How is severance pay calculated for insurance agents? The parameters set out in the ANA 2003.
The calculation of the severance payment provided for by theNational Agent Agreement 2003is rather articulate and complex and is regulated in Articles 12 et seq.
First of all, it is important to emphasise that Section 18 ANA provides that in the event of termination of the agency contract due to termination by the undertaking or the agent for just cause:
- no notice is due;
- if the terminating party is the enterprise, the agent shall be entitled to the termination indemnities set out in Arts. 27 to 33 (examined below); if the agent terminates, it shall be entitled to the termination indemnities provided for in the case of termination by the undertaking.
That being said, according to Section 12(I) ANA, the agency contract may be terminated by:
- Cancellation of the agent from the National Register of Agents referred to in Law No. 48 of 7 February 1979;
- Death;
- Total invalidity;
- Age limits;
- Termination for cause.
Para. (II) of the same article also provides that the agency contract may be terminated either by withdrawal by the undertaking or by the agent. Termination by the undertaking, in turn, is divided into three types:
- Withdrawal with an indication of the reasons and possible recourse to the Arbitration Board, in which case the rules set out in Art. 12-.encore;
- termination of the undertaking without stating reasons, in which case the discipline set out in Art. 12-.ter;
- withdrawal of the undertaking with application of Art. 12-quater for eligible agents.
If the termination is effected by the agent, the provisions of Art. 12-.encore
Para. (III) provides that the termination indemnities payable to the agent are set forth in Articles 14 to 19.
However, para. (4) of Art. 12 provides that in the event of termination of the contract due to death or total invalidity of the agent, an additional sum shall be due to the terminated agent or his heirs, in addition to the indemnities referred to in Articles 14 to 19, as follows:
| Scales of commissions
(Euro) |
Seniority
|
|
| Up to 5 years old | Over 5 years | |
| up to 20,500.00
from 20,501.00 to 26,400.00 from 26,401.00 to 38,000.00 from 38,001.00 onwards |
20%
15% 15% 15% |
30%
25% 20% 15% |
| This additional sum may not be less than EUR 8,800.00 or more than EUR 29,300.00. | ||
Article 12A then provides for detailed rules with a precise scheme of reference for the calculation of any additional sum due to the agent under the 2003 NAA, viz:
| Scheme of reference and discipline under Art. 12A | ||
| on the first | € 103,291.00 in commissions | 65% |
| on subsequent | € 103,291.00 in commissions | 40% |
| on subsequent | € 154,937.00 in commissions | 15% |
| on subsequent | € 154,937.00 in commissions | 10% |
| on how much it exceeds | € 516.457,00 | 5% |
| This additional sum may not be less than EUR 8,800.00 or more than EUR 29,300.00. | ||
Art. 12-bis provides that within 20 days of receipt of the notice of termination, the other party may have recourse to an informal arbitration procedure; the modalities of access to this procedure are expressly regulated in Art. 12-.encore itself.Article 12-encore regulates termination by the company with an indication of the reasons.
Article 13-ter regulates, on the other hand, the hypothesis of termination by the undertaking without giving any reason. In this case the notice due to the agent, pursuant to Article 13, will start only after the thirtieth day following the notice of termination by the undertaking. Within that term, the Agent may choose between the payment of the indemnities and the release of the portfolio managed by the agency, by sending the undertaking a notice to that effect. If the parties agree to opt for the liberalisation of the portfolio, this must be done by signing the attached text in Annex A to the ANA 2003 agreement.
It is important to note that, according to case law, the liberalisation of the portfolio is considered a legitimate alternative to the payment of severance payments.[1]
In the event of the agent's failure to exercise the option and in any event in the event of the agent's failure to sign the deed of liberalisation referred to in the preceding paragraph, the undertaking shall be obliged to pay the agent the indemnities referred to in Articles II and III of Art. 12-ter and the contract is terminated as of right by the agent:
- the treatment set out in Article 13 of the ANA (governing the notice period);
- termination indemnities set out in Arts. 25 and 33;
- as well as to an additional sum equal to 50% of that calculated for the agency on the basis of the reference scheme and rules set out in Article 12A.
Art. 13 para. III lays down as notice periods:
| 1 month | for the first year of management; |
| 2 months | for the second year of management |
| 3 months | for the third year of management |
| 4 months | for the fourth year of management |
| 5 months | for the fifth year of management |
| 6 months | for the sixth year of management |
Para. (IV) of Art. 13 provides that the undertaking may replace all or part of the notice due by an indemnity determined as follows:
- if the agent started the first year of management but did not complete it: in lieu of one month's notice, 1/42 of the commissions;
- if the agent has completed the first year of management but has not started the second year of management: in lieu of one month's notice, 1/10 of the commissions;
- if the agent has started the second year of management but has not completed it:
- in lieu of 1st month's notice, 1/15th of the commissions;
- in lieu of 2nd month's notice, 1/20th of the commissions.
- if the agent has completed the second year of management but has not started the third year of management:
- in lieu of 1st month's notice, 1/10th of the commissions;
- in lieu of the 2nd month's notice, 1/12 of the commissions.
- if the agent has started its third year of management but has not exceeded four years of management:
- in lieu of the 1st month's notice, 1/12 of the commissions;
- in lieu of 2nd month's notice, 1/18th of the commissions;
- in lieu of the 3rd month's notice, 1/24 of the commissions;
- in lieu of the 4th month's notice, 1/42 of the commissions.
- if the agent has started the fifth year of management but has not completed the fifteen years of management:
- in lieu of 1st month's notice, 1/15th of the commissions;
- in lieu of 2nd month's notice, 1/20th of the commissions;
- in lieu of the 3rd month's notice, 1/25th of the commissions;
- in lieu of the 4th month's notice, 1/30 of the commissions;
- in lieu of the 5th month's notice, 1/35 of the commissions;
- in lieu of the 6th month's notice, 1/40th of the commissions.
- if the agent has completed or exceeded 15 years of management:
- in lieu of the 1st month's notice, 1/12 of the commissions;
- in lieu of 2nd month's notice, 1/18th of the commissions;
- in lieu of the 3rd month's notice, 1/24 of the commissions;
- in lieu of the 4th month's notice, 1/30 of the commissions;
- in lieu of the 5th month's notice, 1/36 of the commissions;
- in lieu of the 6th month's notice, 1/42 of the commissions.
In calculating the replacement indemnity, account shall be taken of the commissions paid to the agent in the entire year preceding the termination of the contract or, failing that, in the last 12 months of operation.
With regard to the termination indemnity for the Theft, Fire, Accident, Illness, Third Party Liability, Motor and Watercraft Liability, Miscellaneous Risks, Glass and Crystal, and Miscellaneous Risks classes, three indemnities are envisaged, calculated in accordance with the rules set out in Articles 25, 26 and 27 below.
Article 25 (allowance on increase of premium income) applies to agents who have been in business for at least two years and consists of a percentage, as set forth in para:
| Staggers | Percentages | |
| up to euro 35,100.00 6.30 | 6,30 | |
| from euro 35,101.00 | to euro 70,200.00 4.80 | 4,80 |
| from euro 70,201.00 | to euro 105,200.00 3.38 | 3,38 |
| from euro 105,201.00 | to euro 140,300.00 2.63 | 2,63 |
| over euro 140,300.00 1.65 | 1,65 | |
For agents who have been in management for at least one year, the allowance is payable at the rate of 75%.
Article 26 recognises a second allowance, relating to receipts. It too consists of a percentage on agents with at least two years of management and its reduction, to 75%, after the first year of management). Paragraph II provides for the following percentages:
| Staggers | Percentages | |
| up to euro 87,700.00 | 1,25 | |
| from euro 87,701.00 | to euro 251,400.00 | 0,90 |
| from euro 251,400.00 | 0,45 | |
Art. 27 governs the third indemnity (also extended to the Credit and Cautionary lines of business), which consists of a percentage fixed by para. IV on the annual average of the commissions paid to the agent in the last three financial years and described in the following table:
| Seniority | Percentages |
| Up to 2 years | 2,5 |
| Over 3 years | 3,5 |
| Over 4 years | 5 |
| Over 5 years | 7 |
| Over 6 years | 8,5 |
| Over 7 years | 11,5 |
| Over 8 years | 13,5 |
| Over 9 years | 16 |
| Over 10 years | 20,5 |
| Over 11 years | 26 |
| Over 12 years | 29,5 |
| Over 13 years | 35 |
| Over 14 years | 40,5 |
| Over 15 years | 50,5 |
| Over 16 years | 56 |
| Over 17 years | 57 |
| Over 18 years | 58,5 |
| Over 19 years | 59,5 |
| Over 20 years | 60,5 |
| For each subsequent completed year of management, the percentage is increased by 0.50 | |
| If the management period is less than 12 months, the indemnity shall be calculated by applying the percentage 2.5 to the amount of the commissions actually paid during the management period, without prejudice to the provisions of paragraph III above | |
| If, during the periods referred to in the preceding paragraphs, portfolio reductions have been made for which the indemnity provided for in Article 8 bis (3) has been paid, the amount of the commissions, to be taken into account in determining the average, shall be reduced by the amount of the commissions for which the aforesaid indemnity has been paid. | |
The following specific provisions regulate the indemnity for Life (Art. 28), Capitalisation (Art. 29), Livestock (Art. 30), Hail (Art. 31), Transport (Art. 32) and the branches not covered by Art. 24 and 32 (Art. 33). For which reference is made in full to the ANA 2003 attached hereto.
Lastly, Article 35 regulates the termination indemnity in the case of co-agencies, providing that, notwithstanding the joint nature of the co-agency assignment, the termination of the agency agreement with respect to one or some of the co-agents is not in itself cause for termination with respect to the other co-agent(s), who retain to all intents and purposes their accrued management seniority.
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[1] On this point, see Court of Cassation Civ. 2006 No. 1286, which provided that, unless otherwise agreed between the parties, "upon termination of the insurance agency relationship, the outgoing agent is not entitled to dispose of the agency's client portfolio, which is owned by the principal, since he is only entitled to the treatment provided for by collective bargaining in connection with the termination of the contract, in part commensurate with the increase he brought to the portfolio. (In the present case, the S.C. upheld the judgment on the merits, condemning the principal to pay the agent the indemnity in lieu of notice and other termination benefits, and rejecting the agent's request to acquire the portfolio, holding at the same time that the same terminating company had legitimately failed to pay the agent the indemnity in lieu of notice, although it was due, in respect of the agent's failure to return all the material inherent to his assignment, relating to the portfolio of customers owned by the undertaking, an obligation that the agent had fulfilled following an appeal pursuant to Art. 700 of the Code of Civil Procedure against him).
