No C 298/2 Official Journal of the European Communities 27. 11. 89 
Opinion on the proposal for a second Council Directive on the coordination of laws, 
regulations and administrative provisions relating to direct life-assurance, laying down 
provisions to facilitate the effective exercise of freedom to provide services and amending 
Directive 79/267/EEC (*) 
(89/C 298/02) 
On 16 January 1989 the Council decided to consult the Economic and Social Committee, 
under Article 57 (2) of the Treaty establishing the European Economic Community, on the 
abovementioned proposal. 
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing 
the Committee's work on the subject, adopted its Opinion on 5 September 1989. The 
rapporteur was Mr Pelletier. 
At its 269th plenary session (meeting of 27 September 1989), the Economic and Social 
Committee adopted the following Opinion by a majority vote (with 1 abstention). 
1. Introduction 2. General comments 
1.1. The adoption by the Council on 24 June 1988 
of a Directive freeing capital movements within the 
Community area from July 1990 onwards will have the 
effect—as indicated in that text—of eliminating any 
measure which limits the possibility of concluding 
'underlying' transactions, i.e. operations involving a 
capital movement between residents of different Mem­
ber States. 
1.2. As life-assurance operations, mentioned in point 
X of the nomenclature attached to the Directive of 
24 June 1988, are regarded by the Commission as 
'underlying' operations, it is important for them to be 
liberalized along with the capital movements to which 
they give rise. 
1.3. There appears, then, to be a need for a specific 
draft Directive, subject to the comments below, in order 
to define the conditions for the effective exercise of 
freedom to provide services in life-assurance, in accord­
ance with Articles 57, 59, 61, 62 and 66 of the Treaty 
of Rome, and with a view to offering consumers appro­
priate protection in such sensitive fields as savings and 
provident schemes. 
1.4. Moreover, the establishment of the internal 
insurance market, which is a key aspect of the European 
financial area, presupposes that it will be made easier 
for insurance firms with their headquarters in the Com­
munity to provide services, so that clients can avail 
themselves of the services not only of insurers estab­
lished in their own country but also of insurers based 
in other Member States who have their registered office 
in the Community. 
1.5. The client must be provided with full infor­
mation, so that the choice can be made in full know­
ledge of the new possibilities. 
1.6. The Committee therefore welcomes the Com­
mission proposal, subject to the following comments. 
I1) OJ No C 38, 15. 2. 1989, p. 7. 2.1. In its present version the draft Directive covers 
only a limited area of life-assurance—individual con­
tracts not related to an occupation—and hence excludes 
all other types of assurance, particularly group assur­
ance. 
2.2. The Committee takes the view that this limited 
field of application compromises the unity of the 
arrangements covering the free provision of services in 
life-assurance, and consequently the protection to be 
provided by the law whatever the form of contract 
(collective or individual) or the conditions governing 
the contract. 
The protection which such a draft Directive should 
give the beneficiaries of the contracts—who are always 
natural persons—is in fact essential whether the con­
tract has been drawn up for an individual or for a 
group. 
The fact that there are several Directives would also 
give rise to considerable difficulty in defining their 
respective fields of application. 
2.3. The Committee notes that the Directive takes 
only limited steps in liberalizing the market and in 
consumer choice. Further steps may be necessary in 
terms of the role of brokers vis-a-vis agents and on 
advertising limitations to ensure the consumer is fully 
aware of insurance options available. 
2.4.1. The Committee therefore feels that the 
arrangements common to all life-assurance oper­
ations—individual and group assurance—must be dealt 
with in a single Directive before the date planned for 
liberalization of capital movements (July 1990), or at 
least in two texts to be examined together. 
27. 11. 89 Official Journal of the European Communities No C 298/3 
2.4.2. The inclusion of collective contracts in the 
field of the proposed Directive, under the same con­
ditions as individual contracts, would have the advan­
tage of applying to direct or indirect beneficiaries of 
collective contracts the protective provisions which 
apply to individual contracts. 
2.4.3. This extension of the draft Directive would 
involve no technical problem and would have the con­
siderable advantage of avoiding definition and frontier 
problems, unifying the rules on free provision of ser­
vices applicable to the entire range of individual and 
collective life-assurance operations, and making it poss­
ible to apply these provisions rapidly. 
The changes to the proposed Directive could be achiev­
ed by the amendment of Articles 2, 10 and 13 as 
indicated in the specific comments. 
2.5. In the field of application confined to individual 
contracts, the draft Directive makes a distinction 
between: 
— contracts drawn up as a result of the active inter­
vention of an insurance company free to provide 
services, which would justify the provision of effec­
tive protection for the policy-holder and the ben­
eficiary, 
— contracts entered into by persons, who have taken 
the initiative of approaching an insurer based in 
another Member State. The policy-holder thereby 
renounces the forms of protection offered by his 
State of residence, and would therefore come under 
an intermediate form of protection. 
2.6. This analysis of the policy-holder's wishes, 
based according to the Commission on a practice fol­
lowed in certain States, leads to solutions whose practi­
cal application would in the Section's view be difficult 
or even artificial and illusory. 
2.7. The draft Directive includes the provisions on 
indirect taxation already adopted in the Directive of 
22 June 1988 on direct insurance other than life-assur­
ance, namely application of the principle of territoriality 
to insurance tax pending further harmonization. 
However, this system involves no improvement in the 
considerable distortions which exist in tax matters 
between different Member States, particularly for 
insurance tax applied to contracts. The Committee takes the view that harmonization in 
this field must not entail any additional tax burden for 
policy-holders. 
2.8. The procedures envisaged to ensure reciprocity 
between third countries and the Community are essen­
tial in order to give Community firms equal and effec­
tive access to third country markets. The Committee 
would here mention its Opinion on the second banking 
coordination Directive(!). 
2.9. The provisions relating to the law applicable to 
contracts are ambiguous and must be clarified, as their 
content is essential for consumer protection. 
They should be redrafted to remove any uncertainty on 
this score. 
In this context, the Committee questions the desirability 
of adopting for life-assurance solutions which are ident­
ical to those adopted for non-life insurance in the 
Directive of 22 June 1988. 
3. Specific comments 
3.0. Article 2 
This Article defines the concept of 'Member State of 
the commitment'. To take account of the variety of 
situations which may arise, particularly that of con­
tracts entered into by undertakings which do not consti­
tute legal persons, it is necessary to add the concept of 
'sole operator' in order to embrace undertakings run 
by one natural person. 
The Article would thus read: 
'Member State of the commitment: the Member 
State where the policy-holder has his habitual resi­
dence or, if the policy-holder is a legal person or 
sole operator, the Member State where the latter's 
establishment, to which the contract relates, is situ­
ated.' 
3.1. Article 4 
This Article is particularly important, since it defines 
the law applicable to contracts. 
Paragraph 5 lays down, on the one hand, that the rules 
of the law of the forum shall apply in a situation where 
they are mandatory, irrespective of the law otherwise 
applicable to the contract; and on the other hand, that 
the mandatory rules of the law of the Member State of 
the commitment may be applied. 
(') ESC Opinion (OJ No C 318, 12. 12. 1988). 
No C 298/4 Official Journal of the European Communities 27. 11. 89 
The Committee takes the view that this concept of 
'mandatory rules' must be clarified so that the insured 
person can be well aware of the law which will be 
applied to his/her contract. 
3.2. Article 9 
This Article lays down the conditions for access to 
Community markets for insurance companies whose 
head office comes under the law of a third country. 
These provisions seek to allow the Commission to 
ensure that Community firms enjoy reciprocal treat-
ment which guarantees them free access to the markets 
of third countries. 
The Directive gives the Commission the necessary 
powers to submit to the Council proposals seeking 
to establish true reciprocity with third countries — a 
precondition for the essential fluidity of the markets. 
The Committee strongly endorses this Article, since it 
takes into account the European Community's interest 
in ensuring respect for freedom of establishment offered 
to Community firms in third countries. — Paragraph 3 would be replaced by the following: 
'This title shall likewise not apply to assurance 
policies of which an undertaking, whether consti­
tuted in the form of a legal person or not, is directly 
or indirectly the sole beneficiary', 
— Paragraph 4 would be retained. 
3.4. Article 13 
This Article lays down the conditions for exercising the 
free provision of services on the initiative of the policy­
holder. 
In this case the insurance operation comes under the 
control of the insurer's country ('home country con­
trol'), while giving the policy-holder the opportunity to 
retain the protection of his national law under the 
conditions stated in Article 4 (1) and (2). 
It also includes provisions to maintain the spontaneity 
and reality of the policy-holder's initiative (written dec­
laration by the policy-holder, limitation of advertising); 
the Committee feels that these measures would be diffi­
cult to monitor and unreliable. 
3.3. Article 10 
The Committee regrets that the scope of the draft 
Directive is confined to contracts entered into with 
natural persons acting on their own account, thereby 
excluding a very large segment of life-assurance. 
The Committee proposes that the field of application 
be widened and that market operators, especially con­
sumers, be given the opportunity to avail themselves 
immediately of the free provision of services while still 
ensuring adequate protection for the policy-holder or 
beneficiary irrespective of whether the contract was 
entered into on an individual or collective basis. Paragraph 3 provides for the policy-holder to be able 
to engage a broker, who therefore represents only the 
policy-holder, to select a life assurance policy from 
those freely available. 
It is essential for the broker to provide his client with 
all the data necessary to enable him to enter into the 
contract. 
The conditions for possible intervention by an 
insurance professional in the context of freedom for 
passive provision of services should be clearly defined 
and controlled in order to maintain the real spontaneity 
of the policy-holder which is the essential feature of the 
spirit of the text. 
The text should be amended so that it excludes from 
the field of application only contracts where the direct 
or indirect beneficiary of the life assurance is a legal 
person who, in this latter case, could benefit from even 
more liberal provisions. 
The present Directive would cover all contracts whose 
beneficiary is a natural person, regardless of whether 
the contract has been entered into by a legal or a natural 
person, and in the form of an individual or a collective 
contract. 
Article 10 would be revamped as follows: 
— Paragraph 1 would be retained, 
— Paragraph 2 would be retained, Finally, in view of the amendments proposed in 
Articles 2 and 10, it is proposed that the following 
paragraph be added to Article 13: 
'The provisions of this Article do not apply to 
assurance taken out in respect of the lives of persons 
other than the policy-holder himself.' 
This Article is justified by the voluntary, individual 
nature of the request by the policy-holder, who must 
alone accept all the financial and legal consequences of 
his decision. 
Hence this freedom to provide services passively must 
not apply to collective contracts where the policy-holder 
commits other persons whose lives are assured. 
27. 11. 89 Official Journal of the European Communities No C 298/5 
3.5. Article 15 
This Article provides for a cancellation period of a least 
30 days for the policy-holder's benefit after he has 
concluded a contract on his own initiative. 
This measure is regarded by the Committee as effective 
protection for the consumer, but it points out that the 
cancellation period could be made longer. 
3.6. Article 16 
The Committee takes the view that the wording of this 
Article is unclear and should be improved. Thus there 
is no way of knowing which are the 'commitments 
within the meaning of Article 10 but not of Article 13'. 
Moreover, the Committee questions the appropriate­
ness of the last paragraph of this Article, which allows 
each Member State to choose its own arrangements for 
allowing an undertaking to combine free provision of 
services with its insurance activities in the country of 
establishment. 
3.7. Article 18 
The Committee hopes it will be clearly indicated that 
this Article refers to the first coordination Directive 
on life assurance (79/767/EEC), which laid down the 
principle of specialization by branch of activity (life and 
non-life), but which, since it did not apply retroactively, 
allowed existing multi-branch companies to continue 
to operate. 
This Article also poses problems of implementation 
with particular regard to Article 62 of the Treaty. 
Done at Brussels, 27 September 1989. 3.8. Article 22 
The Committee points out the crucial nature of this 
Article for consumer protection, and proposes that the 
second paragraph of Article 22(1) be replaced by the 
following formulation making it obligatory to provide 
information for the policy-holder: 'The information 
referred to in the previous paragraph must appear on 
the documents issued to the policy-holder.' This amend­
ment is essential to proper consumer information. 
3.9. Article 24 
As taxation is to be covered by a specific Directive, this 
Article appears to be a transitional measure for the 
payment of indirect taxes and parafiscal charges on 
assurance premiums. 
The Committee takes the view that it should be stated, 
along the lines of Directive 88/357/EEC of 22 June 
1988, that these provisions, which will be difficult to 
apply, are adopted 'without prejudice to any further 
harmonization'. 
The Committee also feels that the distortions of compe­
tition affecting consumer choice in this field could be 
avoided by abolishing indirect taxes on life assurance 
premiums. 
3.10. Article 26 
This should be amended to read: 
'The Commission shall forward to the Council and 
the Economic and Social Committee...' (remainder 
unchanged.) 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE