Transparency requirements
The Directive requires insurance intermediaries to give customers clear explanations for the advice they give on which products to buy. They 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.
The IMD requires intermediaries to tell the customer whether they are giving advice based upon a fair analysis, or whether they have contractual obligations with one or more insurers.
In addition, the intermediary has to state in writing the reasons for any advice on a given insurance product and all this is supervised and controlled by the national supervisory authorities.
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.
The IMD stipulates for example that (extract art 12 of IMD):
“In addition, an insurance intermediary shall inform the customer, concerning the contract that is provided, whether:
(i) he gives advice based on the obligation in paragraph 2 to provide a fair analysis, or
(ii) he is under a contractual obligation to conduct insurance mediation business exclusively with one or more insurance undertakings. In that case, he shall, at the customer's request provide the names of those insurance undertakings, or
(iii) he is not under a contractual obligation to conduct insurance mediation business exclusively with one or more insurance undertakings and does not give advice based on the obligation in paragraph 2 to provide a fair analysis. In that case, he shall, at the customer's request provide the names of the insurance undertakings with which he may and does conduct business.
In those cases where information is to be provided solely at the customer's request, the customer shall be informed that he has the right to request such information.
