LIFE ASSURANCE CONTRACTS

The taking up of insurance business in the territory of italian republic under the freedom by an undertaking with head office in another european state

a cura di Avv. Alessandra Perelli
skype: aleperelli

The taking up of insurance business under the freedom to provide services in the territory of the Italian Republic by an undertaking with head office in another EU or EEA State is subject to the communication to ISVAP (the Italian Supervisory Authority for Private Insurance Undertakings and Insurance Undertakings of Public Interest, herein after ISVAP) by the home supervisor of the following documents drawn up in Italian:
  1. the name of the undertaking and the address of its head office or, in case the undertaking intends to carry on business from a branch situated in another member State, the address of that branch and the name of the general representative;
  2. a certificate of the insurance classes that the undertaking has been authorised to pursue in its home State attesting that the undertaking possesses, with respect to its entire business, the minimum solvency margin envisaged by directive 2002/83/EEC (life assurance) or 1973/239/EEC (non-life insurance) and subsequent modifications and integrations;
  3. a declaration indicating the nature of the risks and commitments which the undertaking is proposing to cover in Italy (undertakings authorised to carry on both life assurance and non-life insurance in their home member States may simultaneously pursue the two lines of business by way of free provision of services provided that they abide by the rules of legislative decrees 174/95 and 175/95, especially as regards the obligation to maintain a separate management);
  4. only if the undertaking is to cover insurance class 10 (motor vehicle liability) and 12 (liability for ships): the name and address of the representative for the handling of claims envisaged by art. 90 of legislative decree 175/95 and a declaration of membership of Ufficio Centrale Italiano (the national bureau as per law 242/1990) and Fondo di Garanzia per le Vittime della Strada (the national guarantee fund envisaged by art. 19 of law 990/1969);
  5. only if the undertaking is to cover insurance class 17 (legal expenses): notification of the option chosen from those described in art. 3 point 2 of directive 87/344/EEC.
The undertaking may start business under the freedom to provide services as soon as it has been notified by its home supervisor.
ISVAP informs the home supervisor of the general good conditions which the undertaking must observe as regards the contracts concluded and the forms of advertising adopted.
Contracts are governed by the Italian law. However, the parties may agree that the contract be subject to the law of another State, except for the limits deriving from the application of Italian mandatory rules and without prejudice to the obligation to apply the Italian law to compulsory insurance contracts.
The undertaking must notify ISVAP through the home supervisor of any changes to the conditions governing pursuit of business contained in the first communication. The undertaking may effect the changes immediately after it has been informed that the communication has been notified to ISVAP.
Business under the freedom to provide services in Italy cannot be carried on through branches, agencies or any other permanent presence even if it consists merely of an office managed by the undertaking's own staff or by a person who is independent but authorised to act on a permanent basis for the undertaking.
The undertaking must appoint a fiscal representative resident in Italy and communicate the name of such representative to
  1. Agenzia delle Entrate, Ufficio Roma 6, Via Canton 20, 00144 Rome,
  2. ISVAP, Istituto di Vigilanza delle Assicurazioni Private e di Interesse Collettivo, Via del Quirinale 21, 00187 Rome.
Furthermore, if the undertaking is also interested in pursuing compulsory insurance, he is subject to specific regulations (inter alia the appointment of an Italian representative and the communication of the policy conditions to ISVAP before their application).

THE DISCLOSURE IN LIFE ASSURANCE CONTRACTS

According to ISVAP Circular n. 551/D of 1 March 2005 concerning the Disclosure in life assurance contracts, before concluding the insurance contract, the undertaking must give the policyholders all the information concerning the policy, contained in an information dossier (herein after the “Information Dossier”) which may take the form of a set of detachable documents, drawn up in compliance with the Italian regulations.
The Information Dossier shall contain the following pre-contractual and contractual documents:
a) Summary Profile;
b) Information Note;
c) Insurance Conditions including:
c1) Regulations governing the internal fund (for unit- linked contracts);
c2) Regulations governing the segregate fund (for increasing benefits contracts);
d) Glossary;
e) Proposal form.
The documents making up the Information Dossier shall be numbered on each page, with an indication of the total number of the pages (1 of 6, 2 of 6 etc.) and, at the end of the Information Dossier, the date of the last update of the contents.
The Cover of the Information Dossier shall only state:
  1. the name, logo and symbol of the undertaking and the parent group;
  2. the heading: “Contratto di ... ... (insert the type of contract and the commercial name)”;
  3. the phrase in bold letters: “The present Information Dossier, containing … (insert the list of documents as referred above) must be delivered to the policyholder before he or she underwrites the insurance proposal”;
  4. the sentence: “Read the Summary Profile and the Information Note carefully before signing the contract” in bold type.
As to the criteria for drawing up documents, when drawing up pre-contractual and contractual documents undertakings shall:
  1. use clear and concise expressions so that the policyholder can understand the contents of the contract that he/she will sign, together with the relative benefits offered, the guarantees and any financial risk that he/she must bear;
  2. draw up a Glossary explaining the meaning of the technical terms;
  3. use a typeset of not less than 11 and use graphic, layout and editing arrangements that will facilitate the reading of the documents. With exclusive reference to the editing of the proposal form, such arrangements can be appropriately adapted to specific typographic needs;
  4. use bold characters for those clauses that state possibilities of risks, limitations, charges, obligations and forfeitures to which the policy may be liable as also the “Warnings” contained in the Summary Profile and Information Note;
  5. ensure consistency of the information and clauses within a single document and between the documents referred to the Information Dossier;
  6. only use terms such as "guarantee” and “guaranteed" with reference to contracts for which the undertaking has directly committed to providing a financial guarantee, and shall avoid using such terms in the event of commitments made by third parties to pay predetermined sums;
  7. only use the term "protected capital" with reference to contracts for which the adoption of particular management techniques aimed at minimising the possibility of the loss of invested capital is required. In these cases it must be stressed that protection does not represent the guarantee of conservation of capital or of a minimum return;
  8. not include expressions or wordings of an advertising or promotional nature.

THE INFORMATION DOSSIER

a) Summary Profile
The companies shall draw up a Summary Profile exclusively for with-profit, unit-linked and index-linked contracts and for contracts designed to implement individual pension plans on the basis of the models drawn up by ISVAP.
In the case of policies consisting in a combination of different contract types, for purposes of an adequate representation of the characteristics of the contract, the undertakings shall draw up the Summary Profile by combining the models for the various contract types.
The rate of return to be used for determining the "annual average percentage cost" as provided for by the Summary Profiles of with-profit and unit-linked contracts and contracts designed to implement individual pension plans shall be determined by ISVAP, which will update it whenever necessary. For the first application the rate of return is fixed at 4% per annum.
It is forbidden to use expressions in the Summary Profiles to indicate, even indirectly, that ISVAP has given its approval to their contents.

b) Information Note
The undertakings shall draw up different Information Notes for different types of contracts on the basis of the models drawn up by ISVAP.
In the case of pure risk contracts, the Information Note contains the representation of the tables illustrating the premiums.
The insertion of supplementary information with respect to that envisaged by the models must be limited to the need to make the characteristics of the contract fully understandable.
In the case of policies comprising the combination of different contract types, and for purposes of an adequate representation of the characteristics of the contract, the undertakings shall draw up the Information Note by combining the models of the various contract types.
It is forbidden to use expressions in the Information Note to indicate, even indirectly, that ISVAP has given its approval to their contents.
The Information Note of with-profit contracts provides an Exemplifying Scheme of the development of premiums, insurance benefits and surrender and paid-up values according to the model set forth by ISVAP, and based on specific combinations of age, duration and premium amount, chosen by the undertaking according to criteria that ensure the example is adequately representative of the existing portfolio.
The projections are made according to the guaranteed minimum rate of return and an assumption of financial return set by the Institute, which will update it where necessary. For the first application the rate of return is fixed at 4% per annum.

c) Glossary
In order to better understand the meaning of the contractual clauses and the technical terms, a glossary must be inserted in the Information Dossier. ISVAP propose a specific glossary.

d) Insurance proposal
The proposal form is an integral part of the Information Dossier and can be made up of a number of detachable sheets of self-copying paper. If undertakings use IT procedures for issuing contracts, alternative procedures can be used for the proposal form on condition that the information acquired by the company and that stated in the copy given to the policyholder can be guaranteed as identical and that the progressive numbering within the Information Dossier is complied with.
For contracts that provide for benefits in case of death or other coverage that will, in any case, require the acquisition of information on the state of health of the insured, the undertakings shall state, using bold characters, the following warning in the proposal regarding the compilation of the health questionnaire:
  1. untruthful, inexact or incomplete declarations made by the subject authorised to provide the information requested for the conclusion of the contract can compromise the right to benefits;
  2. before signing the questionnaire, the subject indicated under a) must verify that the statements made in the questionnaire are exact;
  3. even in cases not expressly provided for by the undertaking, the insured party can request that he/she undergo a medical examination to certify his/her actual state of health, with all costs for his/her account.
The insurance proposal shall provide a special declaration, with appropriate typographic characters in terms of size and graphic format, that the policyholder must sign to attest to the receipt of the Information Dossier.
In the insurance proposal, the undertakings will also provide for a special area describing the means of premium payment allowed for by each undertaking.
In the event that means of payment are allowed involving payment through the use of means not directly referable to the undertaking, or to the agent in his/her capacity as the undertaking's intermediary, the following warning must be included and highlighted in bold characters: “Attention: in the case that the premium is paid in cash or through the use of means not directly referable to the undertaking, or to the agent in his/her capacity as intermediary of the undertaking, proof of payment to the company shall be represented by the indication of the sum paid and the affixing of the signature of the subject who physically collects the sums and collects the present proposal”.
In these cases the insurance proposal shall contain a special section in which the amount of the premium collected, the particulars and the handwritten signature of the subject appointed to collect the monies are indicated.

THE INFORMATION DURING THE TERM OF THE CONTRACT

For unit-linked contracts, the undertakings shall send to the policyholder a letter confirming the investment of premiums, no later than 10 working days after the valuation date of the units (the day to which the quotation of the units refers), containing the amount of the gross premium paid in for executing the contract and that for investment, the contract's commencement date, the number of units attributed, their unit value and the valuation date. For contracts that convert premiums into units according to the date on which the proposal is received and/or the premium collected, the relative dates must be stated.
As regards successive premiums, the undertakings shall communicate to the policyholder in writing no later than 10 working days after the valuation date of the units, the amount of the gross premium paid in, and the amount invested, the number of units attributed further to the new payment, their unit value and their valuation date. In the case of recurrent premium contracts that obey a predefined payment plan, the undertakings can send a cumulative confirmatory letter for the premiums paid over a six-monthly period.
In case of with-profit contracts undertakings must send the policyholder, in writing, the annual statement of account of his/her insurance position within sixty days from the end of each solar year or from the date envisaged in the policy conditions for the increase of insured benefits. Such statement must contain, at least:
  1. the total amount of premiums paid from the execution of the contract to the reference date of the preceding statement of account and the value of the benefits accrued at the reference date of the preceding statement of account;
  2. details of premiums paid in the reference year, illustrating any unpaid premiums and stating the results of the non-payment;
  3. value of partial surrenders in the reference year;
  4. value of the benefits accrued at the reference date of the statement of account;
  5. surrender value accrued at the reference date of the statement of account;
  6. for increasing benefits contracts, the gross annual rate of financial return achieved by the segregate fund, the percentage of the rate of return retrocessed to policyholders, the net annual rate of return to policyholders, with indications of any levies applied by the undertaking, and the annual rate for increasing benefits.
For with-profit contracts other than those specified above, the statement of account will state the profits allocated to the contract in the reference year.
As concerns single premium contracts and contracts with paid-up value the undertakings shall submit the information stated above 1 within the same term.
For contracts designed to implement individual pension plans, the foregoing information must be supplemented by the indication of the value of the individual transferable position at the reference date of the statement of account. During the payment of the annuity, the annual statement of account shall indicate the amount of the insured annuity at the reference date of the preceding statement of account and of the current statement as well as the information contained above, under letter f).
In case of unit-linked contracts undertakings must send the policyholder, in writing, the annual statement of account of his/her insurance position within sixty days from the end of each solar year. Such statement must contain, at least:
  1. the total amount of premiums paid from the execution of the contract until 31 December of the preceding year, the number and equivalent value of the units as at 31 December of the preceding year;
  2. details of premiums paid in, those invested, the number and value of the units assigned in the reference year;
  3. number and value of the units transferred and of those assigned following switch operations;
  4. number of the units that may have been cancelled during the reference year for the premium relating to pure risk coverage;
  5. number and value of the units reimbursed as a result of a partial surrender in the reference year;
  6. number of the units cancelled for management commissions in the reference year (only for contracts directly linked to UCITS);
  7. overall number of the units and their value at the end of the reference year;
  8. value of the guaranteed benefit (only for contracts with financial guarantees).
Undertakings must transmit, along with the annual statement of account, the updating of the historical.
For contracts designed to implement individual pension plans, the foregoing information must be supplemented by the indication of the value of the individual transferable position at the reference date of the statement of account. During the payment of the annuity, the annual statement of account shall indicate the amount of the insured annuity at the reference date of the preceding statement of account and of the current statement, as well as the information contained above, under letter f).
In case of index-linked contracts undertakings must send the policyholder, in writing, the annual statement of account of his/her insurance position within sixty days from the end of each solar year. Such statement must contain, at least:
  1. the total amount of premiums paid from the execution of the contract until 31 December of the preceding year;
  2. details of premiums paid in and invested in the reference year;
  3. details of the sums paid to policyholders/beneficiaries in the reference year (periodic payments, any partial surrender ...);
  4. the value of the reference indices at the periodical valuation dates envisaged in the contract for the determination of benefits as well as, for contracts whose benefits are directly linked to the value of representative assets, indication of the relevant current value as at 31 December of the reference year;
  5. value of the guaranteed benefit (only for contracts with financial guarantees).
* * *
The above mentioned ISVAP Circular 551D regulates other hypothesis of information to be given to the policyholder during the term of the contract, such as the publication in daily newspapers and on internet sites, the amendments during the term of the contract, the communication in the event of loss, the variation in the guaranteed interest rate, the communications in case of exercise of contractual options, the transformation of the contract, the setting up of new internal insurance funds or compartments.

(published on 20 June 2006)


© 2006 Quagliarella & Associati  |   Informativa sulla privacy