1. Insurance intermediation activities
1.1 Is the distribution of insurance products (hereinafter referred to as 'insurance intermediation activities' or 'insurance intermediation') limited to insurance intermediaries in your country?
Insurance intermediation within the scope of the Swiss Federal Act on Insurance Supervision ('ISA') by untied insurance intermediaries (usually insurance brokers, see 3.1 below) in Switzerland triggers a requirement to register with the Swiss Financial Market Supervisory Authority ('FINMA') (Article 43, paragraph 1, ISA). In contrast, tied insurance intermediaries (usually insurance agents, see 3.1 below) are not subject to any registration requirement in Switzerland but have a right to register with FINMA (Article 43, paragraph 2, ISA).
The term 'insurance intermediation' in Swiss insurance regulation is very broad and includes both concluding insurance contracts as well as offering insurance contracts, both in the interests of an insurance undertaking or of a (prospective) client/insured person (Article 40, ISA; see 1.2 below).
Furthermore, insurance intermediaries have certain information obligations vis-à-vis the client, irrespective of whether they are registered with FINMA or not (see 4.1). In particular, they must provide the insured with information regarding the intermediary's identity and address and disclose their contractual relationships with the insurance undertakings on whose behalf they act, as well as the names of these insurance undertakings (Article 45, ISA).
1.2 What does the term 'insurance intermediation' include? Is there any definition set forth by statutory or case law? In any case, please indicate which activities/services are included in the above definition, for example, presentation or proposal of insurance products, assistance or consultancy aimed at drafting the agreement. Are collaboration activities that relate to the administration or execution of the contracts drafted, even in the case of accidents, included in the definition? Does the drafting of contracts or insurance agreements in a collective form on behalf of insured individuals also form part of insurance intermediation activities?
The term 'insurance intermediation' in the meaning of ISA is very broad and includes both concluding insurance contracts as well as offering insurance contracts, acting either on behalf or in the interest of an insurance undertaking or on behalf or in the interest of another person (usually the prospective client/insured) (Article 40, ISA; see also 3.1 below).
An insurance intermediary 'concludes' an insurance contract in the meaning of ISA, for example, by entering into an insurance contract as the representative of one party to that contract (ie, the insured or the insurance undertaking) under a power of attorney.
The term 'offering insurance contracts' is not clearly defined by statutory and case law and is therefore subject to interpretation. Swiss legal scholars have qualified as relevant any activities that influence the client in respect of his willingness/readiness to enter into a specific insurance contract or otherwise support the conclusion of such a contract by the client. Such activities include, in particular, advising on insurance products as well as preparatory activities such as risk analysis, tariff analysis, gathering information necessary for the drawing up of an insurance policy and preparing and passing on insurance documentation.1 In addition, activities carried out during the term of an existing insurance contract or insurance portfolio may be considered relevant to the extent they include advice regarding the renewal or amendment of insurance contracts or of the entire portfolio.2 As the notification and/or settlement of insurance claims to/with the relevant insurer regularly do not specifically aim at the renewal or amendment of existing insurance contracts, they should not qualify as insurance intermediation.3
Activities on a more general level, such as the discussion of insurance needs/requirements with a client by type or category of insurance product (as opposed to a discussion regarding specific insurance products) and also with respect to the range of required coverage should in our view not yet qualify as offering of insurance contracts.
1.3 Are insurance intermediation activities allowed as ancillary activities for other professional activities (eg, travel or rent-a-car services, etc) and to what extent? Furthermore, are there exceptions that allow actors, other than insurance intermediaries, to carry out insurance intermediation activities? Is it a matter related, for example, to the risk covered, the duration or the cost of the policy premium, etc?
In principle, any person offering or concluding insurance contracts on behalf of an insurance undertaking or another person (see 1.2) qualifies as an insurance intermediary (Article 40, ISA), irrespective of whether insurance intermediation activities are conducted as ancillary activities or on a stand-alone basis.4 However, only so-called untied insurance intermediaries (as opposed to tied insurance intermediaries) are required to register with FINMA (Article 43, paragraph 2, ISA; see 2.1 below). Both untied and tied insurance intermediaries are subject to information obligations (Article 45, ISA; see 4.1 below).
2. Insurance intermediaries' requirements
2.1 In order to act as an insurance intermediary, is there need for an authorisation and/or to be enrolled in a register? If yes, what are the requirements to be authorised/enrolled in the register as an insurance intermediary (individual or legal entities, integrity and/or professional requirements, etc)? Briefly explain how it works.
Untied insurance intermediaries must register in the register of insurance intermediaries with FINMA (Article 43, paragraph 1, ISA). Tied insurance intermediaries are not subject to a registration requirement but have the right to register with FINMA (Article 43, paragraph 2, ISA).
Insurance intermediaries qualify as tied if they are legally, economically or in other ways tied to an insurance undertaking, in particular if they generate, in the course of a given calendar year, more than 50 per cent of their commission volume with one or two insurance undertakings (eg, an insurance intermediary who intermediates insurance products of up to three insurance undertakings is always a tied insurance intermediary as it generates more than 50 per cent of its commission volume with one or two insurance undertakings by definition), if they have a direct or indirect participation of more than ten per cent of the equity capital in an insurance undertaking, or if they have a management function in an insurance undertaking or otherwise exercise influence on the business of an insurance undertaking (Article 183, paragraph 1 Ordinance on the Supervision of Private Insurance Companies (ISO)).
To be able to register, an insurance intermediary has to fulfil the following requirements:
- proof of sufficient professional qualifications (Article 44, paragraph 1a, ISA);
- proof of professional indemnity insurance with an annual policy limit for all damages up to at least CHF 2 million or equivalent financial security (Article 44, paragraph 1b, ISA and Article 186 of the ISO);
- capacity to act (Article 185 (lit. a), ISA);
- no criminal record involving activities incompatible with the business of an insurance intermediary (Article 185 (lit. b), ISA);
- no outstanding certificates of unpaid debts based on activities that are incompatible with the business of an insurance intermediary (Article 185 (lit. c), ISA).
Under Swiss regulations, both the insurance intermediary firm as well as the responsible individual persons working for the insurance intermediary firm are subject to registration requirement.5 However, the insurance undertaking itself, including its directors and senior officers, is not considered an insurance intermediary regarding the intermediation of its own insurance products.6
2.2 In what form can anyone access and verify the registration/authorisation or verify the fact that the insurance intermediary is a professional (eg, via the web)?
The register maintained by FINMA can be accessed online (Article 42, paragraph 2, ISA and Article 188, ISO).7 Tied insurance intermediaries have the right to register but are not subject to a registration requirement (Article 43, paragraph 2, ISA). It is therefore possible for tied insurance intermediaries not to be registered in the register of insurance intermediaries even though they are allowed to conduct insurance intermediation activities.
2.3 Are insurance intermediaries with a registered office in another country allowed to operate in your country and how (eg, under the right of establishment or freedom to provide services in your country, as in the EU)? If yes under which conditions? In such a case, are they bound by the same obligations as the insurance intermediaries with registered office in your country? Please describe.
Registration requirements for insurance intermediation activities of untied insurance intermediaries in Switzerland (see 2.1) can be triggered irrespective of whether the relevant insurance intermediary has its registered office in Switzerland or in another country.8 In addition, the place where the insurance intermediation activity is (physically) conducted is not relevant either for the determination of whether such activity is relevant under Swiss regulations. Rather, one has to look at the products that the insurance intermediary plans to offer to prospective clients.
Where insurance products of foreign domiciled insurance undertakings are to be intermediated (and the insurance product is within the scope of ISA), a registration requirement applies, in principle, if: (i) insurance intermediation activities are conducted towards a natural person or a legal entity domiciled in Switzerland as the policyholder or as the insured; or (ii) insurance intermediation activities are conducted regarding insurance coverage of risks in connection with assets located in Switzerland (Article 1, paragraphs 1 and 3, ISO). An insurance intermediary may, in any case, only intermediate insurance products that, from a Swiss regulatory perspective, an insurance undertaking is permitted to write.
The intermediation of products of insurance undertakings domiciled in Switzerland, in principle, always triggers a registration requirement. As a general principle, insurance intermediation is not subject to a Swiss registration requirement if it refers to any insurance business outside the scope of ISA (eg, de minimis insurance activities below the materiality threshold of ISA or reinsurance business of foreign reinsurers cross-border into Switzerland).9
As Switzerland is not a member of the European Union, the right of establishment and the freedom to provide services as outlined in the Directive 2002/92/EC of the European Parliament and the Council of 9 December 2002 on insurance mediation are not applicable. Furthermore, the treaty between the Swiss Confederation and the European Community regarding the free movement of persons does not provide for any facilitation regarding the registration requirement for insurance intermediaries. Currently, Switzerland only maintains a treaty on this matter with the Principality of Liechtenstein. Under this treaty, in principle, insurance intermediaries only have to register with the relevant supervisory authority of one country in order to be permitted to engage in insurance intermediation activities in the other country territory.10
3. Different types of insurance intermediaries
3.1 Please list the different types of insurance intermediaries acting in your country such as agents, brokers, banks, financial intermediaries or financial advisers.
Swiss insurance supervisory law, in principle, only differentiates between tied insurance intermediaries (Article 43, paragraph 2, ISA) and untied insurance intermediaries (Article 43, paragraph 1, ISA).
Tied insurance intermediaries are customarily described as insurance agents, and untied insurance intermediaries as insurance brokers,11 referring to the typical set-up of the contractual relationship between the respective insurance intermediaries and the insurance undertakings and/or the insured (see 3.4.1.3 and 3.4.2.1). However, the contractual categorisations based on Swiss private law do not always correspond with the qualifications according to Swiss insurance supervisory law. Consequently, some insurance agents qualify as untied insurance intermediaries and some insurance brokers qualify as tied insurance intermediaries.12 Insurance intermediaries may also be active in the financial market in other functions (eg, as banks, financial intermediaries or advisers). However, this does not, in principle, affect their qualification under Swiss insurance supervisory law.
Please note that a bill for a new Financial Services Act ('FFSA') is expected to be debated in Swiss Federal Parliament in the course of 2015 and might enter into force as early as 2017 or 2018. Under the current draft FFSA, the existing register of insurance intermediaries would be combined with a new register for 'client advisors' in the financial sector and, in addition, not only untied but also tied insurance intermediaries would be required to register. As a consequence, the distinction between tied and untied insurance intermediaries would no longer be significant with regard to the registration requirement. Furthermore, under the current draft FFSA, insurance intermediaries would only be allowed to designate themselves as 'independent' if (i) they consider a sufficient range of insurance products offered on the market; and (ii) do not accept any benefits in association with the provision of third-party services, or, if they do, pass them on to the clients (Article 9, FFSA per analogiam).13
3.2 Do insurance intermediaries need to enter into a written contract with the insurers (or receive a mandate from the insurers)?
In principle, neither Swiss insurance regulation nor mandatory civil law oblige insurance intermediaries to enter into a written contract with the insurer. The Code of Conduct of the Swiss Insurance Brokers Association (SIBA) recommends but does not require insurance brokers to enter into a written contract with the insurance undertaking.14 In any case, it is customary to do so. In addition, for example, where the insurance intermediary acts as an insurance agent, it may, depending on the legal type of contractual relationship between the insurance intermediary and the insurance undertaking, be required to enter into a written contract, as certain types of agreements are only valid when executed in writing.15
3.3 Can an insurance intermediary enter into a contract with the insurers (or receive a mandate from the insurer) and in turn enter into one or more agreements with other insurance intermediaries (the so-called horizontal distribution)?
Yes, it is in principle possible for an insurance intermediary to enter into a contract with the insurer and in turn enter into one or more agreements with other insurance intermediaries.
However, the main intermediary (ie, the one in a direct relationship with the insurance undertaking) should ensure that the other intermediaries with whom he enters into agreements comply with registration requirements and other regulatory duties, if applicable.
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Footnotes
1 BSK VAG-Alois Rimle, Art. 40 N 10; Martin Kessler, Die Stellung der gebundenen und ungebundenen Versicherungsvermittler nach Inkrafttreten des neuen VAG am 1. January 2006, Diss. Zürich 2009, N 77.
2 BSK VAG-Alois Rimle, Art. 10 N 12; Martin Kessler, N 78 f.
3 However, in particular the settlement of insurance claims by an insurance intermediary on behalf or in the interest of an insurance undertaking might be considered as outsourcing of an essential function of an insurance undertaking and thus require an outsourcing agreement, to be included in the regulatory business plan of the insurance undertaking, which has to be filed with FINMA (art. 4, para. 2 lit. j ISA; BSK VAG-Alois Rimle, Art. 40 N 12).
4 Stephan Fuhrer, Schweizerisches Privatversicherungsrecht, Zürich 2011, N 7.26.
5 BSK VAG-Alois Rimle, Art. 40 N 14.
6 BSK VAG-Alois Rimle, Art. 40 N 14.
7 http://register.vermittleraufsicht.ch/search.aspx?lng=en (last accessed 17 July 2015).
8 BSK VAG-Helmut Heiss/Ulrike Mönnich, Art. 2 N 120.
9 BSK VAG-Helmut Heiss/Ulrike Mönnich, Art. 2 N 103 and 110; BSK VAG-Alois Rimle, Art. 41 N 10; Sybille Käser/Helmut Studer, Versicherungsvermittlung, in: Waldmeier (Hrsg.), Versicherungsaufsicht, Zürich/Basel/Genf 2007, p. 293.
10 Treaty between the Swiss Confederation and the Principality of Liechtenstein regarding direct insurance and insurance intermediation, SR 0.961.514.
11 BSK VAG- Helmut Heiss/Ulrike Mönnich, Art. 2 N 120.
12 Stephan Fuhrer, N 7.9.
13 Federal Department of Finance, Explanatory Report of 25 June 2014 on the consultation draft bill of the Financial Services Act and on the Federal Act on Financial Institutions Act, p. 119, et seq.
14 Swiss Insurance Brokers Association, Code of Conduct as of 29 October 2008, as amended 21 January 2015, N 48.
15 This applies, for example, to certain specifics of an agreement when the contractual relationship is qualified as a commercial travellers' contract (article 347a, CO).
Previously published in IBA Insurance Committee Substantive Project 2015
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
