Brussels, 23/01/2014 (Agence Europe) - On Wednesday 22 January, the European Parliament's economic and monetary affairs committee decided on its negotiating position on the draft IMD2 directive on the role of brokers of insurance contracts.
The draft legislation aims to ensure the same level of consumer protection irrespective of the manner in which consumers take out insurance contracts, be it directly from an insurance company or indirectly through a broker (see EUROPE 10647). In exchange for tighter rules, brokers will be helped to expand their business overseas.
Retail investors will have the right to honest advice and clear information about insurance products (coverage, exclusions, premiums and risks) and, in order to reduce risks, information about potential conflicts of interest must be published. It will remain for the member states to decide whether brokers will have to provide information on commission and other payments they receive. The insurance industry is happy with this because of the variety of models in the member states and says that it would be too demanding to ask insurance companies to provide information about the variable pay received by their employees.
Consumer organisations have reacted very differently. In a press release, Anne Fily of BEUC, the European consumer bureau, says that big commission payments give brokers an incentive to get customers to take out certain insurance contracts and the vote at the EP falls short of tackling the perverse incentives generated by commission payments. BEUC is happy, however, about the restrictions on the online sale of insurance contracts accompanying products or services.
Insurance as part of a pension. As desired by the insurance industry, the draft legislation exempts insurance taken out as part of a professional or individual pension. The exact name given to this exemption will be decided in talks in the future on the technical aspects of the directive on MiFID II, on which agreement in principle was reached last week (see EUROPE 10997). The draft MiFID II and IMD 2 legislations do not exempt life-insurance contracts, for which there are no investment risks for the holder of the insurance policy.
The European legislator has agreed to amend the first insurance brokerage directive, which is already in force, when the MiFID II rules come into force at the end of 2016. The idea is to have a safety net in case there are delays in introducing the IMD 2 rules as a result of the European elections in May. (MB/transl.fl)