The IDD and Digital “Cross-Selling”
In recent years, online distribution of insurance as add-on has become common practice. That said, find below four examples for online ancillary insurance intermediaries:
An airline offers – embedded in the online booking process – a parametric flight delay insurance, which automatically compensates the insured person in case of a flight delay. In addition to the sale of an electronic appliance an online electronic retailer sells a warranty extension. When ordering glasses in an online shop, the conclusion of a glass insurance is offered to the customer. The booking platform for vacation travel enables the conclusion of a travel cancellation insurance.
In order to provide maximum clarity to the consumer, the IDD has incorporated a new term “the ancillary insurance intermediary”.
Ancillary insurance intermediary
The implementation of the IDD in Austria introduced a new form of business licence, namely the “ancillary insurance intermediary” (§ 137 para. 3 GewO). This is a “product-supplementary” insurance distribution by businesses (with the exception of financial institutions and investment firms) who carry out insurance distribution as an ancillary activity for remuneration and meet all the following conditions:
- the principal business activity is not insurance mediation
- only specific insurance products that are complementary to a good or service are distributed
- the insurance products concerned do not cover life insurance or liability risks (unless such cover complements the goods or services which the intermediary provides as its principal professional activity or for its principal business purpose)
Insurance as add-on: what is to be considered
The provisions on insurance distribution basically also apply to ancillary insurance intermediaries, unless otherwise stipulated by law. In accordance with this regulation, § 2 para. 1 of the Austrian general good rules for insurance intermediaries stipulates that the ancillary insurance intermediaries only have to fulfill the obligations in accordance with § 1 para. 1 to 3, para. 7, para. 8, para. 9 number 1 to 4 and number 9 and §§ 3 to 6 of the Austrian general good rules for insurance intermediaries. Hence the obligations of the ancillary insurance intermediary are limited to a certain extent.
Provision of information by an (online-) ancillary insurance intermediary
With regard to the provision of the obligatory pre-contractual information as well as the obligation to obtain the consent of the customer ancillary insurance intermediaries have to comply with the same requirements as usual insurance intermediaries.
Obligatory information provided by the (online-) ancillary insurance intermediary
Basically, the ancillary insurance intermediary must clearly point out in the header or footer of the business documents that the insurance distribution is ancillary and whether he acts as an insurance agent or as an insurance broker (§ 1 exp. 7 of the VO – general good rules).
Furthermore, the customer shall be provided with the following information prior to the (online-) conclusion of the insurance contract (clicking the order button):
- the information concerning the right to receive premiums
- its identity and address and the fact that it is an insurance intermediary
- whether it provides advice about the insurance products sold
- a reference to the complaint procedure referred to in § 365z1 GewO 1994
- the register in which it has been included and the means for verifying that it has been registered
Even in the event of (online-) ancillary insurance mediation certain legal obligations have to be fulfilled. However, the obligations are less extensive as they are for “usual” insurance intermediaries.
Insurance as add-on: What does that mean for you?
Insurance as add-on: Every insurance distribution partner who sells insurance products online must comply with the IDD obligations for each individual insurance product.
The IDD does indeed enable forms of so-called “Smart Contracts”, in which goods or services are supplemented by insurance.
Find the full IDD-series here on our blog!