EIOPA publishes a Consultation Paper on conflicts of interest in direct and intermediated sales of insurance-based investment products Published on October 3, 2014 On 1 October 2014, EIOPA published a Consultation Paper following a request from the European Commission for technical advice concerning organisational requirements obliging insurance intermediaries and insurance undertakings to take appropriate measures to address conflicts of interest arising in the distribution of insurance based investment products. EIOPA warned that conflicts of interests may lead to severe consumer detriment. EIOPA reiterated that consumer protection is one of EIOPA’s key objectives. These issues arose as a result of amendments made to the Insurance Mediation Directive (IMD) by the amended Markets in Financial Instruments Directive (MiFID 2). MiFID 2 aims to introduce similar consumer protection requirements for the distribution of investment and insurance products that have an investment element. In order to strengthen protection for investors and to develop a level playing field, MiFID 2 contained amendments (set out in Article 91) to the Insurance Mediation Directive (IMD). These amendments introduce new requirements for insurance intermediaries and insurance undertakings with regard to conflicts of interest. Following an earlier discussion paper on the issues to be addressed in the technical advice to the Commission, the consultation paper presents, in more detail, the recommendations that EIOPA is considering including in its technical advice to the Commission. These focus on defining the steps that insurance intermediaries or undertakings might reasonably be expected to take to identify, prevent, manage and disclose conflicts of interest when carrying out insurance distribution activities and the minimum criteria for determining the types of conflict of interest which may damage the interests of customers or potential customers of the insurance undertaking or insurance intermediary. The EIOPA consultation paper includes 13 specific questions to stakeholders on the identification of conflicts of interests, conflicts of interest policy, on proportionality, on remuneration (third party payments, disclosure, quality enhancement, remuneration) and on investment research. All concerned stakeholders are invited to provide their comments by 1st December 2014. Once EIOPA has gathered feedback from all stakeholders on this consultation paper, it is expected to deliver its technical advice to the Commission by mid -February 2015. Based on EIOPA advice, the European Commission will prepare a Delegated Act (format of a Directive) on the issue. A copy of the consultation paper can be viewed by clicking here. Go back