In the field of life insurance two types of products coexist: group membership contracts and individual membership contracts. What makes them different in concrete terms? What are their respective advantages and disadvantages? Overview.
Fund returns in euros, level of fees, number and variety of units of account, duration of the contract: here are some of the main characteristics to consider when choosing your multi-support life insurance contract. There is, however, another, more discreet but which may be important. Let us compare for example two contracts distributed on the internet by specialist brokers: Linxea Spirit on one side and Mes-placements Libert de lautre. At first glance, the two products have more in common than differences: same insurer (Spirica, a subsidiary of Crdit Agricole Assurances), same level of costs (0.50% management fees), same entry ticket (500 euros). However, one detail, which does not immediately stand out, differentiates them: the first, that of Linxea, is a collective membership contract; the second with an individual membership contract.
See the comparison between the Linxea Spirit and Mes-placements Libert contracts
To grasp this nuance, it should be remembered that certain life insurance distributors do not directly insure their customers, but place themselves in an intermediary position between the insurer and the investor. The proposed contracts are therefore the result of a discussion between this intermediary and the insurer on the general conditions of the product. In particular, the distributor has the option of opting for either a group contract (sometimes called a group contract) or an individual contract. In the first case, it is the distributor (sometimes an association), as a legal person, who signs the contract with the insurer, then offers investors to join it. In the second, it is the saver, as a natural person, who is directly linked to the insurer, the role of the distributor being limited to selecting and marketing the contract.
The choice is not neutral
What are the advantages and disadvantages of the two formulas? We asked the question to the two brokers marketing the contracts mentioned in the introduction. And they don't quite agree on the subject.
Mes-placements, a brand used by the online broker Finance Slection, has therefore chosen to only offer individual contracts. Logical, since Eric Girault, its CEO, sees no advantage in collective contracts, except for the distributor. The choice is not neutral, he says. In the case of a collective contract, it is the distributor who determines the general conditions of the contract, and in particular the pricing conditions. He can therefore change them at any time and unilaterally, without asking for the opinion of the savers.
Certainly, his knowledge, this scenario has never happened, but it is theoretically possible. An increase in management fees would not be justified today, because the market is doing well. But imagine that tomorrow, life insurance will no longer be a recipe, and that new members will be rare. The only way for the distributor to maintain its margins would then be to increase its management costs. This is possible in the case of a group contract, not in the case of an individual membership contract.
Leave the choice to the customer
Emmanuelle Facchin, Linxea's sales manager, is less categorical. Unlike Finance Slection, the Parisian broker has chosen to distribute the two types of contracts (1), to leave the choice to the customer. But it has historically rather privileged collective contracts. Working with the client in mind, negotiating with the insurer to improve the contract is our business. The individual, in this context, can be problematic because major modifications, to the benefit of the client but requiring an addendum to the contract, may not come into being if some clients oppose it, or even quite simply if they are not reachable.
What about the risk of increased fees? This is effectively the only risk for the client in the case of a collective contract, continues Emmanuelle Facchin. This is why we have made a commitment, in the general conditions of our contracts, not to increase the costs. In the absence of such a mention, I could understand that the customer doubts. According to her, the group contract, provided that the level of costs is blocked, can on the contrary be protective for the insured: The group contract could for example make it easier to change insurer in the event of fault thereof, or to do it more easily pressure for a contract transfer. This is what the broker has tried to do recently. Dissatisfied with the performance of its Linxea Evolution contract insured by ACMN Vie, Linxea tried to negotiate a transfer of funds to another insurer. However, without success, faced with ACMN Vie's refusal: the distributor's negotiating power also has its limits, those of the other party's willingness to negotiate.
Read this article: Online life insurance: are contracts with ACMN Vie in the process of being concluded?
There is one point, however, on which the two brokers come together: the lack of interest of the subscribers for the question of the mode of adhesion. Customers who ask us the question of the individual or the group are rare, explains Emmanuelle Facchin. They are much more interested in the issue of fees, and they may one day be raised.
Confirmation by Eric Girault: In 2004-2005, when the first 100% internet contracts appeared, the first customers were experienced customers, very attentive to the type of contract. Now that these contracts have become more democratic, they are generally less vigilant on this point. Wrongly, he believes: When a distributor does not communicate on the membership mode, it is generally because it is collective. It would be good, however, to explain to customers what this group contract is, and what are its disadvantages.
Aviva and known price contracts
Recently, we mentioned in an article the legal dispute between the insurer Aviva and some of its customers, concerning a particular type of contract, known as known price because it allows its underwriters to buy and sell securities at the last known price. Marketed at the end of the 1980s, most of these ultra-advantageous contracts, in particular internet time and real-time order placement, have since been closed, under pressure from the insurer. But a handful of customers resist and take Aviva to court. If they can do so, it is precisely because these contracts are individual membership. The game, in loccurrence, is worth the candle: the outstanding amount of certain contracts would amount today in million euros!
(1) Of the four contracts put forward by Linxea, two are collective: Linxea Spirit, insured by Spirica, and Linxea Vie, insured by E-cie Vie; two are individual: Linxea Avenir, insured by Suravenir, and Linxea Zen, insured by Apicil.