The European Federation of Financial Advisers and Intermediaries has claimed a victory in getting compromises in the finalised Insurance Distribution Directive text, which benefit advisers across the continent.
In FECIF’s opinion, many of the earlier versions of the IDD had contained text that would have been unfair and anti-competitive, not least to the adviser and intermediary sectors.
Paul Stanfield, secretary general and also chief executive of the Federation of European IFAs, stated the finalised text is now more equitable, relevant and practical.
He told FTAdviser that the original text of the IDD appeared to be in danger of creating “regulatory arbitrage” which would have meant less consumer protection for some insurance products.
A ban on commission had also been discussed at an early stage of the directive.
Some of the key proposals put forward by FECIF and incorporated within the agreed text were:
• The need for a level playing field, both across all distribution channels and also with regards to all insurance-based investment products, thus bringing these under the scope of the IDD rather than the Markets in Financial Instruments Directive.
• The establishment by European Insurance and Occupational Pensions Authority of a single electronic database of intermediaries providing cross border services.
• That all insurance distribution sources should provide information to customers about the nature of the remuneration their employees or representatives receive for the sale of insurance products.
• That the directive should not be too burdensome for SMEs and this should be achieved in part by the proper application of the proportionality principle.
• The choice of the method of remuneration should be left to the consumer, with all the necessary information and relevant knowledge at their disposal.
• The disclosure of all costs via the issuance of the Key Investor Information Document to consumers at an appropriate point in the sales process.
Mr Stanfield commented that there will always be areas where the text is not ideal, but on the key matters he was pleased with the final draft. “It achieves what it was set out to do, but while not stifling innovation or access to advice,” he added.
In July, the European parliament and European Commission gave their backing to the IDD, which should mean insurance distributors will have to become more transparent about the price and the costs of their products.
The 90-page IDD paper rules customers should be provided in advance with clear information about the status of the person selling insurance products and about the type of remuneration they receive.
This information should be given to the customer at the pre-contractual stage, the European Commission paper states.
The paper states: “Its role is to show the relationship between the insurance undertaking and the intermediary, where applicable, as well as the type of the intermediary’s remuneration.”
Mr Stanfield said that while the text has now been agreed, it still needs to get through the political channels, before moving on to the implementation period where Eiopa will recommend how the text is translated into national frameworks.
In 2002 the Insurance Mediation Directive was introduced to regulate selling practices by intermediaries selling insurance products. A decade later, the EU began to update the rules, which became the IDD.
The European parliament is expected to a vote on the directive this autumn, with each member state then asked to endorse it. They will then have two years to transpose it into their national laws before it takes effect.
peter.walker@ft.com
