Insights

On 26 February 2014, the European Parliament (EP) adopted in plenary the proposed text of the recast Insurance Mediation Directive (IMD II). The new Directive is set to introduce some significant developments to the rules governing the selling of insurance products across the EU.

Industry stakeholders have expressed mixed feelings on the EP’s proposed text and also stressed that certain issues require clarification.

The proposed text includes a recital seeking to “ensure alignment” between IMD II and the revised Markets in Financial Instruments Directive (MiFID II). The specifics of this alignment remain unclear. The EP has however declared that the exact details will have to be ironed out during Trialogue negotiations on IMD II.

The upside of the IMD II is that insurance intermediaries should now find it easier to conduct business across the single market. There is currently ambiguity as to which rules apply to an insurance intermediary that is taking advantage of its European passport right. The IMD II will provide greater clarity as to whether a particular issue is subject to ‘home’ or ‘host’ Member State regulation. Each Member State will also be required to publish ‘general good rules’ that regulate the carrying on of insurance mediation business by incoming firms in their respective jurisdictions.

The EP’s proposed text however seeks to introduce a ban on ‘tying’ different products together, by requiring the components of a package to be offered separately. Insurance Europe and BIPAR are insisting that this approach is inconsistent with MiFID II, which provides for the more appropriate requirement that customers be informed that the components may be bought separately.

Another controversial element is that potential customers are to be informed about whether insurer’s employees receive any variable remuneration and the quantitative elements of this variable remuneration. This would introduce an additional administrative burden and cost on the insurance industry. It would also mislead customers from more relevant information, such as the coverage and exclusions of their insurance policies.

The final text of the IMD II has to be agreed in Trialogue by the European Commission, Council and Parliament. Those discussions are not expected to take place before the elections for the new European Parliament in May 2014.

The current text of the IMD II can be accessed by clicking here.