26 February 2014

Comments on Plenary vote on IMD2: Greens, Insurance Europe

The Greens/EFA

MEPs voted in favour of provisions to strengthen the rights of consumers when purchasing insurance, with full disclosure of fees and costs, despite this having been long resisted by the rapporteur Werner Langen. The Greens welcomed the outcome, with finance and economic affairs spokesperson Sven Giegold stating: "The EU Parliament has voted to strengthen the rights of consumers of insurance products. The outcome is all the more welcome, as MEPs faced down intense lobbying from the insurance sector.

"A large majority supported finally provisions to disclose the commissions paid to brokers, as well as all other costs. By shedding greater light on the high and hidden costs of insurance products, consumers will be able to make a more informed decision. For insurance investment products (e.g. life insurance), all costs and fees associated with the product would have to be disclosed. The inclusion of an 'appropriateness test' along the lines of that set out in EU rules on financial products (MiFID) would further strengthen investor protection.

"MEPs also voted to disentangle the knot of tied sales. For combined products, such as term life insurance with savings shares, brokers would have to inform their customers about the prices of the individual components and offer them separately.

"However, a centre-right and socialist majority combined to prevent other consumer protection provisions. They blocked provisions which would have enabled the European Insurance Supervisory Authority (EIOPA) to remove products that threaten consumer protection and market stability. This victory for the insurance lobby is a blow for consumers."

Press release

Insurance Europe

Insurance Europe is pleased that the Parliament report confirms the Member State option established in the recent trialogue agreement on the MiFID 2 that allows each Member State to decide whether to prohibit or further restrict the offer or acceptance of fees, commissions or non-monetary benefits from third parties in relation to the sale of insurance investment products. The Parliament confirms thus that no system of remuneration for those selling insurance should be favoured over another. Insurance Europe has always advocated that the IMD 2 should be flexible enough to accommodate the diversity of insurance distribution channels across Europe, which reflects different consumer cultures, needs and preferences.

However, the Parliament report seeks to introduce a ban on tying together different products, by requiring the components of a package to be offered for sale separately. This approach is inconsistent with MiFID 2, which provides for the more appropriate requirement to inform consumers whether they can buy the components separately. To avoid an unlevel regulatory playing field between insurance and investment products, Insurance Europe calls on the trialogue parties to align the IMD 2 requirements on tying with those in MiFID 2.

Another concerning element is that the Parliament report requests the disclosure of information about whether insurers’ employees receive any variable remuneration as well as “relevant quantitative elements” of such variable remuneration. While Insurance Europe fully supports the provision of better and meaningful information to help consumers to make informed decisions when purchasing insurance, it stresses that these disclosures would only distract insurance buyers from more relevant information, such as the coverage and exclusions of their policies.

The final text of the revised Directive has to be agreed in trialogue by the European Commission, Council and Parliament. Those discussions are not expected to take place before the elections for the new European Parliament.

Press release

Plenary press release