The aim of the new Directive is to strengthen consumer protection, improve the competitive landscape of the European insurance industry, and reduce cross-sectorial inconsistencies.
However, the IDD is a minimum harmonization Directive. This means that the Directive does not preclude Member States from maintaining or introducing more stringent provisions than those stipulated by the Directive when transposing the Directive into domestic law. As a consequence, the various Member States may introduce different requirements.
These are some of the changes proposed by FSAN:
- IDD continues the existing requirement that insurance and reinsurance intermediaries must be registered with an authority in their home state, and the register must be publicly available from a single point of information. For the Norwegian system to be satisfactory in terms of accessibility and searchability, it is suggested that all insurance intermediaries, including ancillary insurance intermediaries, are to be registered in FSAN’s register.
- FSAN is of the opinion that insurance intermediaries must be subject to stricter regulations with respect to the engagement of sub-agents, and proposes a new provision stating that any sub-agent agreement cannot include more agents than 50 % of the insurance intermediary’s own agent employees.
- IDD does not include any capital adequacy requirements, but because there is an increasing proportion of insurance intermediaries that have negative equity, FSAN believes that there is reason to require positive equity for all insurance intermediaries.
- There is a requirement for at least 15 hours of professional training or development per year for employees of intermediaries and insurers and reinsurers carrying out distribution activities.
The limitation on the agency's use of ancillary insurance intermediaries may necessitate company reorganization, which again could lead to loss in capital turnover. Some ancillary insurance intermediary companies may have to phase out the business if they cannot get their contracts renewed.
The requirement for positive equity can also be challenging as the market is characterized by many small players. Failure to comply may result in revocation of the license to act as an insurance intermediary.
The Directive aims to prevent an insurance intermediary from establishing itself in another EEA State, with the intention of avoiding compliance with the rules in the State in which the business is to be performed. If an insurance, reinsurance or ancillary insurance intermediary’s primary place of business is located in a Member State other than the home Member State, the competent authority in that other state may agree with the home Member State competent authority with regard to the supervising of, among other things, the qualification requirements, the information and advice requirements of the Directive, good business practice and the right to make decisions imposing sanctions and other measures on insurance intermediaries.
The IDD will be implemented by all EU Member States by 23 February 2018, with a one year transitional arrangement. Some delays may occur, but this has not yet been clarified. FSAN proposes a one year transitional arrangement for Norwegian companies after the new legislation has entered into force, but insurance companies which have their own register of agents must discontinue these within six months after the legislation has entered into force.