Insurance mediation

A single insurance market requires that insurance intermediaries may conduct their activities throughout the EU and establish and provide services freely, in accordance with the principles of the Treaty. Insurance intermediaries are a vital link in the process of selling insurance products in the European Union. They also play a pivotal role in protecting the interests of insurance customers, primarily by offering them advice and assistance and by analysing their specific needs. Therefore they are a major element in the functioning of the single insurance market.

The Financial Services Action Plan stresses the urgency of developing a truly integrated retail market in which the interests of consumers and service providers are properly protected. European Union has carried on a policy aimed at achieving an internal market for insurance intermediaries. A Directive has been adopted to set up a legal framework which ensures a high level of professionalism and competence among insurance intermediaries whilst guaranteeing a high level of protection of customers’ interests.

Study on the impact of the revision of the Insurance Mediation Directive

Study on the impact of the revision of the Insurance Mediation Directive (ETD/2007/IM/B2/51)

(Prepared for the European Commission DG Internal Market and Services by PwC Luxembourg)

Public consultation – revising the Insurance Mediation Directive

Why does the current legislation need to be revised?

How the Directive is actually applied varies considerably between EU countries. This has lead to fragmented insurance markets in the EU, with significant gaps and inconsistencies, in particular regarding the information requirements imposed on sellers of insurance products.

This has increased the problem of customers having a poor understanding of the risks, costs and features of insurance products. The collapse in consumer confidence during the financial crisis has also given new prominence to level-playing field and consumer protection issues.

A request for advice PDF on solving these issues was sent to the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) early in 2010.

A public consultation has been launched in autumn 2010 to collect views from all stakeholders concerned on the necessary changes to address the main weaknesses in the current Directive.

This consultation aims to discuss the pros and cons of increased harmonisation, with the aim of establishing a real level playing field for all sellers of insurance products at EU level.

It will also address cross-sectoral inconsistencies in rules on selling investment products.

10 December 2010: Public Hearing on the revision of the Insurance Mediation Directive

The 'Internal Market and Services' Directorate General of the European Commission hosted a Public Hearing on the revision of the Insurance Mediation Directive (IMD) on Friday, 10th December 2010, in Brussels.

The public hearing provided a unique opportunity to hear the views of a range of stakeholders on the key issues relating to the revision of the IMD and was attended by relevant associations of insurance intermediaries, insurance undertakings, CEIOPS and its members and consumer groups. Over 270 people attended.

Director Elemér Terták's opening and MEP Sharon Bowles' keynote speeches were followed by panel discussions and Q&A on the scope of the IMD, its registration system, information requirements, transparency, conflicts of interests issues and selling practices of investments packaged as life insurance policies (PRIPs insurance products). Commissioner Barnier gave his keynote speech in the afternoon.

What is the role of an insurance intermediary?

Insurance intermediaries are key actors in the process of selling insurance products in the EU.

They help insurers by:

  • facilitating entry into the market, helping new insurers reach a wide client base without having to incur the costs of building a distribution network.
  • assisting with claims-related services and policy administration.

They also help insurance customers by:

  • identifying the risks customers face
  • ensuring that customers take informed decisions about the risks they wish to insure
  • designing new and innovative solutions
  • reducing customers’ search costs
  • providing personalised advice
  • assisting customers with claims-related services and policy administration.

Broadly speaking, there are 3 types of insurance intermediaries in the EU:

  • global and multinational business insurance intermediaries, serving major multinational and domestic firms (as well as small businesses), and providing a wide range of services in addition to traditional brokerage.
  • major domestic intermediaries providing services to larger and medium-sized companies, and some national branches or subsidiaries of multinationals and small companies. Such intermediaries are likely to be present throughout the country.
  • small private intermediaries focusing mainly on the “small” end of the business spectrum and the personal lines insurance market, but occasionally serving larger companies.

Some intermediaries in the latter two categories belong to international networks, allowing them to offer products to their clients in several countries.

Aims of current legislation in this sector

EU policy is aimed at achieving a market throughout the EU for insurance intermediaries.

The current EU Directive 2002/92 on insurance mediation takes an activity-based approach rather than distinguishing between agents and brokers. Various types of persons or institutions, such as agents, brokers and “bancassurance” operators can distribute insurance products.

The Directive aims to ensure:

  • a high level of professionalism and competence among insurance intermediaries whilst guaranteeing a high level of protection of customers’ interests.
  • that individuals/companies providing insurance or reinsurance mediation are registered in their home EU country (which allows them to do business elsewhere in the EU).
  • that the following minimum professional requirements are respected (individual EU countries may adopt more stringent provisions, but only for intermediaries registered on their territory):
    • appropriate knowledge and ability as laid down in national rules
    • good repute
    • professional indemnity insurance or other comparable guarantee against liability arising out of professional negligence
    • sufficient financial capacity to protect customers against any failure by the intermediary to transfer customers’ premiums to insurance companies or to pass on to customers money received for claims under the policies they hold.
  • that insurance intermediaries give customers clear explanations for the advice they give on which products to buy (why they have recommended particular products in the light of the customer’s individual requirements).
  • the involvement of national financial authorities and other bodies (i.e. insurance undertakings or professional associations) in the registration process by, for instance, registering insurance intermediaries under the supervision or control of the competent authority of that State.
  • easy public access to details of registered insurance and reinsurance intermediaries, the competent authorities with which they are registered and the EU countries in which they operate.
  • appropriate and effective Alternative Dispute Resolution procedures for out-of-court redress for dissatisfied customers, in particular via the cross-border FIN-NET network.

Protocol on the application of the Directive

A Protocol on cooperation between national authorities PDF (with regard to regular exchanges of information and notifications under the insurance mediation directive) has been prepared by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS).

List of national competent authorities under the insurance mediation directive

EU countries have to notify the Commission if they wish to be informed by other countries’ competent authorities when (re)insurance intermediaries want to carry on business in their territory. This list of competent authorities PDF responsible for ensuring the implementation of the IMD also specifies which EU countries wish to receive notifications.

Last update: 17.04.2012