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Vote on the Insurance Mediation Directive in the European Parliament ABI analysis

On February 26, 2014 the European Parliament voted on a revised version of the Insurance Mediation Directive, known as IMD2.

This has followed more than two years of delays and debate since the European Commission first announced they were reviewing the original Insurance Mediation Directive 2002/92.

What is the insurance mediation Directive?

The Insurance Mediation Directive was adopted in 2002, and implemented in the UK via ICOBS rules. It was directed at insurance intermediaries, and aimed to make it easier for them to sell insurance in other EU countries, by setting out minimum requirements for all insurance intermediaries in the EU.  

How does it affect ABI members?

Since 2002, there have been a number of significant changes in the insurance market – such as the increasing importance of the direct sales channel. The Directive had a built-in review mechanism, so the European Commission published a revised proposal in June 2012, which extended the scope to cover insurance firms, and added a number of additional consumer protections.

The Directive may have a significant impact on ABI members’ distribution and sales practices for all insurance products; life insurance, pensions and general insurance, for both retail/personal and commercial lines - and for advised and non-advised sales.

What rules does the directive introduce?

The revised Directive as proposed by the European Commission sets out:  

  • Requirements for how intermediaries should be registered with their national supervisor, and what they must do if they want to conduct business in another MS.
  • Professional and organisational requirements for intermediaries and insurers, including levels of qualification and professional training, the safeguarding of client money, minimum levels of PI cover for intermediaries
  • Information Requirements and conduct of business rules for the sale of insurance products, including what information must be given to the customer at point-of-sale, such as the firm's name and address, commission or remuneration received for the sale, whether advice is provided and marker coverage. It also has conduct of business rules setting out minimum standards for advice, how the information should be provided (PDF, paper, online etc.), and rules for the tying and bundling of insurance products.
  • Specific sales rules for insurance PRIPS, including how to manage potential conflicts of interest, and more stringent rules for advised sales
  • Supervisory powers, including sanctions and product intervention powers for EU supervisory authority EIOPA

Next steps

As mentioned, the European Parliament has been debating this proposal, and in February MEPs voted in favour of a number of changes to the European Commission’s proposal. Some of these could be very damaging to the UK insurance market and ABI members (pdf 198kB).

The Council – representatives from each EU Member State – have also begun to consider the European Commission’s proposal and agree their own changes to the rules. A draft set of rules was discussed at their first meeting on 19th May, and can be found here. We expect them to complete this process sometime later in 2014.

The European Parliament and the Council will then negotiate with each other to find a solution that is acceptable for both parties. Once this is agreed, we will have a new Insurance Mediation Directive, and Member States will have roughly 2 years to implement it into their own rules.

Meanwhile, EIOPA has been asked by the European Commission to advise them on technical standards for new conflict of interest rules which were introduced for insurance PRIPS under MIFID II in January this year known as “IMD 1.5”. A consultation was published on 22nd May, with a deadline for responses by 22nd July. EIOPA will hold a hearing to discuss the content on 11th July 2014.

To get a sense of where sales rules for insurance PRIPs could end up, should they be aligned with MiFID II rules, ABI members may also be interested to note the recently published consultation by ESMA on MiFID II, and in particular, the investor protection aspects on pp 13 – 173. Responses are due by 1st August 2014.

How is the ABI involved?

The ABI was actively involved in lobbying the European Parliament throughout their political process. We have also been in close contact with the FCA and HM Treasury (who will be representing the UK during the Council discussions). We are working closely with our counterparts representing other EU markets with our EU umbrella trade body, Insurance Europe, as the IMD2 will have a significant impact on most, if not all, other EU insurance markets. We also have contact with EIOPA, and in particular with those leading work on technical standards for IMD2, such as conflicts of interest rules and information disclosure.

Last updated 01/07/2016