The insurance distribution directive (IDD), which came into application throughout the EU on 1 October, should strengthen consumer protection by reinforcing the rules on the way insurance products are sold. The new, enhanced rules are expected to benefit policyholders, as well as insurance companies and providers.

Main benefits

The IDD covers all forms of insurance distribution: advising on insurance products; offering insurance contracts or other activities; preparing the conclusion of insurance contracts, including by way of online distribution through websites or comparison portals. The directive applies to all insurance distributors – insurance agents and brokers, insurance companies selling their products directly through websites or other channels, and even to businesses – for instance travel agents, airlines, electrical appliances retailers or opticians – that are offering insurance coverage as add-on products to their customers.

The IDD updates the 2002 insurance mediation directive, which applied only to sales of insurance products through agents or brokers. These are the main benefits the new directive brings:  

• Greater transparency of insurance distributors regarding the price and costs of their products will mean it is clear to consumers what they are paying for.
• Better and more easy-to-understand information, with a simple, standardised insurance product information document (IPID) for non-life insurance products, will mean that consumers can make more informed decisions.
• Where insurance products are offered in a package with another good or service, for example when a new car is sold at a bargain price together with motor insurance, consumers will have the choice to buy the main good or service without the insurance policy.
• Rules on transparency and business conduct to prevent consumers from buying products that do not meet their needs.
• Clear rules regarding how insurance distributors can be supervised and sanctioned if they breach the provisions of the directive.

Who will benefit?

Consumers and retail investors buying insurance products will be among those who will clearly benefit from the directive. With the insurance product information document, consumers will receive basic, standardised information about an investment product before they sign a contract. This will make it easier for them to compare offers and shop around for the product best suited to their needs. The directive will also raise sales standards and extend them to new areas of protection, for example to insurance-based investment products.

National supervisors will also benefit from clearer rules, in particular regarding cross-border sales, sanctions and consumer protection. Consumer protection is different depending on where a person buys an insurance product. The IDD provides clearer and more uniform rules, so there are fewer sales of unsuitable insurance products and fewer early terminations of policies. This means lower monitoring costs for national supervisors. For insurance distributors, the new rules will mean fairer competition and a more level playing field. Improved consumer confidence, meanwhile, should lead to greater business opportunities.

Although the deadline for incorporating the directive into national law has already passed (01/07/2018), there are still 11 Member States that have not yet fully done so. The Commission has called on these countries to act quickly and has already received feedback from a number of them.

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