Territory Protection (Gebietsschutz)

Concept

Territory protection is a contractual commitment by an insurer to an exclusive agent not to appoint any further exclusive agent for the same products within a contractually defined geographic area, so that the protected agent is not exposed to direct competition from other agents of the same insurer within that area.

Distinction from Book Protection

Territory protection concerns which agents are permitted to act for the insurer within a geographic area, whereas book protection relates to the allocation of the customer book already serviced by an agent; both protection mechanisms complement one another in the practice of exclusive agency and secure for the agent both access to new customers within the protected area and the long-term economic value of its existing customer book.

Practical Significance and Limits

Territory protection is an important incentive for exclusive agents to invest in building their business, since it gives them a degree of economic planning certainty; however, the specific design of territory protection is subject to competition law limits, particularly with regard to the prohibition of impermissible territorial arrangements in relation to independent intermediaries or other distribution channels of the same insurer.