sexta, 12 novembro 2021

Client compensation in the field of insurance distribution in Portugal

VolverClient compensation in the field of insurance distribution in PortugalThe termination of a distribution contract with an insurance company is always an important moment in the activity of an intermediary, as he may be deprived of an important source of income. However, after termination of the contract, the intermediary may still, provided certain conditions are met, be entitled to receive a so-called client compensation.

This indemnity began in Austria, in the year of 1921, in the scope of the agency contract, and was due whenever situations occurred in which the contract was terminated by determination of the principal, without the fault of the agent, and in which the agent had created clientele in favour of the principal. Later, this subject was enshrined in Community legislation, through Directive 86/653/CEE, of 18 December 1986, and consequently spread throughout the European legal systems.

When transposing the said Directive into their legal systems, the various Member-States were able to opt for the adoption of one of two different models: the Germanic model, which had underlying an idea of compensation to the agent for the benefit that the principal would obtain from the clientele gained; and the French model, which was based on an idea of compensation for the damages suffered by the agent as a consequence of the termination of the contract. In Portugal the legislator chose to follow the Germanic model, so in Portugal the clientele indemnity is not seen as a true indemnity, in the strictest sense of the word, but rather as a compensation to the agent aimed at reinforcing his social protection, in so far as he may come to be in a weakened situation.

Although it was enshrined in our legal system within the scope of the agency contract, the truth is that its importance was such that it began to be applied within the scope of other activities, such as insurance mediation, for example.

In this way, and without prejudice to any other compensation that may be due, the insurance intermediary (or his successors in the event of his death) will be entitled to client compensation if he has brought new clients to the insurance company or substantially increased the volume of business with existing clients and the insurance company benefits, after the termination of the contract, from the activity carried out by him.

The amount of this indemnity/compensation should be fixed in equitable terms, and the law establishes a minimum limit: it cannot be less than the value equivalent to double the average annual remuneration of the mediator in the last five years, or the period of time during which the contract was in force, if less.

However, it should be clarified that the attribution to the insurance intermediary of the client compensation is not automatic, and there are some situations in which this does not occur and which must be considered. In fact, there are exceptions to this rule, namely when the contract has been terminated by (i) initiative of the intermediary without just cause or (ii) by initiative of the insurance company with just cause. We may think, for example, of situations in which the insurance intermediary terminates the distribution contract or when there is a breach, by the intermediary, of the duties of loyalty and trust towards the insurance company, it being understood that its behaviour, due to its gravity and consequences, makes the subsistence of the contractual relationship immediately and practically impossible. In both cases, no client compensation will be paid.

Furthermore, the insurance company and the intermediary may also agree, if they so wish, to establish in the distribution contract, a set of situations which, if not complied with, may lead to the removal of the obligation to pay the customer compensation. In other words, the parties may contractually define the cases in which, in their understanding, there will be a just cause for termination of the contract. We are thinking, for instance, of the non-compliance, by the intermediary, with certain minimum limits of sales of products. It should, however, be clarified that the burden of proof of the existence of just cause in the termination will always fall on the party terminating the contract.

In conclusion, the attribution of an indemnity/client compensation to the insurance intermediary will always depend on the fulfilment of a series of requirements that must be duly analysed in order to ascertain whether, after the termination of the distribution contract, there will or will not be a need to pay it.


Article published in Atualidad€ magazine - Câmara de Comércio e Indústria Luso Espanhola (CCILE)

 Luis Filipe Faria Luis Filipe Faria 

Departamento Direito dos Seguros | Portugal

 

Belzuz Abogados SLP

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