Insurtech and MGA’s

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Publié le 20/03/2024 par Jérôme Goy

INSURANCE LAW

In a definitive judgment dated October 2, 2023, Paris Commercial Court ruled that brokerage practices are binding on Managing General Agent (MGAs) (as well as insurers), as they act as agents of insurers. Consequently, they must, among other things, respect the commission rights of the introducing broker.

Jérôme GOY
Partner at Enthemis law firm

THE FACTS

The volume of so-called affinity insurance policies, whether through traditional channels or Insurtech, continues to grow. This type of distribution involves several insurance intermediaries, including an MGA, in all branches of insurance.

A definitive judgment from Paris Commercial Court on October 2, 2023 (1), draws all the practical consequences from this, which should be noted by all brokers.

The insured risks (French expatriates in Asia) were non-French health insurance risks. The insurance programs were subscribed to by the association of insured persons April with Groupama Gan Vie and were governed by French insurance law. The marketing and management of these policies were carried out under a partnership agreement concluded by the neo-broker with the April group. The agreement between the neo-broker and the wholesaler explicitly referred to brokerage practices and the Moral Code of Planete CSCA [association of insurance brokers).

The judges generally apply these professional rules of practice to which insurers and brokers submit, as the Court of Cassation recalls (2). Brokerage practices, including the right to commission, are, for reference, applicable to French MGAs (3).

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Good to know 
In the code of ethics for brokers, brokerage practices refer to professional rules of practice to which insurers and brokers submit. The first practices appeared in 1935 and are still relevant for most.

THE DECISION

The question therefore arose as to the applicable law to the contractual relationship between brokers, a relationship which, for reference, is entirely independent of the law applicable to the insurance policy. Although they were “non-French” risks, the distribution agreement was also subject to French law. The court therefore retains the jurisdiction of French judges and French law. The judge concludes that French brokerage practices also apply to the policy in question, including the obligation on the MGA to comply with them.

THE COMMENTARY

Brokerage practices were designed to protect brokers from insurers and prevent onerous replacement orders to the benefit of their agents. The role of an MGA is closer to that of an agent of insurers than an agent of insured persons. 

It is therefore logical that these practices effectively protect the introducing broker against the practices of the MGA. This is notwithstanding the context of foreign risks, as the relationship between brokers here is governed by French law. As the MGA acts as an agent of insurers, brokerage practices are binding on them, just as they are on insurers. 

They must notably respect the commission rights of the introducing broker. Even though established in 1935, these practices still preserve the interests of brokers, whether new or traditional, especially in the context of collective membership policies, where it is easy to bypass the introducing broker.

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