Are you planning to take out life insurance or home insurance against damage? Choosing the right insurance isn’t easy. It’s not just the insurance policy itself that’s important, but also who is taking it out with you. In this article, we will therefore look at what the obligations of insurance intermediaries are and give you advice on what to do in case of problems.
Insurance distribution is not just the sale of contracts, but a comprehensive service including advice, administration and eventual termination of insurance. Insurance intermediaries help clients not only with the negotiation of a new contract, but also with its modification or cancellation. They compare the offers of different insurance companies and find the best solution according to the individual needs of the client. Expert advice, clear communication and administrative support throughout the process are essential. The aim is to ensure that the insurance is truly relevant to the client’s life situation and effectively protects them when they need it most.
The Insurance Distribution and Reinsurance Act replaced the former Insurance Intermediaries Act and is harmonised with the European Insurance Distribution Directive (IDD).
The Insurance Distribution Act regulates the conditions under which insurance can be offered and brokered. It sets out who is authorised to carry out this activity, what conditions must be met and what principles must be observed when dealing with prospective customers. It also regulates the professional competence of persons offering insurance and requires them to act responsibly and transparently.
The regulation also includes rules designed to protect consumers. The law sets out what information is to be provided, how communication with customers is to take place and how to ensure that only suitable products are offered. Particular attention is also paid to more complex types of insurance, where a more thorough assessment of the client’s needs is required.
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The law also regulates the supervision of compliance with these rules and the procedures for breach of obligations. Overall, it creates a framework to ensure fair market conditions and greater certainty for those taking out insurance.
Let us now look at the most important information in more detail:
Only those who meet the statutory conditions and are registered in the register maintained by the Czech National Bank may act as an insurance intermediary. The law distinguishes several types of intermediaries according to the manner and extent to which they intermediate insurance:
The largest scope of authorisation is for a stand-alone intermediary, which can operate on the basis of a special authorisation from the Czech National Bank. It must be professionally qualified, trustworthy, have its registered office in the Czech Republic and meet a number of other conditions that enable effective supervision of its activities.
Example: Jan Novák, a self-employed insurance broker who arranges life and property insurance from various insurance companies such as Allianz, Kooperativa or Generali.
Another option is to act as a tied agent. He can offer insurance on behalf of one particular insurance company or an independent broker with whom he has a written contract. The registration of the tied agent in the register is ensured by the represented entity, which is also responsible for its activities.
Example: Lucie Dvořáková works as a financial adviser and offers exclusively products of Česká podnikatelská pojišt’ovna, with which she is registered as a tied agent.
A specific type of intermediary is a supplementary insurance intermediary. This type of intermediary may only offer insurance which is related to its main activity (for example, the sale of goods or the provision of services). Registration in the register is also required in this case, on the basis of a notification submitted by the relevant insurance undertaking or intermediary.
Example: an electronics shop sells mobile phones and offers insurance against damage or theft. The insurer is, for example, BNP Paribas Cardif and the retailer therefore acts as an additional insurance intermediary.
Insurance can also be brokered in the Czech Republic by entities from other EU Member States. These persons enjoy the so-called freedom of establishment or freedom to provide services on a temporary basis and may operate here to the extent permitted by the authorisation granted in their home state.
In addition to these four categories, an insurance or reinsurance undertaking may itself broker insurance as an undertaking, provided that it does so in the course of its core business. Such entities are governed by similar rules as independent intermediaries when distributing insurance.
The Register of Insurance Intermediaries is an electronic database maintained and administered by the Czech National Bank. This register is used to keep a record of all persons who are authorised to intermediate insurance or reinsurance. It includes not only Czech intermediaries but also foreign entities operating on the Czech market.
The register contains various information on intermediaries – from basic identification data, through the subject of their activity, to information on responsible persons, possible sanctions or the legal status of the company, such as entering liquidation or bankruptcy. In the case of intermediaries from abroad, it is also recorded whether they operate in the Czech Republic on the basis of freedom of establishment or only temporarily.
The register is publicly accessible online on the CNB’s website. You can easily check whether a particular person or company has a valid authorisation to operate, including the history of data for the last 10 years after the authorisation has expired. An electronic extract containing verifiable information about the entity can also be obtained from the register.
The objective of insurance distribution is that people who take out insurance receive fair, understandable and truthful information and are recommended a product that actually meets their needs.
The insurer or adviser must act honestly, fairly and always with the best interests of the client in mind. They must also make it clear whether they are acting for themselves or for an insurance company. All communication – both verbal and written – must be clear and understandable. No misleading or false statements must be used. If it is advertising, it must be prominently identified as such.
An important obligation is to protect confidential information provided by the customer. Both intermediaries and insurers are bound by confidentiality. At the same time, they must not accept or offer any remuneration or benefits that could affect their independence – for example, not to offer a product just because they will get a higher commission for it.
Liability insurance can be taken out for bodily injury, property damage or financial loss caused to someone else. Read more in the next article.
Before arranging insurance, the advisor needs to ask what the client really needs, what their goals and ideas are. Based on this information, he or she will recommend the appropriate insurance. For more complex products, such as life insurance with an investment component, the adviser needs to carry out a more detailed analysis – for example, finding out what the client’s investment experience is, how much they can afford to pay and what their risk profile is. Everything is recorded, including the recommendation and the reasons why the product was recommended.
The law also says exactly what information the client must be given before entering into a contract. For example, about who offers the insurance, what is covered, what the exclusions are, how much they will pay, when the insurance starts and ends, how it can be terminated, and what to do if a claim occurs. For more complex policies (e.g. life insurance), other details need to be disclosed, such as how the amount saved develops or what costs the insurance company charges.
Insurance companies and advisers have a duty to keep records of what was discussed with the client, what recommendations were made and why. They usually keep these documents for ten years, even if the insurance is not ultimately taken out. As part of this, they also process clients’ personal data, because without it, insurance could not be set up properly.
But even after the contract is signed, the care does not end – if something important changes (e.g. the terms of the insurance), the client must be informed. In addition, for some products, such as investment life insurance, the client needs to be informed regularly about the development of the contract, costs and other important data.
The whole system is set up so that the customer has clear, complete and timely information throughout the process, can make an informed decision and can be confident that they are being recommended a product that matches their actual needs and capabilities.
The activities of insurance intermediaries are supervised by the Czech National Bank. Entities that are supervised have an obligation to cooperate with the CNB. This means that they must submit the requested information, documents and explanations without undue delay. This obligation applies not only to registered intermediaries but also to persons suspected of illegally brokering insurance.
In practice, an insurance company or insurance intermediary’s dealings with a customer should look something like this:
At the outset, the insurer or adviser should make it clear who they are, whether they are acting on behalf of a particular insurer or on their own, and in what capacity they are acting (e.g. independent broker, tied agent or supplementary salesperson). They should also inform you that they are registered with the Czech National Bank and provide information on how to lodge a complaint – for example, with the CNB or a financial arbitrator.
Unfortunately, you cannot avoid injury or illness, but you can prepare for it. Life insurance is one way. How to choose and what to look out for? Find out in our article.
Before an adviser offers you a specific insurance policy, he or she should get an idea of your situation. For example, he or she will ask you why you are considering insurance, what you expect from it, what risks you want to cover, how much you want to pay or how long the insurance should last.
If you are considering more complex products – for example, life insurance with an investment component – he or she should also go through other circumstances with you, such as your investment experience, financial situation, willingness to take risk and find out what other insurance policies you already have.
Based on this information, the adviser will recommend the product that best suits your requirements. He or she should also explain clearly why he or she has chosen that particular product – for example, because it covers the risks you want well, is reasonably priced or offers an appropriate length of cover.
This recommendation will be recorded in a ‘record of the meeting’, which you should be given to see. The record will include your needs, the solution offered and the reasoning behind it. For more complex policies, an analysis of your situation is also included.
Before you sign the contract, you must receive clear and understandable information about:
In addition, for life insurance or investment insurance, you must also be informed about the development of the invested portion, the costs associated with the administration of the insurance, the so-called surrender value (the amount you would receive in the event of early termination) and other important facts.
Once you have decided to take out the contract, you should be given a complete package of documents – the contract itself, the policy terms and conditions, a record of the negotiations and other additional information. These documents are retained by the insurer and the adviser for the duration of the policy and for a further ten years to prove that everything was done according to the rules.
Even after the insurance has been taken out, you have the right to be informed of any important changes – for example, changes to the terms and conditions, the amount of the surrender charge or the development of the value of the investment. For some products, you will also receive regular statements and information about charges. If you have been informed in advance that the suitability of the insurance will be assessed after the contract has been taken out, the insurer or adviser must also give you ongoing advice.
How do I choose property insurance and how does the insurance process work? This is what we have focused on in our article.
Insurance is there to protect you in times of hardship. But to really help, it’s important to know what you’re getting into. Don’t be tempted by attractive promises or confused by complicated terms. Check these ten key things before you sign up:
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Intermediaries must treat customers fairly, clearly and in their best interests. Problems arise, for example, when an adviser recommends insurance that is not suitable for the customer, withholds important information, is unclear or uses misleading arguments. It is also an offence if the customer is not given all the information they need about the policy – what it covers, how much it costs, how long it lasts or how to cancel it. For more complex policies, such as life or investment policies, the adviser must also provide expert advice and document everything with a record of the meeting.
Other offences can be committed for breaching confidentiality, failing to keep documentation, or demanding money for information that is supposed to be free. For serious breaches, they then face fines of up to tens of millions of crowns.
If you feel that a mistake or unfair treatment has been made in arranging insurance, first contact the insurance company or broker you dealt with directly. Describe what happened and ask for redress – for example, an explanation, correction of incorrect information, cancellation of the insurance or some other form of compensation. Many problems can be resolved in this way without having to take further action.
If the situation is not resolved, you can file a complaint with the Czech National Bank, which supervises the activities of insurance companies and advisers. The complaint can be sent directly via the CNB website.
In your submission , describe what happened as precisely as possible , including names, dates, related documents and any evidence (e.g. contracts, email communications, etc.). Keep in mind that while the CNB does not resolve damages for specific clients, it may fine the firm or order corrective action.
If it’s a specific dispute – for example, if you disagree with the amount of an insurance claim or haven’t gotten your money back – you can also go to a financial arbitrator. Going to a financial arbitrator is free, but you need to exhaust your options with the insurance company first.
If you are dealing with a larger financial loss or a more complex case, it is a good idea to seek the help of an experienced attorney. He or she can help you determine whether you can file a lawsuit, rescind the contract, or seek damages. With us, you can resolve everything online and receive a proposed solution to the problem and a price quote within 24 hours.
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Insurance distribution is not just about selling policies, but also includes advice, administration and eventual termination. Insurance intermediaries help clients to choose the right product, compare offers and communicate with insurers. Knowing the client’s needs and making clear and tailored recommendations is key.
The Insurance Distribution Act regulates who can offer insurance, what conditions must be met and how communication with the client should look. The law also emphasises consumer protection and sets out the obligations of intermediaries – for example, to provide truthful and complete information, to protect personal data and to keep documentation for 10 years.
There are several types of intermediaries: independent, tied, supplementary and also entities from other EU countries. All must be registered in a register kept by the Czech National Bank, which supervises their activities.
In practice, the intermediary should first identify the client’s needs, recommend a suitable product with justification, provide clear information about the contract and then take care of post-contractual communication. If a mistake is made, the client can contact the insurance company, the CNB, a financial arbitrator or a lawyer. It is important to always know what you are insuring, understand the terms and conditions and have enough time to make a decision.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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