Thursday, 24 January 2013

Insurance mediation

BEUC published a position paper on the plan of the European Commission to review the Insurance Mediation Directive (IMD). Consumers often report problems with regards to insurance being sold to them by intermediaries and they are especially vulnerable when concluding insurance contracts, due to the rarity of situations they encounter when they make use thereof, which prevents them from learning which insurance contract would fit them the best. Obviously, the insurance intermediaries would have a significant influence on consumers and their advice should be careful, well-thought through and of high quality. The improvements that are being sought in the IMD concern, among others: 

  • an inclusion of a duty to act honestly, fairly and professionally, in accordance with the best interests of the customers;
  • upholding the same level of protection regardless the distribution channel of the insurance;
  • providing consumers with clear information about the status and remuneration of the insurance seller;
  • disclosing the nature, basis and structure of the intermediary remuneration;
  • prohibiting of tying practices;
  • compulsory participation in procedures for impartial and independent out-of-court settlement of disputes.

Still, the BEUC considers the proposal not to be sufficiently progressive and argues that additional changes should be introduced, e.g.:

  • broadening the scope of the IMD to cover all intermediaries selling insurances on an ancillary basis;
  • prohibiting contingent remuneration linked to any targets related to the activities run by the intermediary (incl sales volume and number of claims reported);
  • preventing conflict of interests by appropriate design of remuneration schemes and performance evaluations;
  • obligation to disclose any remuneration related to the mediation activity;
  • standardised information disclosure;
  • training intermediaries by independent from insurance companies agencies, approved by competent authorities;
  • obligation for intermediaries to assess their targeted public and suitability of the product for that public prior to distribution of investment insurance products.

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