A new EU directive setting out the framework for regulating the sale of insurance products was approved by the European Parliament on 24 November 2015 and should make it easier for firms to trade cross-border. The Insurance Distribution Directive (IDD) will now have to be implemented by Member States within the next two years.
The IDD, formerly known as the Second Insurance Mediation Directive (IMD2) has been introduced to amend and replace the Insurance Mediation Directive (IMD) and can be seen as part of a wider push to improve protection of financial end-users together with other initiatives aimed at improving product disclosure rules such as the PRIIPs regulation and UCITS V directive.
Concretely “the new rules will lead to more transparency for customers, especially on life insurance and so-called tying products. If insurance products are sold as a package together with goods, customers must be informed of the prices of the individual components. Similarly, customers must be informed of all costs and fees associated with the insurance product”, says Green MEP Sven Giegold.
Whereas increased transparency and better product information will help consumers to find their way in “the jungle of insurance products”, as Giegold describes the current situation, he also adds that the lack of “support for the objective of creating a level-playing field for directly competing products” means that life insurance brokers can “continue to collect commissions without having to disclose the amounts to the customer”.
BETTER FINANCE also deeply regrets that conduct of business rules for insurance distributors have not been aligned to, nor made consistent with, those for distributors of other financial products such as funds and securities.
Read more: “Insurance sector: EU strengthens consumer protection on insurance products”