted by the ECJ:
The list is not definitive and the Court may add to it at any time
The national restrictive measure must be taken on a case-by-case basis
against a specific financial service provided by a given operator (IIM)
Prof. Dr. I. Rokas
AIDA World - Working Party: Distribution of Insurance Products
Prof. Dr. I. Rokas


Irokas - Aida Sydney 2013

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AIDA World - Working Party: Distribution of Insurance Products

Sydney, 18 September 2013

Prof. Dr. I. Rokas

Obligation of (off)online insurance intermediaries (IIM)

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

Prof. Dr. I. Rokas

Obligation of (off)online insurance intermediaries (IIM)

Prof. Dr. I. Rokas

Obligation of an IIM to establish in a host MS

Criteria to establish in online business

Third Country IIM (off)online business in the Union

Criteria distinguishing offline services as solicited/unsolicited

Prof. Dr. I. Rokas

Third Country IIM (off)online business in the Union

Unsolicited services are identified

Prof. Dr. I. Rokas

From a law on insurance intermediation to a law on marketing

Prof. Dr. I. Rokas

From a law on insurance intermediation to a law on marketing

From a law on insurance intermediation to a law on marketing

Reaching the coast

By provision of this information the customer is not protected as to

Not all customers are benefited by the same information

Customers remain responsible to take advantage and to evaluate

Prof. Dr. I. Rokas

Special issues: Comparison websites

Aggregators which provide IIM

Special issues: The bank as tied intermediary

Prof. Dr. I. Rokas

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

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

Prof. Dr. I. Rokas

Special issues: Online FoS vs traditional FoS ? Yes

Special issues: Online FoS vs traditional FoS ? Yes

Prof. Dr. I. Rokas

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