Supermarkets are pushing into insurance sales

Policy sale next to the deposit machine? Why not! Lawyer Johannes Fiala and actuary Peter A. Schramm explain how discounters and full-range retailers could circumvent the strict rules for insurance brokerage.


Insurance intermediaries have to face growing competition from online comparison portals and brokers as well as direct insurers. Tech giants like Google and Amazon are also rivals to be taken very seriously. There is also a further danger from an unexpected corner: the branches of large supermarket chains represented nationwide. Attorney Johannes Fiala and actuary Peter A. Schramm draw attention to this in the following original article. (jb)


Insurance sales in the mass business and without any advisory duties are carried out by a so-called “closed-shop”. Here simply an association is created, gladly in form of a “self-help group”. In this case, the insurance products are not directly advertised. In the foreground is the belief in “good conditions”, about which one is only informed when one has joined such a community. The clubs act as tipsters and advertise with special conditions. Commissions can also flow along the way, perhaps even kickbacks. In this way, not only insurers but also telephone providers or car rental companies are advertised.


So the not really “new” sales approach is to make the future customers members. This requires a legal entity for the membership of the customers – such as a cooperative, an association, a foundation or even a non-profit limited liability company. These are not subject to the rules of the EU Insurance Sales Directive IDD, nor does it require approval by a chamber of industry and commerce. The discounter can now choose the appropriate legal form for his “self-help group” himself. He will then also find a suitable name for it, so that all customers feel secure.


How exactly do the policies get to the man or woman? The association simply buys the insurance cover from one or more insurers, thus becoming the policyholder itself. The discounter’s customers then only become “insured persons” in a group contract. This also offers cost advantages in sales with potential unique selling points in the design of the scope of cover and insurance premiums.


Mediation by chain stores without the obligation to consult and without documentation?

Furthermore, distribution via discounters and/or for comrades can be slim, because the law does not provide that such “closed-shops” are subject to the strict regulations with duties to provide advice and documentation. This is not the case, if only because there are strict obligations for insurance mediation only towards the policyholder, but not on the part of the policyholder towards an insured person. The acquisition of insured persons is therefore not at all the mediation of an insurance contract, because the insured persons do not have such a contract in the end, but are only insured through the policyholder.


Insurance cover via support funds (UK) for medical costs or death and other self-help organisations such as (purchasing) cooperatives can also be offered without the rules of the IDD, just like the offers of discounters. Because even in this case, the institutions are the policyholders.


Initial information in text form and waiver of consultation in writing?

Which regulatory hurdles do discounters and provident funds not have to overcome? According to Section 11 of the Insurance Mediation Ordinance, insurance intermediaries must transmit the content of the initial information in text form at the time of the first business contact. This means legible, permanent, without a signature – and since 13.06.2014 with the name of the person making the declaration and “on permanent data carrier”.


Only since 23 February 2018 has it been permitted to have the waiver of advice and documentation in distance selling in accordance with Section 312c of the German Civil Code, also in text form – earlier waivers would only have been effective in writing. Before the waiver, legal advice must also be given about the compensation – Section 63 of the Insurance Contract Act VVG. In addition, Sections 7b and 7c VVG must be observed.


So once again: all such hurdles and pitfalls in insurance sales can be elegantly circumvented by discounters, provided that one operates outside the regulated insurance brokerage.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of (published on 30.11.2018)


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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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