The company SATUM CZECH s.r.o. (hereinafter referred to as the “Company” or “SATUM”), with its registered office in Ostrava, Moravská Ostrava, 28. října 3346/91, postal code 702 00, Company ID No. 253 73 951, registered in the Commercial Register maintained by the Regional Court in Ostrava in Section C, Insert 16189, is, within the meaning of Act No. 170/2018 Coll., on Insurance Distribution and Reinsurance Distribution (hereinafter referred to as the “IDRA”), a registered independent intermediary with the Czech National Bank and, within the meaning of the relevant official communications of the Czech National Bank, applies the following Directive on the Management of Conflicts of Interest in the Company (hereinafter referred to as the “Directive”).
This Directive contains the main principles and procedures for identifying and managing conflicts of interest in the Company, as well as in persons that are financially or otherwise linked to the Company, in particular for the identification of potential conflicts of interest, the prevention of conflicts of interest and the management of any conflicts of interest that arise.
The purpose of managing conflicts of interest is to ensure that the intermediation of insurance by the Company does not result in damage to the interests of the Company’s clients and potential clients, or of third parties (financial institutions, etc.). The Directive is published on the Company’s website.
The Company SATUM shall review the Directive on the management of conflicts of interest at least once a year as part of the Compliance audit and, where appropriate, take appropriate corrective measures to remedy any deficiencies.
The Directive on the management of conflicts of interest contains rules for identifying and managing conflicts of interest between:
For the purposes of identifying the types of conflict of interest that arise in the performance of the Company’s activities, i.e. in particular activities related to the distribution of insurance products, and which represent a risk of damage to the interests of the Client, the Company shall assess whether any person referred to in point 5.1. of the Directive or a person directly or indirectly linked to the Company by control has an interest in the outcome of the activity related to the distribution of insurance and whether that interest meets the following criteria:
The Company shall proceed in the same manner in an attempt to determine a conflict of interest between clients.
For the purposes of the above assessment, the Company shall take into account as minimum criteria the following situations, when assessing whether the Company or a person referred to in point 5.1. of this Directive:
If a conflict of interest cannot be avoided, the Company shall always prioritise the interests of the Client over its own interests or the interests of persons that are financially or otherwise linked to the Company. If a conflict of interest arises between Clients mutually, the Company shall ensure a fair solution for those Clients. In the event that a fair solution cannot be ensured, the Company may refuse to provide the service to the Client.
As part of effective management of conflicts of interest, the Company:
All organisational units and employees of SATUM are obliged to participate in the identification and management of conflicts of interest and, in the event that a conflict of interest is threatened or has occurred, are obliged to inform their superior employee or the compliance manager of this fact.
In cases where the measures adopted by the Company for the purpose of preventing and managing conflicts of interest are not sufficient to ensure with reasonable certainty that the risk of damage to the interests of clients will be prevented, the Company shall, before providing the service, inform the Client of the nature or source of the conflicts of interest. The information is provided in sufficient detail for the client to make an informed decision about the service in which the conflicts of interest arise.
The disclosure must contain:
The Company shall provide the Client with information about the nature or source of conflicts of interest on a durable medium (in paper form or electronically) and shall enable the Client to duly take into account the conflict of interest related to the Company’s service, whereby the Client has the opportunity to make an informed decision on whether or not to use the services offered by the Company.
The Company’s management maintains and regularly updates records of situations where a conflict of interest has arisen or, in the case of an ongoing service or activity, may arise, which entails a risk of damage to the interests of the client.
The Company’s management and lawyer continuously, but at least once a year, evaluate as part of the Compliance audit reports on the management of significant conflicts of interest in the Company.
In connection with insurance intermediation, there is a conflict of interest between the Company and the client, where the Company is motivated to distribute insurance on the basis of an agreement concluded with the insurance company.
This is a case of conflict of interest which the Company cannot effectively prevent, and therefore informs the Client of this fact in advance so that the Client may make an informed decision.
Before concluding an insurance contract, the Company informs the client that the Company and its Employees are remunerated by the insurance company for which the Company intermediated the conclusion of the insurance contract.
The rules for remunerating employees must not motivate non-compliance with obligations under Act No. 170/2018 Coll., on Insurance Distribution and Reinsurance Distribution, other legal regulations to the extent that they relate to insurance distribution, and directly applicable regulations of the European Union in the area of insurance distribution, in particular in the area of rules of conduct, and must not motivate the recommendation of specific insurance products to Clients to the detriment of other products that would better meet the Client’s needs.
When distributing investment life insurance, on the basis of the Client’s requirements and needs, SATUM evaluates whether the Client intends to invest and appreciate their available financial resources, or to invest for the purpose of securing a pension, and in such cases ensures that the Client is informed of all types of investment products corresponding to the Client’s requirements, the conclusion of which SATUM intermediates (investment life insurance), and that the Client may make an informed decision. Pursuant to Act No. 170/2018 Coll., IDRA, a SATUM employee shall provide the Client with advice before concluding the insurance when distributing investment life insurance.
SATUM may be of assistance in asserting rights from insurance and this does not constitute a breach of obligations under the IDRA, unless SATUM acted as an insurance agent when concluding the insurance and assists as an insurance broker when asserting rights from insurance (which is not settlement in the true sense of the word). If an independent intermediary intermediated insurance as an insurance broker, but carries out the settlement for the insurance company under the Trade Licensing Act, this is a conflict of interest that must be excluded.
If, therefore, SATUM acted when concluding the insurance in the role of:
If this conflict of interest has an impact on the client and it concerns reserve-forming insurance, then the management of the conflict of interest, in particular with regard to Article 3 et seq. of Regulation No. 2017/2359[1], also includes, in a specific case, when other conditions are met, the obligation to inform the client of the conflict of interest and to refuse representation of the insurance company.
Within the meaning of § 76 of the IDRA, an independent intermediary may not intermediate individual insurance simultaneously as an insurance agent and an insurance broker. Such a breach would also occur if an independent intermediary intermediated insurance for an insurance company as an insurance agent and at the same time assisted the client in asserting claims from it in the role of an insurance broker.
If a parent and subsidiary company represented each other either towards the client or towards the insurance company, this would be in conflict with § 47 of the IDRA, and if either of them represented both the client and the insurance company, this would be in conflict with § 76 of the IDRA. The outsourcing model of activity is not excluded, provided that the above-mentioned prohibitions are observed.
Assistance with insurance administration by one independent intermediary (II), which is a parent company, for another II (subsidiary company) within the meaning of the IDRA, where the client communicates and concluded a brokerage agreement exclusively with the subsidiary company, is in compliance with the IDRA only if it is merely an outsourcing of certain activities to another entity, without the chaining of representative authorities in insurance intermediation.
If, on the other hand, the client is represented towards the insurance company, in addition to the subsidiary company, by another II (parent company), this would be in conflict with § 47 of the IDRA. According to this provision, an II may be represented in insurance intermediation only by an employee, a tied agent or an ancillary insurance intermediary. Assistance with insurance administration is part of intermediation, both for the client (broker method of activity) and for the insurance company (agent method of activity). If, in insurance administration, legal relationships are arranged as follows:
client – II (subsidiary company) – II (parent company) – insurance company,
where these are relationships of representation (i.e. not outsourcing), where one II acts on behalf of the client and at the same time is represented towards the insurance company by another II, who acts on its behalf and on its account, there is a chaining of insurance intermediaries in conflict with § 47 of the IDRA.
Conflict of interest is regulated in particular in § 76 of the IDRA, according to which an independent intermediary may not intermediate individual insurance simultaneously as an insurance agent and an insurance broker. In the event that the insurance was concluded by a subsidiary company as an insurance broker and its administration is carried out by its parent company as an insurance agent, on the basis of cooperation between the parent and subsidiary company, this constitutes a breach of § 76 of the IDRA, if one of these companies acts as a broker and at the same time as an agent (performs the said activity on the basis of both an agreement with the client and a tripartite agreement to which the insurance company is also a party, as evidenced by the fact that this subsidiary company is also remunerated by the insurance company for this activity). In view of the need for an objective approach to resolving individual insurance cases, it is necessary for an II to act in a given insurance relationship from the beginning to the end in only one capacity, without changing it during the duration of the specific insurance depending on the situation that has arisen. In general, the subsidiary company should itself know in what role, what activity it performs, act in that role, and also in communication with the client should inform the client of this role, in a clear and non-misleading manner (§ 72 paragraph 2 and § 73 of the IDRA).
Conversely, there might not be a breach of § 76 of the IDRA in a situation where it would be outsourcing of certain activities on the part of the insurance company, or also on the part of the first II (broker subsidiary company), without any of them acting towards the client or towards the insurance company in a dual capacity (agent–broker). However, this also means that the parent company must not breach § 47 of the IDRA and be represented – towards the insurance company or towards the client – by a second II. In any case, it is necessary, even in outsourcing, to manage any conflict of interest in accordance with § 48 of the IDRA.
A specific case of conflicts of interest are so-called inducements. Inducements represent a financial stimulus, therefore as a general rule an inducement may only be paid if it is to contribute to improving the quality of the service provided. It is presumed that an inducement or a system of inducements has a detrimental effect on the quality of the relevant service provided to the client if, by its nature and extent, it motivates the performance of activities related to the distribution of insurance in a manner that is not in accordance with the obligation to act honestly, fairly and professionally in the best interests of the client.
The Company maintains a list of specific inducements, and at the Client’s request shall provide details of an individual inducement. Performance within the Company, which includes, for example, the remuneration of employees, tied agents, the equipment of establishments, etc., is not an inducement. The acceptance or provision of an inducement by the Company’s employees outside this relationship is attributed to the Company.
For the purposes of assessing whether an inducement or a system of inducements has a detrimental effect on the quality of the service provided to the client, the Company shall carry out an overall analysis taking into account all relevant factors that may increase or decrease the risk of a detrimental effect on the quality of the service provided to the client, taking into account in particular the following criteria:
The Company and its employees must not, when providing insurance intermediation services, accept, offer or provide a fee, remuneration or other monetary or non-monetary benefit that may lead to a breach of the Company’s obligation to act in a qualified, honest, fair and in the best interests of Clients manner or to a breach of the obligation to properly manage conflicts of interest.
An inducement is not considered permissible for the purposes of insurance intermediation if, as a result of it, the provision of services to the Client is biased or impaired.
The Company approaches the management of inducements in the same way as other conflicts of interest. This means that the Company ensures the identification of inducements, takes measures against their occurrence and, where appropriate, carries out their effective management.
The basic prerequisite for the permissibility of an inducement is that the inducement serves to increase the quality of the service provided to the client, which is fulfilled if all of the following conditions are met:
The acceptance or provision of a gift or benefit by an employee is governed by the Code of Ethics of a member of the Association of Czech Insurance Brokers, and conduct in conflict with the rules of that code shall be considered a material breach of employment or contractual obligations.
Remuneration (commission) paid to the Company by the insurance provider (insurance company) for intermediation of the conclusion of an insurance contract and related activities (follow-up care of the insurance contract, etc.). The remuneration usually consists of acquisition commission and subsequent commission.
Basic information about the remuneration of the independent intermediary is part of the document “Information about the insurance intermediary”. At the Client’s request, the Company shall specify the methods of its remuneration.
