SATUM CZECH s.r.o. (hereinafter referred to as the “Company” or “SATUM”), with its registered office at Ostrava, Moravská Ostrava, 28. října 3346/91, postal code 702 00, company registration number 253 73 951, registered in the Commercial Register maintained by the Regional Court in Ostrava under section C, file 16189, is a registered independent intermediary with the Czech National Bank pursuant to Act No. 170/2018 Coll., on Insurance and Reinsurance Distribution (hereinafter referred to as “ZDPZ”) and in accordance with the relevant official communications of the Czech National Bank applies the following Conflict of Interest Management Directive within the Company (hereinafter referred to as the “Directive”).
This Directive contains the main principles and procedures for identifying and managing conflicts of interest within the Company, as well as in respect of persons who are financially or otherwise connected with the Company, namely for the identification of possible conflicts of interest, prevention of conflicts of interest and potential management of conflicts of interest that have arisen.
The objective of conflict of interest management is to ensure that the Company’s insurance intermediation activities do not result in detriment to the interests of the Company’s customers and potential customers, or third parties (financial institutions, etc.). The Directive is published on the Company’s website.
SATUM Company shall review the Conflict of Interest Management Directive at least once annually as part of the Compliance audit and shall, where appropriate, adopt suitable measures to remedy any deficiencies.
Cases of Conflicts of Interest within the Company
The Conflict of Interest Management Directive contains rules for identifying and managing conflicts of interest between:
Detection of Conflicts of Interest
For the purpose of identifying types of conflicts of interest that arise in the performance of the Company’s activities, i.e. particularly activities related to the distribution of insurance products and which present a risk of detriment to the Customer’s interests, the Company assesses whether any person referred to in point 5.1 of the Directive or a person directly or indirectly connected with the Company through control has an interest in the outcome of activities related to insurance distribution and whether this interest meets the following criteria:
a) is different from the Customer’s interest in the outcome of activities related to insurance distribution;
b) has the potential to influence the outcome of distribution activities to the detriment of the Customer.
The Company proceeds in the same manner in an effort to determine conflicts of interest between customers.
For the purpose of the above assessment, the Company shall consider as minimum criteria the following situations, where it assesses whether the Company or a person referred to in point 5.1 of this Directive:
If a conflict of interest cannot be prevented, the Company shall always prioritise the Customer’s interests over its own interests or the interests of persons who are financially or otherwise connected with the Company. If conflicts of interest arise between Customers mutually, the Company shall ensure a fair solution for these Customers. In the event that a fair solution cannot be ensured, it may refuse to perform the service for the Customer.
Procedures for Limiting the Possibility of Conflicts of Interest
Disclosure of Conflicts of Interest
In cases where measures adopted by the Company for the purpose of preventing and managing conflicts of interest are insufficient to ensure with reasonable certainty that the risk of detriment to customers’ interests will be prevented, the Company shall disclose to the Customer, before providing the service, information about the nature or source of conflicts of interest. The information is provided in sufficient detail to enable the customer to make an informed decision about the service in which conflicts of interest arise.
The disclosure must contain:
The Company shall provide the Customer with information about the nature or source of conflicts of interest on a durable medium (in paper form or electronically) and enable them to properly take into account the conflict of interest related to the Company’s service, whereby the Customer has the possibility to make an informed decision whether to use the services offered by the Company or not.
Review and Record Keeping
Company management maintains and regularly updates records of situations where a conflict of interest has arisen or, in the case of ongoing service or activity, may arise that carries a risk of detriment to customer interests.
Company management and the Company lawyer continuously, but at least once annually, evaluate reports on the management of serious conflicts of interest within the Company as part of the Compliance audit.
Specific Cases of Conflicts of Interest
Insurance Intermediation
In connection with insurance intermediation, a conflict of interest arises between the Company and the customer, where the Company is motivated to distribute insurance on the basis of a contract concluded with an insurance company.
This is a case of conflict of interest which the Company cannot effectively prevent and informs the Customer of this fact in advance so that they can make an informed decision.
The Company informs the customer before concluding the insurance contract that the Company and its Employees are remunerated by the insurance company for which the Company intermediated the conclusion of the insurance contract.
Employee remuneration rules must not motivate failure to fulfil obligations under Act No. 170/2018 Coll., on Insurance and Reinsurance Distribution, other legal regulations to the extent that they relate to insurance distribution and directly applicable European Union regulations in the area of insurance distribution, particularly in the area of conduct rules, and must not motivate the recommendation of specific insurance products to Customers to the detriment of other products that would better meet the Customer’s needs.
Investment Life Insurance Intermediation
Claims Settlement
If SATUM therefore acted in the role of when concluding insurance:
1) insurance broker and assists the customer in the same role when asserting rights thereunder under § 2 letter e) point 5. ZDPZ, there is no conflict of interest;
2) insurance agent, then in the event that it would obtain trade licensing and performs claims settlement for the insurance company, this does not constitute a breach of the prohibition on concurrent brokerage and agency activities under § 76 ZDPZ, however it may constitute a conflict of interest that needs to be managed (e.g. by implementing independent control of such claims settlement) in accordance with § 6 ZPoj (for the insurance company) and § 48 ZDPZ (for the intermediary).
If this conflict of interest has an impact on the customer and concerns reserve-forming insurance, then conflict of interest management, particularly with regard to Article 3 et seq. of Regulation No. 2017/2359, also includes in specific cases where additional conditions are met the obligation to inform the customer about the conflict of interest and to refuse representation of the insurer.
Under § 76 ZDPZ, an independent intermediary must not intermediate individual insurance simultaneously as an insurance agent and insurance broker. Such a breach would also occur if an independent intermediary intermediated insurance for an insurer as an insurance agent and simultaneously assisted the customer in asserting claims thereunder in the role of insurance broker.
Insurance Administration
If a parent and subsidiary company were to represent each other either towards the customer or towards the insurer, this would constitute a breach of § 47 ZDPZ, and if either of them represented both the customer and the insurer simultaneously, this would constitute a breach of § 76 ZDPZ. An outsourcing model of activities is not excluded provided the above-mentioned prohibitions are complied with.
Assistance with insurance administration by one independent intermediary (SZ) that is a parent company for another SZ (subsidiary company) under ZDPZ, where the customer communicates and concluded a brokerage contract exclusively with the subsidiary company, is in compliance with ZDPZ only if it concerns merely ensuring the performance of certain activities by another entity (outsourcing), whereby no chaining of representative authorizations occurs in insurance intermediation.
If, conversely, the customer were further represented towards the insurer by another SZ (parent company) alongside the subsidiary company, this would constitute a breach of § 47 ZDPZ. According to this provision, an SZ can only be represented when intermediating insurance by an employee, tied agent or ancillary insurance intermediary. Assistance with insurance administration is part of intermediation, both for the customer (brokerage mode) and for the insurer (agency mode). If legal relationships in insurance administration are arranged in the following manner:
customer – SZ (subsidiary company) – SZ (parent company) – insurer where these are representation relationships (i.e. not outsourcing), whereby one SZ acts on behalf of the customer and simultaneously has itself represented towards the insurer by another SZ that acts in its name and on its account, there is a chaining of insurance intermediaries in breach of § 47 ZDPZ.
The conflict of interest is regulated particularly in § 76 ZDPZ, according to which an independent intermediary must not intermediate individual insurance simultaneously as an insurance agent and insurance broker. In the event that insurance was concluded by a subsidiary company as an insurance broker and its administration is performed by its parent company as an insurance agent, based on cooperation between the parent and subsidiary companies, this constitutes a breach of § 76 ZDPZ if one of these companies acts as a broker and simultaneously as an agent (performs the stated activity on the basis of both a contract with the customer and a tripartite agreement to which the insurer is also a party, as evidenced by the fact that this subsidiary company is also remunerated by the insurer for this activity). Given the need for an objective approach to resolving individual insurance claims, it is necessary for an SZ to act in a given insurance relationship from beginning to end only in one capacity, without changing it during the course of specific insurance depending on the situation that arises. Generally, the subsidiary company should itself know in what role it performs what activity, act in this role and also communicate its role to the customer in a clear and non-misleading manner in communication with the customer (§ 72 paragraph 2 and § 73 ZDPZ).
Conversely, there might not be a breach of § 76 ZDPZ in a situation where it concerned outsourcing of certain activities by the insurer or also by the first SZ (brokerage subsidiary company), without any of them acting towards the customer or towards the insurer in a dual capacity (agent-broker). However, this also means that the parent company must not breach § 47 ZDPZ and be represented – towards either the insurer or the customer – by a second SZ. In any case, even with outsourcing, any conflict of interest must be managed in accordance with § 48 ZDPZ.
Incentives
Incentives represent a specific case of conflicts of interest. Incentives constitute a financial stimulus, therefore it generally applies that an incentive may only be provided where it contributes to improving the quality of the service provided. It is presumed that an incentive or incentive system has a detrimental effect on the quality of the relevant service provided to the customer if, by its nature and scope, it motivates the performance of activities related to insurance distribution in a manner that is not in accordance with the duty to act honestly, fairly and professionally in the best interest of the customer.
The Company maintains a list of specific incentives, whereby upon Customer request it shall disclose details regarding individual incentives. Performance within the Company, which includes for example employee remuneration, tied agents, office equipment etc., is not an incentive. Acceptance or provision of incentives by Company employees outside this relationship is attributed to the Company.
Assessment of Incentives
For the purpose of assessing whether an incentive or incentive system has a detrimental effect on the quality of service provided to the customer, the Company conducts a comprehensive analysis taking into account all relevant factors that may increase or reduce the risk of detrimental effect on the quality of service provided to the customer, whereby it considers particularly the following criteria:
a) whether the incentive or incentive system may motivate offering or recommending to the customer a specific insurance product or specific service, even though another insurance product or service could be offered that would better meet the needs of the given customer;
b) whether the incentive or incentive system is based exclusively or predominantly on quantitative business criteria or whether it fully takes into account appropriate qualitative criteria that reflect compliance with applicable legal regulations, quality of services provided to customers and customer satisfaction;
c) the value of the incentive paid out or received in proportion to the value of the product and services provided;
d) whether the incentive is paid entirely or predominantly upon conclusion of the insurance contract or throughout the entire duration of this contract;
e) existence of an appropriate mechanism allowing recovery of the incentive in the event that the product terminates or is surrendered at an early stage, or in the event of detriment to customer interests;
f) existence of some form of variable or conditional limit or coefficient increasing the value of another type when achieving certain targets defined on the basis of sales volume or revenue value.
Rules for Accepting and Providing Incentives
The Company and its employees must not, when providing insurance intermediation services, accept, offer or provide any fee, remuneration or other monetary or non-monetary benefit that may lead to a breach of the Company’s obligation to act competently, honestly, fairly and in the best interest of Customers or breach of the obligation of proper management of conflicts of interest.
Permissible Incentives
The basic prerequisite for the permissibility of an incentive is that the incentive serves to enhance the quality of service provided to the customer, which is fulfilled if all of these conditions are met:
a) the incentive is connected with providing additional service or service at a higher level to the customer, at least proportionate to the value of the received incentive,
b) the incentive is not directly beneficial to the Company or its employees, unless it brings material benefit to the given customer,
c) the incentive is justified by providing ongoing benefit to the customer in relation to the ongoing incentive.
Gifts and Other Benefits
Forms of Specific Incentives within the Company
Remuneration (commission) paid to the Company by the insurance provider (insurer) for intermediating the conclusion of insurance contracts and related activities (ongoing care of insurance contracts, etc.). The remuneration usually consists of acquisition commission and renewal commission.
Basic information about the remuneration of the independent intermediary forms part of the document Information about the Insurance Intermediary. Upon Customer request, the Company shall specify the methods of its remuneration.
