Outdated browser

You are using an outdated browser. DNB.nl works best with:

Q&A Do subscriptions qualify as insurance?

Q&A

Published: 28 August 2019

Question:

Consumers are regularly offered subscriptions, for example in the form of service agreements relating to maintenance and repair of products they purchase. Subscriptions are also used in other situations, such as in financial services. On a regular basis, the question arises whether these subscriptions qualify as a non-life insurance within the meaning of Article 1:1 of the Financial Supervision Act (Wet op het financieel toezicht - Wft)? This Q&A outlines what DNB takes into account in its assessment of such subscriptions.

Answer:

It depends. The definition of non-life insurance in the Wft corresponds to the definition of insurance in Section 7:925 in conjunction with Section 7:944 of the Dutch Civil Code. For a subscription to qualify as non-life insurance the following conditions must in any case be met:

  • There is an agreement
  • in which one party undertakes to pay one or more benefits (including a benefit in kind)
  • for which the other party has to pay premiums.
  • At the time of conclusion of the agreement, there is uncertainty for both parties with regard to the benefit side and/or the premium side, and
  • the purpose of the payment is to compensate for financial damage.
  • The definition of non-life insurance in Section 1:1 of the Wft includes the addition that there must be an obligation to pay as a consequence of an uncertain occurrence or an uncertain circumstance affecting the insured person's interests.

If the above conditions are met, the subscription may qualify as non-life insurance, but this does not have to be the case. The legislator has indicated that the concept of non-life insurance in the Dutch Civil Code is too broad in certain cases and that its limits must be determined in case law. This means we must assess whether a subscription should be considered non-life insurance within the limits of Section 7:925 in conjunction with Section 7:944 of the Dutch Civil Code. The criterion we use in this assessment is whether the subscription, regardless of its name, is regarded as non-life insurance by society. We also take the legal relationship between the parties concerned and the circumstances of the case into account.

Do subscriptions qualify as non-life insurance?

There is no general answer to the question whether a subscription qualifies as non-life insurance within the meaning of Section 1:1 of the Wft. Subscriptions occur in different sectors and in multiple variations. This Q&A covers the most common types of subscriptions. The specific content and context of a subscription determine whether it qualifies as non-life insurance.

It should be noted in advance that if a subscription does not cover any uncertain event or uncertain circumstances, it will not qualify as non-life insurance, as it does not meet the criteria of non-life insurance within the meaning of Section 7:925 and 7:944 of the Dutch Civil Code in conjunction with Section 1:1 of the Wft.

Maintenance and repair subscriptions

Consumers are sometimes offered a service subscription for maintenance and repair of products they purchase. A service subscription covering only periodic maintenance of the purchased product will not qualify as non-life insurance since there is limited uncertainty about the service to be provided (see also above).

In the light of society's views, we do not consider a subscription which also covers repairs to qualify as non-life insurance if all of the following criteria are met:

  • the subscription is a subordinate part of the purchase agreement of the product (and is therefore absorbed, as it were)
  • the subscription covers repairs of defects relating to the nature of the product and which are (therefore) not attributable to external causes
  • the duration of the subscription does not evidently exceed the lifetime that can reasonably be expected of the purchased product.

For clarification

A subscription for maintenance and repair can be taken out upon purchase of the product, but can also be taken out separately. As a general rule, even if taken out separately, the subscription will be an extension of the purchase agreement and will therefore be subordinate to it.

This applies both if the subscription is offered by the supplier of the product and if it is offered by a third party having a legal relationship with that supplier. In both situations, there is often, materially speaking, a single material relationship between the parties. If the third party concerned is a group member of the supplier, it will in any case be assumed that there is a legal relationship. If the subscription for the product sold is taken out with a third party that has no legal relationship with the supplier of the product, the situation is less clear-cut. In that case, the subscription should be assessed independently and it is less likely that it will be considered a subordinate part of the purchase agreement. In such a case, social views may stand in the way of the qualification as a non-life insurance. Whether this is the case depends on the specific circumstances of the case.

The expected lifetime referred to here is not necessarily equivalent to the period during which the buyer can rely on the requirement of conformity of Section 7:17 of the Civil Code and/or the period of the manufacturer's warranty. The expected lifetime may exceed that period and can in principle be defined as the period ending when the buyer is generally expected to decide to replace the product in question (economic lifetime).

Subscriptions for legal services

In addition to subscriptions for periodic maintenance and/or repair of products, service subscriptions are also offered in practice. These include, for example, subscriptions relating to legal representation in the event of damage or legal services. With these type of insurances, the question arises whether the nature as well as the extent of activities included in the subscriptions qualify as an insurance or legal assistance insurance.

If the subscription relates to activities aimed at arranging or commercially arranging an insurance between a customer and an insurer as an intermediary or assisting in the management and execution of such insurance, it does not qualify as non-life insurance. In such a case, this qualifies as “intermediation services” within the meaning of Section 1:1 of the Wft. Examples of such activities include reporting damage to the insurer, explaining contract terms to the customer and assisting the customer in contact with the insurer. If the subscription comprises more services than the intermediation services described above, for example, if it also includes assistance in legal proceedings, it will generally be qualified as non-life insurance. This may be different if the service element is clearly predominant, but this will not often be the case.

If the subscription relates to legal services in general, it will qualify as legal assistance insurance, except when it exclusively comprises “first-line legal services”. Examples of “first-line legal services” may include answering simple legal questions and/or offering model solutions in a very limited time. In this case, the nature and scope of the legal service subscription may be too limited (and therefore subordinate) to qualify as legal assistance insurance. Here too, however, the specific content and context of the subscription remains decisive for the question of whether it qualifies as non-life insurance.

DNB licence requirement

Please note that a licence from DNB is required for the commercial provision of insurances. However, under certain conditions an exemption from the licensing requirement is applicable.

AFM licence requirement

Even if you are not required to hold a licence from DNB, you may still be subject to a licence requirement pursuant to the part of the Wft relating to conduct of business supervision . Please contact the Netherlands Authority for the Financial Markets (AFM) for more information.

Assessment of your analysis

If you want to know whether your own analysis of whether you need a licence is correct, you can send a substantiated legal analysis to us, stating the name of the natural person or the company. Please contact us to discuss the options.

Discover related articles