Barnier: Revision of the Insurance Mediation Directive (IMD)
19 June 2012
Barnier said the new regulatory framework would allow insurers and insurance intermediaries to remain a pole of stability and continuity in the financial markets, helping to put the European economy on a path of sustainable growth.
We want to protect consumers of insurance products by revising the IMD, which dates back to 2002. The text that I will be presenting to the European Parliament and the Council will include real progress on transparency, responsible risk management and elimination of conflicts of interest. I know the insurance industry is not the cause of the crisis and should be differentiated from the banking sector. But my belief is that both sectors should be regulated and monitored appropriately, effectively and intelligently.
This takes into account the fact that most operators in the sector of insurance mediation are SMEs, consisting of about 1 million people throughout the EU, which are key drivers of innovation and allow consumers to take advantage of competition in the insurance market.
The new rules will be broken down into three components:
I - Phase one: A coherent response to common challenges
The challenges we want to deal with through the revision of the IMD are really not unique to insurance mediation.
First, some insurance products including life insurance products, are often sold as retail investment products and can then be classified as investment-type insurance. Therefore, the revised IMD will have to follow our initiative on the protection of consumers/PRIPS regarding transparency requirements on such products.
Second, the revised IMD should be consistent with the current revision of the Directive on Markets in Financial Instruments (MiFID) regarding marketing practices, to ensure consistent practices for all investment products, including life insurance products.
However, we will adopt a proportionate approach to reduce the administrative burden on SMEs active in selling insurance. And I can assure you that the rules imposed will be well balanced and will take into account the specificities of the insurance industry.
II - Phase two: Transparency must become the rule for all
To increase transparency and ensure that potential conflicts of interest are managed better, we can consider requiring intermediaries to disclose the nature and structure of their remuneration and the links with insurance companies that could influence the objectivity of their advice. This approach corresponds to the view expressed by most consumers during the public consultation that we conducted on the revision of the IMD between November 2010 and February 2011.
However, we are aware that the current situation is very different from one Member State to the other. EIOPA suggested an obligation of transparency on the remuneration at the request of the policyholder. There are other options on the table, such as the duty of disclosure in all cases, or the introduction of a distinction between 'life' and 'non-life' contracts.
I am aware of the practical implications of this and we are currently studying the various proposals to ensure balanced and proportionate rules. Nevertheless, we recognise that this issue is of considerable importance for intermediaries, and that a level playing field must be established between direct selling and selling through an intermediary. I also know it is important to give players time to adapt to a system of full disclosure.
III - Phase three: Level playing field
We want to ensure conditions of fair and equitable competition among all operators of insurance distribution. Today, there are different rules according to different insurance distributors; these differences in treatment are not always justified.
For this reason, we must establish a level playing field between different vendors of these products, such as insurance companies, but also banks, brokers or car rental companies. The scope of the Directive will therefore include all sellers of insurance products.
We believe that individual policyholders must have the same level of information and protection, regardless of where they have bought their insurance coverage.
The revised IMD is an important step towards restoring consumer confidence in the financial sector.
With the IMD 2, the PRIPS proposal and the revision of rules on the protection of retail investors as part of the MiFID review, we are constructing a simple and consistent regulatory framework, with rules on transparency requirements and marketing practices that will cover all financial products for consumers.
Thus we will allow insurers and insurance intermediaries to remain a pole of stability and continuity in the financial markets, while increasing consumer confidence and putting the European economy on a path of sustainable growth.
Translated from the French
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