Recommendation 2014-R-01 of July 3, 2014, on agreements concerning the distribution of life insurance contracts, amended December 6, 2019

1 Online publication on the ACPR website on 19/12/2019 Recommendation 2014-R-01 of July 3, 2014 on agreements concerning the distribution of life insurance contracts, amended on December 6, 2019

1. Context The analysis of practices and conventions observed in the insurance intermediation market revealed that insurance companies and insurance intermediaries generally use written agreements to govern their relationships.

Under the wording resulting from Ordinance No. 2008-1271 of December 5, 2008, aimed at "harmonizing certain rules applicable to the marketing of financial instruments with those applicable to the marketing of comparable savings and insurance products," Articles L. 533-13-1 of the Monetary and Financial Code and L. 132-28 of the Insurance Code made it mandatory to establish agreements governing the relationships between producers and distributors regarding the marketing of financial instruments, savings products, and life insurance.

These agreements must include details regarding:

• the producer's control over the conformity of advertising documents issued by the distributor with contractual documents;
• the provision by the producer to the distributor of all information necessary for the proper marketing of its life insurance contracts.

However, it was observed that often the required mentions were imprecise and poorly adapted to the multiplicity of actors in the distribution chain. Consequently, the legislator's intent to regulate and ensure the quality of information delivered to the client is not satisfied.

Conversely, it was observed among intermediaries using a network of distributors that some had taken the initiative to establish agreements with their partners containing obligations similar to those provided in the agreements linking them to insurance companies.

Indeed, in the presence of distribution chains, interlocutors multiply, so that the link between the insurance company and the insured becomes increasingly distant. Thus, the intermediary who is the interlocutor of the insurance company ("initial intermediary") may be distinguished from the intermediary who is the interlocutor of the client ("final intermediary") to whom they market the contract. However, this final intermediary is most often not directly linked to the insurance company by an agreement.

In such a context, in order to ensure the purpose and effectiveness of the agreement concluded between the insurance intermediary and the insurance company, distribution methods involving a plurality of intermediaries must be able to be taken into consideration within the framework of this type of agreement.

Called upon to control distribution actors falling within their respective, sometimes common, scope of control, based on texts drafted in similar terms, the ACPR and the AMF therefore conducted a joint action on the application of these agreements, at the end of which it appeared necessary to clarify their expectations, so that these agreements meet the dual objective as follows:

• clarify the obligations of each party to the agreement regarding the process for validating advertising documents and transmitting information allowing the characteristics of a contract to be assessed;
• ensure the protection of clients throughout the marketing chain of the life insurance contract, in particular by ensuring the reliability of the information communicated to them through advertising or advice provided.

Entering into force on January 3, 2018, Ordinance No. 2016-827 of June 23, 2016, transposing Directive 2014/65/EU on markets in financial instruments (MiFID II), removed the obligation set out in Article L. 533-13-1 of the Monetary and Financial Code, given the new obligations arising from this directive. Entering into force on October 1, 2018, Ordinance No. 2018-361 of May 16, 2018, transposing Directive (EU) 2016/97 on insurance distribution (IDD), does not modify the obligation to establish an agreement set out in Article L. 132-28 of the Insurance Code. It also establishes a governance and product surveillance mechanism specified by Regulation (EU) 2017/2358.

2. Recap of the legal and regulatory framework In application of Articles L. 132-28, R. 132-5-1, and R. 132-5-2 of the Insurance Code, intermediaries must establish agreements with insurance companies offering individual life insurance contracts with surrender values, capitalization contracts, as well as group life insurance contracts with transfer or surrender values and contracts referred to in Article L. 441-1, excluding mandatory membership contracts.

According to Articles L. 132-28 and R. 132-5-1 of the Insurance Code, these agreements must be established in writing at the request of insurance intermediaries and must provide in particular:

i. The conditions under which the intermediary submits to the insurance company the advertising documents it has prepared prior to their dissemination: a) At the intermediary's expense: - submission to the insurance company of draft advertising documents and any envisaged modification, regardless of the dissemination medium used; - obligation to use only advertising documents approved by the insurance company. b) At the insurance company's expense: - verification of conformity with the life insurance or capitalization contract and, if applicable, the notice or note 1, of any draft or modification of advertising documents; - a timeframe to carry out this verification.

1 Referenced respectively in Articles L. 132-5-3 and L. 132-5-2 of the Insurance Code.

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ii. The conditions under which the insurance company makes available to the intermediary the information necessary to assess all characteristics of the contract, both by the intermediary and by the client. These information are transmitted and updated systematically, notably in the form of presentation sheets, and are available on paper or any other durable medium.

As provided by Article R.132-5-2 of the Insurance Code, agreements are not required when:

• the intermediary uses only advertising documents made available to it by the insurance company; and
• the insurance company has committed in writing to transmit to the intermediary the information necessary to assess the characteristics of the contract.

Furthermore, information exchanges between insurance companies and intermediaries are also provided for under the governance and product surveillance mechanism provided for in Article L. 516-1 of the Insurance Code, in particular:

• designers 2 make available to distributors all information 3 necessary to assess all characteristics of the insurance product and knowledge of the product approval process carried out before marketing, including the defined target market of the insurance product.
• distributors put in place appropriate devices to obtain this information and to understand the characteristics and defined target market of each insurance product.

Articles L. 116-5 of the Mutual Code and L. 932-52 of the Social Security Code impose that mutual societies, provident institutions, and unions offering life insurance and capitalization contracts establish agreements with their intermediaries that provide a framework similar to that described in Article L. 132-28 of the Insurance Code. The governance and product surveillance mechanism is also applicable to them by reference of Articles L. 116-6 of the Mutual Code and L. 932-53 of the Social Security Code.

3. Scope of the recommendation 3.1 Life insurance contracts concerned This recommendation concerns individual insurance contracts with surrender values, capitalization contracts under the Insurance Code, contracts referred to in Article L. 132-5-3 of the Insurance Code, contracts referred to in Article L. 441-1 of the Insurance Code excluding those whose link between the member and the policyholder makes membership in the contract mandatory, as well as operations referred to in Article L. 223-1 of the Mutual Code and those referred to in Article L. 932-52 of the Social Security Code (hereinafter "life insurance contracts").

3.2 Persons concerned The recommendation addresses insurance and capitalization companies governed by the Insurance Code, mutual societies and unions governed by Book II of the Mutual Code, provident institutions and unions governed by Title III of Book IX of the Social Security Code (hereinafter "the insurance company(ies)") and insurance intermediaries referred to in Articles L. 511-1 of the Insurance Code, L. 116-2 of the Mutual Code, and L. 932-49 of the Social Security Code (hereinafter "the intermediary(ies)"), including when these insurance companies or intermediaries operate in France under the freedom to provide services or freedom of establishment.

4. Recommendation With the aim of better informing the insured and providing adapted advice during the marketing of life insurance contracts, the ACPR recommends, in accordance with the provisions of Articles L. 612-1, II 3°, and L. 612-29-1, second paragraph of the Monetary and Financial Code, the following best practices:

4.1 On advertising communications, the ACPR recommends: When the intermediary uses advertising communications other than those made available to it by the insurance company, to clearly provide in the agreement:

4.1.1 The systematic submission by the intermediary to the insurance company prior to their dissemination of any new draft of advertising communication, as well as modifications made to a previously approved draft or a communication made available by the insurer. These communications are submitted to the insurance company regardless of their dissemination supports and formats, under the conditions of their presentation to the public.

4.1.2 The issuance by the insurance company of an opinion (pure validation, pure refusal, or request for modification) for all advertising communications submitted to it by the intermediary under the conditions of 4.1.1, including in their finalized version, prior to any dissemination to the public.

4.1.3 The commitment by the insurance company to verify the conformity of advertising communications within a timeframe(s) fixed in a maximum number of days, adapted if necessary to the marketing methods of the intermediary and the communication support(s) used.

4.1.4 The commitment by the intermediary not to use advertising documents in the event of silence from the insurance company.

4.2 On information relating to the insurance contract, the ACPR recommends:

4.2.1. In the presence of an agreement Regarding the information that the insurance company must transmit to the intermediary, to clearly provide in the agreement:

4.2.1.1 To enable the parties to the agreement to clearly identify them, the indication of the type(s) of document(s) intended for communicating the information necessary to assess all characteristics of the contract, including if applicable the information provided for in paragraph 2 of Article 8 of Regulation (EU) 2017/2358.

4.2.1.2 The timeframe fixed in a minimum number of days and the methods by which the information is transmitted, prior to the marketing of the life insurance contract and its update, providing that this information:

• must be easily accessible;
• can be stored in a manner allowing easy reference, for a period adapted to the purposes for which they are intended;
• can be reproduced identically to the stored information.

4.2.1.3 With regard to the obligations arising from the product surveillance and governance mechanism set out in Article L. 516-1 of the Insurance Code, the agreement may also provide, at the discretion of the stakeholders: a) the making available by insurance companies 4 of the information provided for in paragraph 2 of Article 8 of Regulation (EU) 2017/2358; b) the methods and frequency of periodic review of products by insurance companies 5 provided for in Article 7 of Regulation (EU) 2017/2358; c) the control measures carried out by insurance companies 6 with the aim of ensuring compliance with the objectives of the product approval process and the defined target market, as provided for in paragraph 4 of Article 8 of Regulation (EU) 2017/2358, as well as any corrective measures provided for in paragraph 5 of Article 8 of Regulation (EU) 2017/2358 in the event of incompatibility of the product distribution with these objectives. d) the methods for periodic revision of the distribution strategy and verification of compliance with the target market by the intermediary, in accordance with the provisions of paragraph 6 of Article 10 of Regulation (EU) 2017/2358; e) the methods of communication by the intermediary of relevant information on sales and periodic reviews of product distribution devices in accordance with the provisions of paragraph 6 of Article 10 of Regulation (EU) 2017/2358 as well as, if applicable, information relating to the inadequacy of a product with the interests, objectives, and characteristics of the defined target market, or any other circumstance relating to the product likely to have adverse effects on the client in accordance with the provisions of Article 11 of Regulation (EU) 2017/2358.

4.2.2. In the absence of an agreement When the intermediary uses only advertising communications as made available to it by the insurance company, to clearly provide in the writing referred to in Article R. 132-5-2 of the Insurance Code the elements referred to in points 4.2.1.1, 4.2.1.2, and a), b), and c) of point 4.2.1.3.

4.3 On the methods of implementing points 4.1 and 4.2 in the case of a distribution chain, the ACPR recommends: When, for the distribution of contracts from an insurance company, the initial intermediary uses other intermediaries:

4.3.1 To further introduce into its agreement with the insurance company a clause by which it commits to conclude itself, with each final intermediary, an agreement covering the methods for validating and/or using advertising documents and the transmission of information necessary to assess all characteristics of the insurance contract.

This agreement concluded between the initial intermediary and each final intermediary may also include the elements mentioned in 4.2.1.3 above for the needs of the product surveillance and governance mechanism set out in Article L. 516-1 of the Insurance Code.

4.3.2 To clearly provide in each agreement between the initial intermediary and a final intermediary that:

• the final intermediary uses advertising communications as made available to it by the initial intermediary;
• failing that, the final intermediary transmits drafts of advertising communications and any envisaged modification, regardless of the dissemination medium used, to the initial intermediary so that the latter submits them to the insurance company for validation;
• the initial intermediary transmits to the final intermediary the information allowing the characteristics of insurance contracts to be assessed and their updates.

4.3.3 To the initial intermediary, to ensure that the agreement it concludes with the final intermediary contains provisions that are compatible with the implementation of the provisions of the agreement it has concluded with the insurance company and that allow it to respect the commitments taken towards the insurance company, under the conditions provided for in this recommendation.

4.3.4 To the initial intermediary, in the case referred to in 4.2.2 and when the final intermediary uses only advertising communications from the insurance company, to commit in writing to transmit to the final intermediary the information necessary to assess all characteristics of the insurance contracts and their updates.

4.4 On the means and procedures put in place, the ACPR recommends: To insurance companies and intermediaries:

• To implement the necessary means and procedures to ensure compliance with the modalities regarding the establishment and execution of the agreements recommended in paragraphs 4.1, 4.2, and 4.3 above.
• To be able to justify to the ACPR the means and procedures implemented or to explain, if necessary, why it was chosen not to conform to certain elements of this recommendation.

This recommendation, as amended, is effective as of its date of publication.

4 And, if applicable, intermediaries who participate in the design of insurance products. 5 And, if applicable, intermediaries who participate in the design of insurance products. 6 And, if applicable, intermediaries who participate in the design of insurance products.