This article is part of the PLC Global Finance January 2011 e-mail update for the United Kingdom.
On 26 November 2010, the European Commission published a consultation paper on the current functioning of the Insurance Mediation Directive (IMD) (2002/92/EC) and on possible amendments which should be made to revise the Directive (IMD2).Close speedread
On 26 November 2010, the European Commission published a consultation paper on the current functioning of the Insurance Mediation Directive (IMD) (2002/92/EC) and on possible amendments which should be made to revise the Directive (IMD2).
The IMD sets out the principles of the single European passport and basic standards of consumer protection in the area of insurance intermediation. Its aim is to facilitate freedom of establishment and freedom to provide services in relation to intermediaries.
An implementation check was initiated by the European Commission to gauge the effectiveness of the regime across the EU. This check found that, although the IMD had introduced a minimum level of consumer protection, the minimum harmonisation nature of the Directive had resulted in a patchwork of national regulations. As a result, there were numerous gaps and inconsistencies in how Member States supervise insurance mediation across Europe, creating barriers to the provision of cross-border services and little coherence as regards consumer protection.
Due to the impact of the risk-based regime to be introduced under Solvency II, Recital 139 of the Solvency II Framework Directive required the Commission put forward a proposal for the revision of the IMD by the end of 2010.
In addition to the advent of Solvency II, the Commission wishes to align the regulation of insurance intermediaries with other financial services sectors. The Commission is currently reviewing the Markets in Financial Instruments Directive (MiFID) and the sale of Packaged Retail Investment Products (PRIPs). As certain PRIPs are life insurance policies packaged as investments, the Commission has proposed that a similar regime to that applied to other retail investments should be included in the revised IMD for all sales of insurance PRIPs. The Commission has suggested using the Level 1 MiFID regime as a benchmark for provisions relating to PRIPs in the IMD.
The focus of the review of the IMD is on:
Clarifying the scope of the directive.
Ensuring clearer information is given to consumers.
Setting some basic principles in terms of professional requirements for those selling insurance products.
The inclusion of a system of 'due credits' for third country intermediaries who wish to operate in more than one Member State.
A simplified notification system for intermediaries passporting on either a branch or services basis.
Perhaps most importantly, the inclusion of a more prescriptive regime governing conflicts of interest and the introduction of rules of remuneration transparency. The current directive has very limited provisions on conflicts of interest and nothing requiring transparency in relation to commission or fees.
The proposals are also expected to bring direct sales made by insurance undertakings within the scope of the revised Directive. The Commission believe that consumers who buy policies direct from insurers are currently at a disadvantage to those buying through intermediaries subject to the IMD.
The timetable for this consultation is tight. The deadline for all comments is 28 February 2011.