The directive replaced the Insurance Mediation Directive 2002 - which set out the framework for regulating EU insurance brokers, agents and other intermediaries - and is incumbent on member states to transpose within two years of it coming into force, set to be January 2018.
The IDD provides the option for member states to impose additional requirements, and sets a threshold which national legislation must meet, known as ‘minimum harmonising’.
With the delay to MiFID II, and amendment to IMD, it sought to introduce some Conduct of Business rules, the scope of the IDD is broader, extending it to all sellers of insurance products, including direct to consumer insurers and re-insurers - not part of IMD.
Introducers and certain activities on price comparison sites will also be affected.
While advice is not mandatory under IDD, member states have the option to impose it and can impose stricter requirements such as prohibiting fees, commission and non-monetary benefits from third parties.
A key information document for insurance-based investment products will be required by the directive, and insurers will need to disclose the nature and basis of remuneration received by employees.
The European Insurance and Occupational Pensions Authority will establish a register of intermediaries who have notified their intention to trade cross-border, or passport out, according the directive.
On bundled products, the onus will now be on the provider to inform the customer if it is possible to buy the products separately, and a process for each product is required to consider the risks for the target market.
Pascale Lamb, policy advisor for conduct regulation at the Association of British Insurers, said: “The biggest change for UK insurers is likely to be requirements around the new IPID, which will set out more standardised information for consumers. The ABI has already expressed its commitment to greater transparency for customers although there are going to be regulatory challenges to overcome, such as identifying appropriate levels of detail and how best to communicate to customers with different levels of understanding.”