Insurance mediation:
a highly regulated activity… in the interest of consumer protection

 

According to the Insurance Mediation Directive¹ (IMD), the activities undertaken by an insurance intermediary include the “introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim”². 

 

The IMD no longer refers to the traditional distinction between agents and brokers, and adopts an activity-based approach.  It relies on disclosure at contract level so that the insurance seeker is aware of the capacity in which the intermediary is acting. Some Member States have retained the traditional distinction while others have adopted the IMD approach.

 

 

¹ Directive 2002/92/EC of 9 December 2002, EC Official Journal L9, Volume 46, 15 January 2003

² See article 2 section 3 of the IMD

 

 

 

The Insurance Mediation Directive (IMD)

 

On 30 September 2002, the Council of Ministers of the EU adopted the Directive on Insurance Mediation. Having consistently campaigned for such EU legislation for a number of years, BIPAR, welcomed this final step towards a genuine Single Market for insurance intermediaries as well as for their commercial and private customers.

 

Now implemented into national legislation, the IMD enables insurance intermediaries, on the basis of their registration in their home Member State, to do business in other EU Member States by way of the freedom to provide services or by establishing a branch, while guaranteeing a high level of protection for the interests of their customers.

 

The Directive gives therefore insurance customers access to a wider range of products that enable them to obtain the cover best suited to their needs and to enjoy the better value for money that results from increased competition between intermediaries in the EU.

 

The IMD requires that all individuals or companies who carry out insurance or reinsurance mediation must be registered in their home Member State on the basis of the following minimum requirements:

-      possession of appropriate knowledge and ability as determined by the regulations applicable in that Member State

-      being of good repute

-      possession of professional indemnity insurance or any other comparable guarantee against liability arising out of professional negligence (at least €1,000,000 per claim and €1,500,000 per year for all claims)

-      sufficient financial capacity to protect customers against any failure by the intermediary to transfer customers' premiums to insurance companies or to pass on to customers money received for claims under the policies they hold.

 

Member States may adopt more stringent provisions, but only for intermediaries registered on their territory.  The Directive also requires insurance intermediaries to give customers clear explanations for the advice they give on which products to buy. They will need to specify accurately in writing, in terms comprehensible to the customer, why they have recommended particular products in the light of the customer's individual requirements.