Insurance Distribution Directive framework finalised

The details of the Insurance Distribution Directive (IDD), which is designed to boost the cross-border trade of insurance products, have been finalised.

Insurance Distribution Directive framework finalised

|

The amended directive, previously called the Insurance Mediation Directive, contains regulatory requirements for insurance intermediaries – including independent financial advisers – within European Union member states.

The IDD will be submitted to the European Parliament for a vote and to the European Council for final adoption. If it is given the green light, it will be published in the Official Journal of the European Union in the next few months.

The directive focuses on practices for selling insurance products in order to improve consumer protection, market integration and competition across the EU. Member states will have two years to render IDD into national laws. 

‘Unfair and anti-competitive’

The European Federation of Financial Advisers and Intermediaries (FECIF) said it is pleased to see most of the proposals it put forward during the consultation have been heeded.

“Many of the earlier versions of the IDD contained text that would have been unfair and anti-competitive, not least to the adviser and intermediary sectors,” it said.

The body’s chairman Johannes Muschik said: “This is surely a very good example of the need for strong and effective representation for the adviser and intermediary community.

“Such activity helps to ensure that any new regulations are appropriate, proportionate and workable, whilst still achieving a sensible and necessary level of consumer protection.”

Key proposals

Some of the key proposals incorporated within the agreed text are:

  • The essential need for a level playing field across all distribution channels and all insurance-based investment products, to bring these under the scope of the IDD rather than MiFID.
  • Establishing an up-to-date single electronic database of intermediaries providing cross-border services.
  • All insurance distribution sources should provide information to customers about the nature of the remuneration their employees or representatives receive for the sale of insurance products. FECIF said otherwise direct selling may have been encouraged, leading to a reduction in the availability of advice, leading to less consumer choice and protection.
  • This directive should not be too burdensome for small and medium sized enterprises.
  • Customers need to be given certain information in good time before the conclusion of the contract or sale..
  • The choice of the method of remuneration should be left to the consumer, with all the necessary information and relevant knowedge at their disposal.
  • The disclosure of all costs at an appropriate and timely point in the sales process.

Coordinated action

Paul Stanfield, FECIF secretary general and chief executive of the Federation of European IFAs, said the finalised text is “more equitable, relevant and practical”.

He added: “There is a need for coordinated action by our sector to avoid inappropriate and unworkable regulation, which is not in the interests of the consumer, never mind the adviser.”

MORE ARTICLES ON