- Agents & Brokers
- Insurance
October 24, 2024
The CGPA Europe European Observatory of Insurance Intermediaries was presented today in Milana company specialized in insuring the professional civil liability risks of intermediaries.
Lorenzo Sapigni, General Representative for Italy and European Underwriting & Claims Director of CGPA Europe, noted that “market concentration, emerging risks, new insurance obligations, rising premiums and digital technologies with potentially enormous effects they are, taken together, configuring a difficult test for intermediaries. This proof – explained Sapigni – can be overcome first of all by defending their centrality in distribution with new skills that allow the development of consultancy capacity. Furthermore, it will be necessary to build distribution models suited to one’s skills and the characteristics of one’s customer base; increase the quality and efficiency of operational management by reviewing internal processes with a view to compliance and competitiveness; be faster in seizing the opportunities offered by the market. It will also be crucial to understand how the applications of new technologies work to put them at the service of your business model“.
The eleventh edition of the Observatory contains an international comparison of the obligation of advice and consultancy during the life cycle of the policy and an analysis of how the duty of diligence is changing with digital technology with the need to protect data and guarantee the cybersecurity. It also reports and comments on the rulings of European courts relevant to the activity of intermediaries and the evolution of the status of intermediaries’ collaborators in the various countries.
Crackdown on compliance with the obligation of advice and consultancy. The duty of advice and consultancy has become a primary subject of legislation and European court rulings on the civil liability of intermediaries. Fulfillment of the obligation is now required at every stage of the life cycle of the insurance contract (placement, management, assistance in the event of an accident) with application criteria that vary significantly between countries.
In Italy, the obligation to provide clear and accurate information on the policy to be taken out was highlighted in an Italian ruling (file no. 2199/2021). On consultancy throughout the duration of the contract, a recent ruling (file 2144/2022) underlined the shared responsibility between insurance companies and insureds in managing changes to the policy.
French jurisprudence (judgment of the French Court of Cassation, case 21-15.528, relating to a dispute over the inadequacy of insurance coverage) imposes a proactive and diligent approach in risk assessment and client advice. Also in France, the 2023 law on the ecological transition introduced the obligation for insurance intermediaries to provide ongoing advice to customers holding life insurance contracts oriented towards capitalization and savings. The legislation has provided guidelines for the fulfillment of this duty, formalizing for the first time the periodic review process and specifying both the frequency of these assessments and the types of events that impact the contract and require the re-evaluation of the initial consultancy. .
German legislation is characterized by particular severity, requiring that the intermediary must provide the essential information for underwriting already at the time of the first contact with the customer (the European directive on insurance distribution requires that they do so only in good time before the conclusion of the contract) and, if the first contact is by telephone, the information must be provided immediately afterwards in writing. German legislation also provides for the obligation of consultancy even in the absence of an explicit request from the customer and includes situations in which the insurance product or the particular type of customer makes it necessary.
The Spanish rulings underline the intermediary’s duty to act as a real consultant, beyond the mere sales activity. The judges affirmed the legal obligation of intermediaries to proactively ensure that policies fully meet the specific needs and wants of customers.
Duty of care in the digital age: there are still many gaps to fill. As digital transformation progresses, intangible information has become the majority of information held or collected by intermediaries. The evolution of legislation, meanwhile, has increased compliance obligations by requiring the collection of an increasing amount of information to fulfill the duty to know the customer and provide advice. This scenario implies the need to adapt the organization and activity to new technologies, modernizing infrastructures and increasing measures for the security of data and digital transactions, which have become essential conditions for gaining customer trust.
Digital allows you to manage the risks associated with operations, offer a more effective/efficient service to customers and, at the same time, comply with compliance obligations. The flip side of the coin is the exposure to the risk of cyber crimes and cyber attacks which can have important consequences, in terms of material damage caused to their IT systems and civil liability towards third parties, in particular customers. Which suggests that intermediaries themselves invest in insurance instruments.
Trade associations across Europe are busy setting guidelines, developing digital tools and offering training with the aim of enabling intermediaries to assess the adequacy of their compliance and manage risks. Despite these efforts and the greater preparation of intermediaries, there are still many gaps to fill, as demonstrated by the large and diverse case history reported by the Observatory on sanctions imposed by supervisory authorities and on cyber attacks suffered by intermediaries.
Below is the 2023 edition of the report:
ESG, what changes for Agents and Brokers: the Annual Report of the CGPA Europe Study Center
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