Insurance undertaking (insurer)
An authorized entity that carries the risk and issues insurance contracts, an insurance company, mutual or provident institution. Not to be confused with the intermediary who distributes those contracts: the insurer is the final payer on a claim, supervised by the ACPR. In borrower insurance, it is the one that compensates the bank.
Key points
- ACPR-licensed entity that carries the risk and pays out on claims.
- Three main legal forms: insurance company, mutual, provident institution.
- Distinct from intermediaries (brokers, agents) who distribute without carrying risk.
- In borrower insurance, the insurer pays benefits to the bank when a claim occurs.
Frequently asked questions
What is the difference between an insurance company, a mutual and a provident institution?
An insurance company is a for-profit entity whose shareholders receive dividends; it is governed by the Insurance Code. A mutual is a non-profit structure whose members are both policyholders and 'owners'; it falls under the Mutuality Code. A provident institution is a joint-management structure run by employer and employee representatives, mainly in collective protection; it is governed by the Social Security Code. All three are licensed by the ACPR and can issue borrower insurance contracts.
Why should a broker check the financial strength of an insurer?
The insurer's role is to pay claims, sometimes long after the contract was taken out, borrower insurance can cover a loan for 25 years. If the insurer fails in the meantime, the borrower is left without cover and the bank may require a replacement policy or invoke clauses in the loan offer. A thorough broker therefore checks the insurer's solvency rating and recommends organisations with a solid financial base.
How do you choose the right insurer for a delegated borrower insurance policy?
The choice rests on several criteria: equivalence of cover required by the bank (death, total and permanent disability, temporary incapacity, partial permanent disability according to the group contract), exclusions and waiting periods, cost, expressed as the annual effective insurance rate (TAEA), and the insurer's financial strength. The broker must also verify that the contract is acceptable to the lender before formally recommending it. A rigorous comparison across these four dimensions is at the heart of the professional's added value.
In practice
A 45-year-old smoker seeking delegated insurance for a 300,000 € loan is offered a group contract by their bank at a TAEA of 0.45%. The broker compares three alternative insurers and identifies an individual contract at 0.28% with equivalent cover, a saving of several thousand euros over the loan term, made possible by the individual underwriting of personal policies.
Official sources
- Borrower insurance for a mortgage · Service-Public.gouv.fr
- Law of 28 February 2022 (Lemoine Act) · Vie-publique.fr