Insurtech and MGA’s

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Publié le 20/03/2024 par Jérôme Goy

INSURANCE LAW

The application of 1935 brokerage practices to MGAs and international adhesion contracts: the Paris Commercial Court ruling of October 2, 2023

The volume of so-called affinity insurance contracts, whether through traditional channels or Insurtech, continues to grow. This type of distribution involves several insurance intermediaries, notably MGAs, in all lines of insurance.

A final ruling by the Paris Commercial Court on October 2, 2023 (1) sets out all the practical consequences, which should be of particular interest to all brokers.

The risks insured (French expatriates in Asia) were non-French health insurance risks. The insurance programs were underwritten by the association of April policyholders with Groupama Gan Vie, and were governed by French insurance law. These policies were marketed and managed under a partnership agreement between the neo-broker and the April group. The agreement between the neo-broker and the wholesaler explicitly referred to brokerage practices and the Planète CSCA Code of Ethics.

Judges generally apply these professional rules of practice, to which insurers and brokers are bound, as the French Supreme Court (Cour de cassation) has reminded us (2). Brokerage practices, including the right to commission, are, for the record, applicable to French MGAs (3).

The question therefore arose as to the law applicable to the contractual relationship between brokers, which, for the record, is totally independent of the law applicable to the insurance contract. Although these were “non-French” risks, the distribution agreement was also subject to French law.

The court therefore accepted the jurisdiction of French judges and French law. The judge concluded that French brokerage practices also applied to the contract in question, and in particular the wholesale broker’s obligation to comply with them.

Brokerage practices were designed to protect brokers from insurers, and to avoid unfair replacement orders for their agents. The role of MGAs is more akin to that of agents for insurers than for policyholders. It is therefore logical that these practices should in fact protect the introducing broker against the practices of the wholesale broker. Notwithstanding the context of foreign risks, the relationship between brokers is governed by French law. As the wholesale broker acts as an agent for insurers, brokerage practices apply to him as they would to an insurer: in particular, he must respect the commission entitlement of the introducing broker. Even as they were in 1935, they still protect the interests of brokers, whether neo or traditional, particularly in the context of group contracts, where it is easy to bypass the broker.