The prohibition on secondary business activities is laid down in the European directives. The aim is to prevent policyholders from being financially disadvantaged by the fact that an insurer also carries on non-insurance activities. When an insurer carries on secondary activities, they must not therefore jeopardise the insurer’s financial health.
The basic principle is that the insurer should always organise, manage and finance its activities in such a way that the resulting risks remain manageable. Nor may the activities entail an unacceptable risk for the policyholders. It is also important that (as indicated in the parliamentary history of the legislation) the term ‘insurance business’ is broadly interpreted. It also includes the activities that an insurer carries on with a view to investing available resources. This means that mortgage origination forms part of insurance business, because it involves the lending of funds in a prudent manner. Much the same applies where the insurer makes payments in kind (e.g. in the case of funeral expenses and benefits-in-kind insurance or certain types of non-life insurance such as the provision of assistance) and the insurer itself provides the relevant benefits in kind. These activities too are deemed to form part of the business of insurance. By extension, De Nederlandsche Bank (DNB) has provided a detailed interpretation specifically for health insurers that implement the basic health insurance. This is because the Health Insurance Act (Zorgverzekeringswet) gives health insurers the possibility of engaging in activities in the field of care procurement and provision.
In the event that secondary business activities are carried on, the insurer should demonstrate to the satisfaction of DNB that the risks of any such activities are adequately covered.
Examples of secondary business activities that are permitted in principle are:
- Insurance intermediary services. This activity is often linked in practice to insurance business because it gives insurers that are not active in all classes of insurance the possibility of offering future policyholders a total package of insurance products.
- Passing policyholders to a common fund in connection with the taking out of insurance. Here, too, the insurer may wish to offer a total package of products in the context of its insurance business.