Unit and Index linked policies are at the centre of a debate as to whether they should be classified as insurance contracts or financial products, respectively governed by different sets of rules.
Linked policies concluded after 25 January 2007 – i.e. the entry into force of Legislative Decree no. 303 of 29 December 2006 –are included in the list of “financial products” provided by the Legislative decree no. 58 of 24 February 1998 and subsequent amendments (the “Italian Financial Act“) and it is not disputed among Courts that linked policies issued after 25 January 2007 are governed by such set of rules (even if some concerns may be raised as to the compliance of such legislation with the European directives regarding insurance contracts, especially in light of the ECJ decision no. C-166/11 discussed below).
The issue which is currently debated is whether the Italian Financial Act also applies to linked policies concluded prior to 2007, on which lower Courts still have different views. Insurance companies and policyholders expected clarifications from the Supreme Court that, however, in the only decision rendered on this matter (Supreme Court decision no. 6061 of 18 April 2012), referred back to the merit courts the task to assess the nature of the disputed policy – and determine the governing law – on a case by case basis. According to the Supreme Court, the lower Courts must carefully exam the terms and conditions of each policy in order to assess whether the so called demographic risk (the main feature of life insurance contracts) prevails over the financial risk related to the underlining fund: in case the demographic risk prevails, the disputed policy will be considered as an insurance contact governed by Legislative Decree no. 174 of 17 March 1995 (subsequently substituted by the “Code of private insurance“, Legislative Decree no. 209 of 7 September 2005). On the same lines, in the opposite case, the dispute will be decided applying the Italian Financial Act.
Because the Supreme Court’s judgment did not provide clear –cut criteria, a consolidated case law on the classification of linked policies and governing rules is still missing and uncertainties remain for stake holders in the insurance field. Courts still have a different approach and almost identical linked policies are classified as financial products by some of them (e.g. see Court of Treviso , 3 February 2014, and Court of Siracusa, 17 October 2013) and as insurance contracts by some others (e.g. see Court of Rome, 9 February 2011, and Court of Rome, 2 May 2012).
The different approach of the Italian Courts may also be explained in light of a decision of European Court of Justice, which seems to be at odds with the aforementioned judgment of the Italian Supreme Court. Indeed, by decision of 1 March 2012 (C-166/11), the ECJ included linked policies among insurance contracts and expressly stated that: «as dictated by the requirements of both uniform application of European Union law and the principle of equality, the scope of the term ‘insurance contract’ must be sought having regard to the context of the directive and must be given an autonomous and uniform interpretation throughout the European Union (see, to that effect, Case 64/81 Corman  ECR 13, paragraph 8, and Case C 98/07 Nordania Finans and BG Factoring  ECR I 1281, paragraph 17)».Conclusively, it is opinion of the Court that «contracts which are ‘unit-linked’ or ‘linked to investment funds’ […] are common in insurance law. Thus, the European Union legislature took the view that that type of contract falls within a class of life assurance, as is clear from Annex I, point III to the Life Assurance Directive, read in conjunction with Article 2(1)(a) of that directive».
Some Courts of first instance relied on the ECJ’s judgment to decide the cases that they handled and disregarded the decision of the Italian Supreme Court (see e.g. Court of Rome, 26 May 2012).
It is worth noting that, as both the Italian Supreme Court’s judgment and the ECJ’s decision were almost simultaneously rendered, it is likely that the Supreme Court was not aware of the ECJ’s decision when its judgment was delivered: hence, a change in the Supreme Court’s approach cannot be excluded. Until then, all the uncertainties surrounding the nature of linked policies might prompt policyholders to claim the lack of compliance of their policies with the Italian Financial Act and the repayment of the invested premium. Indeed, prior to 2007, all the insurance players regarded unit and index linked policies as insurance contracts, so that policyholders have an easy path to claim that the policies they purchased are not compliant with the financial rules as the authorisation by the supervisory authority on private insurance companies (ISVAP) for the sale of such products was not based on the Italian Financial Act but rather on the ad hoc legislation on insurance life contracts.