The answer to this question is provided by the European Commission.

In accordance with Article 1(3)(a)(ii) IDD, one of the conditions for the exemption of ancillary intermediaries from the scope of the Directive is that the insurance is “complementary to the good or service supplied by a provider” and “covers damage to, or loss of, baggage and other risks linked to travel booked with that provider”.

The question refers to the term ‘travel service’ as defined in Article 3(1) of Directive (EU) 2015/2302 on package travel and linked travel arrangements – for the purposes of that Directive – as including the “rental of cars, other motor vehicles … or motorcycles …”. However, the IDD does not use the concept of “travel service” as defined in Directive 2015/2302. The exemption in Article 1(3)(a)(ii) IDD must instead be understood in a way that corresponds to the content and the objectives of the IDD. In this regard, the objective was to exclude certain operators practising insurance distribution as an ancillary activity where the premium does not exceed a certain amount and the risks covered are limited (see recital 15 of the IDD). This includes, among other cases, the sale of mostly short-term travel-related insurance coverage as add-on product by providers of travel services. Such policies will typically cover loss of baggage, personal accident, travel cancelation and other risks connected to travel. They are normally offered by travel agents, tour operators, online travel portals or airlines; however, the IDD does not restrict the exemption to certain groups of providers as long as the insurance products sold cover risks linked to travel booked with the provider in question.

Whether cars rentals are within scope of this exemption will depend on the circumstances of the individual case. If the use of the rental car is part of a comprehensive travel offer arranged, for instance, by a tour operator, the exemption would also apply to travel insurance covering risks linked to the trip in the rental car, such as loss or damages to baggage. Where the rental car is rented directly from a car rental company, the exemption can also be applicable, provided that the rental car will be used for travel and the add-on insurance purchased covers risks linked to that travel. Under such circumstances, the travel can be considered as “booked with that provider”, i.e. the car rental company. By contrast, this is not the case if the car is, for example, rented as a replacement vehicle for a broken-down vehicle and is used for purposes other than travel. In such a case, insurance coverage for the vehicle would not be connected to travel and would accordingly not fall under the exemption.

Furthermore, in order to be exempted from the scope of the Directive, an ancillary insurance intermediary – in the present case a car rental company – would have to meet all the cumulative conditions set out in Article 1(3) IDD for the entire range of insurance products offered. This means that the insurance products provided would have to be strictly limited to damage to, or loss of, baggage and other risks linked to the travel booked with the car rental company and could not contain any element of liability coverage. In addition, the amount of the premium would have to be in line with the limitations set in Article 1(3) points (b) and (c) IDD.

If the exemption of Article 1(3) IDD applies also Article 1(4) IDD has to be complied with. This provision sets out additional obligations when ancillary insurance intermediaries, who are exempted from the scope of the IDD, distribute insurance products. In particular, Article 1(4)(b) IDD requires that insurers and insurance intermediaries, when carrying out a distribution activity through an exempted ancillary insurance intermediary, are responsible for compliance with Articles 17 and 24 IDD, and for considering the demands and needs of the customer before the proposal of the contract.

Disclaimer provided by the European Commission:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.