18 August 2023

Registration requirement for unbound insurance intermediaries, new legal situation

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Stricter rules for insurance intermediaries will apply from January 2024. Compliance with the new requirements is crucial to avoid consequences. The registration obligation will become more demanding. Compliance with the new legal situation is inevitable for successful activity.

Since 2006, unbound insurance intermediaries have been required to register in a public register. Bound intermediaries have a right to be entered in the register, while unbound insurance intermediaries have an obligation to be registered. In the future, however, insurance intermediaries will only be able to act as either bound or unbound intermediaries. At its meeting on June 2, 2023, the Federal Council approved the amendments to the Supervision Ordinance (SO) and brought the revised Insurance Supervision Act (ISA) into force together with the revised SO on January 1, 2024.

A. What is new?

With the entry into force of the revised ordinance, insurance intermediaries will be subject to several new obligations. For example, intermediaries now have information duties, the duty to take organizational precautions to avoid conflicts of interest, and the duty to provide documents to policyholders at any time. In addition, proof of training and continuing education must be submitted to the supervisory authority. Another new feature is the clear distinction between bound and unbound insurance intermediaries. An insurance intermediary is considered to be unaffiliated if he or she acts in the interest of the policyholder and has a fiduciary relationship with the policyholder. All other insurance intermediaries are considered bound. It is therefore important for insurance intermediaries to know whether they are bound or unbound. FINMA will publish a communication on this subject in the fall of 2023, which will further define the criteria for the distinction.

B. Registration obligation for unbound insurance intermediaries: What needs to be considered?

Insurance intermediaries who are neither legally nor economically bound to an insurance company (brokers) may only commence their activities after successful registration (Art. 43 (1) ISA). This applies to both legal entities and natural persons. The Supervision Ordinance specifies the criteria according to which an insurance intermediary is considered bound and thus not subject to registration (Art. 183 SO). Bound intermediaries (sales representatives and agents on behalf of insurance companies) have the right to be entered in the register (Art. 43 para. 2 ISA). In doing so, they must meet certain requirements, such as taking out professional liability insurance and passing an examination of expertise. The new legal situation is intended to help ensure that customers are better protected and that independent intermediaries can offer higher quality advice. If the requirements are not met, and in particular if the duty to provide information to insured persons is breached, there may be severe penalties, such as fines of up to CHF 500,000. Therefore, it is important to inform oneself about the new regulations in time and to take the registration obligation seriously.

C. New legal situation and requirements for the registration obligation

The new legal situation brings some changes for unbound insurance intermediaries. Certain requirements must be met in order to successfully complete the registration process.

The previous provision (Art. 187 SO) remains essentially unchanged. It is adapted to the legal requirement according to which the unbound insurance intermediaries are now expressly in a fiduciary relationship with the policyholders and act in their interest (Art. 40 para. 2 ISA). Unlike bound insurance intermediaries, who could voluntarily register under the previous law, they cannot represent insurance companies by definition.

In order to be registered, unbound and bound insurance intermediaries must fulfill the following requirements (Art. 44 ISA):

  • Personal requirements according to Art. 185 SO
  • Proof of sufficient professional qualification (Art. 184 SO)
  • Conclusion of professional liability insurance or provision of equivalent financial security (Art. 186 SO).

Art. 183 SO specifies that the registration requirement for unbound insurance intermediaries under Article 41(1) ISA applies to sole proprietorships and partnerships as well as to legal entities. Unbound insurance intermediaries now have a fiduciary relationship with policyholders. This alone is decisive for the demarcation from bound insurance intermediaries.

With regard to the distinction between bound and unbound insurance intermediaries, FINMA's current practice will be subject to change. FINMA is expected to publish a corresponding notice in the fall.

D. Conclusion: Necessity to comply with the new legal situation

In conclusion, it can be said that compliance with the new legal situation is of great importance for insurance intermediaries. Insurance intermediaries must determine under the new delimitation criteria whether or not they are considered unbound and thus subject to the registration requirement. The requirements for registration are high and it is important that they are fully met in order to avoid possible consequences. It is therefore strongly recommended to familiarize oneself with the new requirements and to check and fulfill them carefully. This is the only way to avoid unpleasant consequences and to ensure successful activity as a bound or unbound insurance intermediary. Overall, compliance with the new legal situation is therefore unavoidable and should be taken seriously by every insurance intermediary. The team of MME Legal Tax Compliance supports insurance intermediaries in the corresponding clarifications, the establishment of the necessary organization as well as, if necessary, in the registration