On 1st of January 2022, the new Insurance Mediation Act (lov om forsikringsformidling) and certain amendments to the Financial Undertaking Act (finansforetaksloven) were submitted. The new Insurance Mediation Act replaced the Insurance Mediation Act from 2005. The changes are based on proposals in Prop.233 LS (2020-2021), which implement parts of the Insurance Distribution Directive (IDD) from EAA, into Norwegian law.
The new legislation shall facilitate that the mediation of insurance continues in a safe, orderly, and efficient manner. The aim is also to ensure that policyholders get policies that are in accordance with their needs. The new law contains several new regulations, for instance, more detailed conditions regarding conducting insurance mediation and requirements for the activities of an insurance mediation firm.
New Insurance Mediation Act
The new Insurance Mediation Act impose every insurer to register themselves to Finanstilsynet. In contrast to the older legislation, the new Insurance Mediation Act contains new stricter requirements for insurance intermediaries. In the following, we will address some of the practical consequences of the new legislation and provide a quick presentation of the most significant changes in the new legislation.
New requirements for banks, mortgage firms and investment firms
In contrast to the older Insurance Mediation Act from 2005, where banks, mortgage firms and investment firms could be registered as ancillary insurance intermediaries, the new law explicitly delimits banks, mortgage firms and investment firms from being registered as “ancillary insurance intermediaries”, cf. § 2-4 litra a. Consequently, these firms will have to search to Finanstilsynet and then be registered as regular insurance intermediaries, cf. § 2-3. As part of the new legislation, The Ministry of Finance has passed a transition rule, giving these firms one year to comply with the requirements that apply for insurance intermediaries, see section 6-2 (3) in the regulation of the Insurance Mediation Act.
New rules for insurance intermediaries
In accordance with § 6-1, § 6-2, § 6-3 and § 6-5 insurance intermediaries will have to comply with new requirements for further education and conduct requirements to both management and insurance brokers. Note, however, that the requirement of further education after § 6-1, § 6-2 and § 6-3 for the years of 2022 and 2023, shall be implemented and documented by 31st of December 2023, see section 6-2 (4) in the regulation of the Insurance Mediation Act. However, SANDS will emphasize the importance of complying with the new rules and encourage every insurance intermediary to implement the new requirements as soon as possible.
New finance requirements
According to § 8-2 in the new law, insurance intermediaries are required to a) be able to pay their obligations when they fall due, b) have justifiable equity based on the firm’s total liabilities, and c) have positive equity. This change is based on the proposal of Finanstilsynet and is not based on IDD. The Ministry of Finance states that the new finance requirements aim to strengthen insurance intermediaries’ finances and increase trust in the insurance industry.
A new legal standard for insurance intermediaries
The new law includes a new legal standard, which obligates insurance intermediaries to act in accordance with “good business practice”, see § 9-1. The new legal standard will ensure that insurance intermediaries act within the legislation. Violation of the new legal standard can entitle the insured compensation for economic loss suffered if the losses are in a relatable relationship with the violation and the losses are foreseeable and legal adequate.
New requirements regarding management and handling of conflicts of interest
In accordance with § 9-3, insurance intermediaries must be structured and managed in a way that limits the risk of conflicts of interest between the firm and its customers, or the company’s customers among themselves, to a minimum. Insurance intermediaries are therefore obligated to take all necessary measures to prevent, identify and handle conflicts of interest if they occur.
Salary scheme and remuneration
Insurance intermediates can no longer remunerate employees or evaluate employees’ performance in a way that impairs the ability to ensure that customers’ interests are safeguarded in the best way possible. Therefore, insurance intermediates cannot use remuneration schemes, sales targets or other incentives that may influence employees to recommend a specific insurance product over another insurance product that is better suited for the customer, according with § 9-4.
Our government has not yet submitted the proposed amendments to the Insurance Contracts Act. The Justice Committee has until 1st of February 2022 to make a statement regarding the changes. If you want to read more about the subject, whether it is the Insurance Distribution Directive (IDD) or the proposed changes in the Insurance Contracts Act, you find links to our previously newsletters here: