Page 7 - BIPAR Annual Report 2020_EN

Insurance Distribution

Directive (IDD)

The IDD (level 1 text) introduces new rules on insurance distribution. It came into force on 23 February 2016 and had to The IDD repeals the Insurance Mediation Directive (IMD) and is a minimum
be implemented into the national laws of the EU Member States by 1st July 2018. As for the application date, the Member harmonisation Directive. In other words, Member States, as they transpose the
States had to apply the national rules from 1st October 2018 at the latest. According to the latest European Commission IDD into national law, cannot do less than what is required under the Directive,
update published in April 2020, all EU Member States have now implemented the IDD. but they may introduce additional measures if they deem it necessary to
ensure the protection of consumers in their market. Insurance intermediaries
who were already registered under the IMD had until February 2019 to comply
with their respective and relevant provisions of national law implementing IDD
IDD key features knowledge and ability requirements (IDD Articles 40 and 10.1).

The IDD covers the distribution of non-life and life products, reinsurance products,
but also insurance-based investment products (IBIPs). It applies to insurance IDD level 2 measures
Wider scope distributors, i.e. insurance intermediaries, insurance undertakings and ancillary
intermediaries (with exemptions). The IDD expressly applies to certain activities IDD level 3 measures issued by
conducted through price comparison websites. In 2018, empowered by the IDD, the Commission adopted two Delegated EIOPA
Regulations (level 2 texts) that further specify some of the IDD provisions
The IDD introduces POG requirements for insurance undertakings and
intermediaries which manufacture insurance products. It also includes requirements with regard to POG and with conflicts of interest, inducements, assessment - On 13 July 2018, EIOPA published
Product Oversight and Governance (POG): for insurance distributors who propose products that they do not manufacture. POG of suitability and appropriateness and reporting for IBIPs products. The a first set of Questions & Answers (Q&As)
requirements do not apply to insurance products which consist of insurance of large Commission also adopted one implementing technical standard (ITS) regarding
risks. on the application of the IDD. EIOPA Q&As
a standardised format of IPID (see BIPAR Annual Report 2017/18). are a practical convergence tool to support
Insurance distributors will have to act honestly, fairly and professionally in
accordance with the best interests of their customers. In particular, they cannot In May 2019, based on EIOPA proposals submitted in June 2018 after consultation “common supervisory approaches and
make any arrangements by way of remuneration or sales target that could provide practices”. EIOPA’s answers are non-
an incentive to recommend a particular product to a customer when they could of concerned stakeholders, including BIPAR, and as required by Article 10(7) of binding and they are not subject to the
offer a different product that would meet the customer’s needs better. the IDD, the European Commission adopted a Delegated Regulation amending “comply or explain” procedure. These
IDD amounts for professional indemnity insurance and for financial capacity
Before the conclusion of the contract, consumers will be provided with clear Q&As provide practical guidance on the
New information requirements: information about the professional status of the person selling the insurance of insurance and reinsurance intermediaries. It takes into account the changes application of the IDD and its delegated
product and about the nature of remuneration which he will receive. This does not in the European index of consumer prices which increased by 4,03% in the Regulations on POG and on the additional
apply for large risks and for reinsurance distribution activities.
relevant period from 1 January 2013 to 31 December 2017.
regulatory requirements for IBIPs.
The IDD introduces a detailed standardised Insurance Product Information
Document (IPID) for all non-life insurance products that must be provided to the On 22 November 2019, the Delegated Regulation was published in the Official - Under Article 11(3) of the IDD,
customer prior to the conclusion of a contract by the insurance distributor. The Journal of the EU. All language versions can be found here.
manufacturer of the non-life insurance product is required to draw up the IPID. EIOPA must include on its website the
hyperlinks to the websites of competent
The IDD introduces new rules regarding cross-selling: where the insurance product The Regulation entered into force in December 2019 and will apply on 12 June authorities where information on
is the ancillary product to a good or service, the good or service should be allowed 2020. A 6-month transitional period was given to Member States to adapt their
to be purchased separately from the insurance (i.e. ban on tying). The IDD requires “general good” rules is published. Such
Cross-selling rules: national legislation and to give insurance and reinsurance intermediaries and
that where the insurance product is the main product and is sold with an ancillary information is now available on the
product or service that is not insurance, the customer is informed as to whether the their insurance providers time to take the necessary implementation measures.
components can be bought separately. EIOPA website. General good provisions
Please remember that this Regulation is binding in its entirety and directly are rules adopted by a Member State
More clarification is given on the division of competence between the home and applicable in all EU Member States. which introduce additional requirements
host Member States. Broadly speaking, when the intermediary is passporting on a
FOS basis, its home Member State is responsible for ensuring compliance with all addressing specificities of its market (e.g.
Cross-border activities: The figures for PI cover and financial capacity have changed as follows:
IDD requirements. When the intermediary is operating on a FOE basis, the host State consumer protection, prevention of fraud,
concerned is responsible for ensuring compliance with IDD information and conduct preservation of the good reputation of the
of business requirements. Its home Member State is responsible for everything else. • the minimum amount of EUR 1 250 000 per claim is increased to EUR 1 300 national financial sector etc..) and have to
The IDD requires Member States to have mechanisms to assess knowledge and 380 per claim; be observed by insurance intermediaries
Continuous Professional Development (CPD): competence of intermediaries, employees of intermediaries and of undertakings
based on at least 15 hours of CPD per year (courses, e-learning, mentoring etc.). providing cross-border services into that
• the minimum amount of EUR 1 850 000 for all claims/year is increased to market.
The IDD contains a specific chapter with additional requirements for IBIPs EUR 1 924 560 for all claims/year; and
IBIPs regime:
distributed by insurance undertakings and intermediaries.
- According to the IDD, Article
• the minimum amount of EUR 18 750 of financial capacity is increased to EUR 11(5), EIOPA is also required to publish a
19 510.
report examining the general good rules

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