New regulations of the Insurance Distribution Directive (IDD) regarding of insurance intermediaries in the EU

3 May 2016

Insurance Distribution Directive(IDD), entered into force on 22 February 2016, replace the old regulations from 2002, setting new requirements for insurance intermediaries. Member States have two years to implement the directive (until February 23, 2018), the date on which the old directive (IMD) will be abrogated.

The IDD's role is to raise the minimum standards regulated by the IMD, to make it easier for companies to trade cross-border, creation of conditions for fair competition between all participants in the market, and strengthen the consumers of insurance products protection.

While the old regulations only apply to insurance intermediaries, the new directive applies to a broader segment of the market, i.e. all distributors of insurance products- including the direct sellers. This will make the IDD to regulate 98% of the European insurance market towards only a percentage 48% concerned of IMD. IDD will apply to all, including those who act on behalf of insurers, not only those who act on behalf of insureds.

Regarding of the professional requirements of intermediaries in insurance and reinsurance, the new directive will impose tighter regulations. Member States will have to establish mechanisms to control effectively and evaluate the knowledge and skills of employees of the insurance companies and also insurance intermediaries. This should be based on at least 15 hours of professional training or development per year, taking into account the nature of the products sold the type of distributor, the role they perform and the activity carried out within the insurance or reinsurance distributor. Home member states may require that the successful completion of the training and development requirements is proven by obtaining a certificate.

Other regulations of the new directive sets a minimum professional indemnity insurance requirement for intermediaries, the minimum level of such sums, and demands concerning the information to be provided to clients as well as the rules of professional conduct. Thus, the information transmitted before concluding an insurance contract must to be honest, fairly and professionally in accordance with the clients interests, to be accurate, complete, clear and not misleading in error.  In this sense, it is including also the correct information provided to the clients in the case of Cross-selling and bundled products. 

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