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Implementing IDD across the EU—first findings and the way forward

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Abstract

The Insurance Distribution Directive might be dysfunctional in substantial areas of the insurance value chain, ranging from product development to after-sale services. Practical examples are fundamental conflicts with Solvency II, confusion of distribution and claims management, disproportionate complexity for B2B, one-size-fits-all for insurance and investment products, barriers to existing customers, disruption of the digital customer journey, and a monoculture of group insurance contracts. This article provides for a preliminary analysis and identifies potential issues for review at a later stage.

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Notes

  1. Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution [2016] OJ L 26/19, hereinafter referred to as ‘IDD’.

  2. This delay was published in the Official Journal of the European Union a month after the original application date, followed by the delay of the Delegated Acts another month later, cf. Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2016/97 as regards the date of application of Member States’ transposition measures, COM(2017) 792 final, 20.12.2017 and Commission Delegated Regulation (EU) 2018/541 of 20 December 2017 amending Delegated Regulation (EU) 2017/2358 and Delegated Regulation (EU) 2017/2359 as regards their dates of application [2018] OJ L 90/59.

  3. Directive (EU) 2018/411 of the European Parliament and of the Council of 14 March 2018 amending Directive (EU) 2016/97 as regards the date of application of Member States’ transposition measures [2018] OJ L 76/28, Art. 1 para. 1.

  4. Consolidated version of the Treaty on the Functioning of the European Union [2012] OJ C 326/47, Arts. 288–290.

  5. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) [2009] OJ L 335/1, hereinafter referred to as ‘Solvency II’.

  6. Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC [2002] OJ L 271/16, hereinafter referred to as ‘DMD’.

  7. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L 178/1, hereinafter referred to as ‘E-Commerce’.

  8. Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) [2014] OJ L 352/1, hereinafter referred to as ‘PRIIPs’.

  9. Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L 177/6, hereinafter referred to as ‘Rome I’.

  10. EIOPA acknowledged their importance for product oversight and governance as well as for conflicts of interest; cf. EIOPA Technical Advice on possible delegated acts concerning the Insurance Distribution Directive, EIOPA 17/048, 1.2.2017, p. 13 and 36.

  11. Solvency II, Recital 16 and Art. 41(1).

  12. IDD, Art. 17(1).

  13. Commission Delegated Regulation (EU) 2017/2359 of 21 September 2017 supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to information requirements and conduct of business rules applicable to the distribution of insurance-based investment products [2017] OJ L 341/8, Art. 3(2)(b), hereinafter referred to as ‘IBIPs DA’.

  14. Proposal for a Directive of the European Parliament and of the Council on insurance mediation COM/2012/0360 final, 3.7.2012, (‘IMD II’), p. 7.

  15. IDD, Recitals 14 and 31, Art. 2(2)(b).

  16. Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation [2003] OJ L 9/3, Art. 2(3), hereinafter referred to as ‘IMD’.

  17. IDD, Recital 2.

  18. DMD.

  19. Solvency II, Art. 13(27) and Annex I and II.

  20. First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance [1973] OJ L 228/3.

  21. In 1992 the so-called “third generation” of Insurance Directives created the Single Insurance Market and abolished product and price controls; cf. Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive) and Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC (third life assurance Directive).

  22. Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights [2011] OJ L 304/64, Art. 2(1); IDD Art. 22(1) only provides for a Member State option to exempt a professional client as defined in point (10) of Article 4(1) of Directive 2014/65/EU from the requirements applicable to insurance-based investment products.

  23. IDD, Recitals 6–8.

  24. Rome I, Art. 3 and Art. 7(1) and (2).

  25. IDD, Art. 10 and 17(2) and (3).

  26. Solvency II, Art. 13(27)(c): the policyholder of motor, property, general liability or financial loss insurance exceeds the limits of at least two of the following criteria: (i) a balance-sheet total of EUR 6.2 million; (ii) a net turnover of EUR 12.8 million; (iii) an average number of 250 employees during the financial year.

  27. Tailor-made contracts are designed at the request of a single customer, who determines essential features and main elements, including its coverage, price, costs, risk, target market and compensation and guarantee rights, cf. Commission Delegated Regulation (EU) 2017/2358 of 21 September 2017 supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to product oversight and governance requirements for insurance undertakings and insurance distributors [2017] OJ L 341/1, Art. 3.

  28. IDD, Art. 20(5)–(9).

  29. Commission Implementing Regulation (EU) 2017/1469 of 11 August 2017 laying down a standardised presentation format for the insurance product information document [2017] OJ L 209/19, Art. 3.

  30. IDD, Art. 20(9).

  31. EIOPA, Editable Template for the Insurance Product Information Document (IPID), Date of access: 18 May 2018, https://eiopa.europa.eu/Pages/Supervision/Insurance/Editable-Template-for-the-Insurance-Product-Information-Document-(IPID).aspx.

  32. Verordnung über Informationspflichten bei Versicherungsverträgen, BGBl. I S. 225 (06.03.2018), Sect. 4(1).

  33. PRIIPs, Art. 2(2)(f) and Art. 4(6).

  34. IDD, Recital 10 and Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments [2014] OJ L 173/349, hereinafter referred to as ‘MiFID II’.

  35. Member States show a tendency to apply the notion of insurance-based investment products to a wider range of life insurance contracts, including unit-linked life insurance contracts and so-called participating (or with profits) life insurance contracts.

  36. IDD, Art. 41(2).

  37. IBIPs DA, Art. 3(2)(a).

  38. Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive [2017] OJ L 87/1, Art. 33(a), hereinafter referred to as ‘MiFID II DA’.

  39. IDD, Art. 29(1)(a).

  40. Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU [2014] OJ L 173/349, Art. 24(4)(a)(iii), hereinafter referred to as ‘MiFID II’.

  41. IDD, Art. 30(5) and IBIPs DA, Art. 18.

  42. MiFID II, Art. 25(8) and MiFID II DA, Art. 60.

  43. DMD, Art. 1(2).

  44. E-Commerce, Art. 9(1).

  45. IDD, Art. 23(1)(a).

  46. Proposal for a Regulation of the European Parliament and of the Council on a pan-European Personal Pension Product (PEPP), COM/2017/0343 final, Art. 21.

  47. IDD, Art. 20(4).

  48. PRIIPs, Art. 5(1).

  49. European Commission—Directorate-General for Justice: Final Report of the Commission Expert Group on European Insurance Contract Law, 2014.

  50. Commission Delegated Regulation (EU) 2017/2359 of 21 September 2017 supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to information requirements and conduct of business rules applicable to the distribution of insurance-based investment products, Art. 13; group insurance contracts on insurance-based investment products where individuals cannot take an individual decision to join.

  51. IDD, Recital 49.

  52. IDD, Art. 2(1).

  53. IDD, Recital 36.

  54. Consolidated version of the Treaty on the Functioning of the European Union [2012] OJ C 326/47, Art. 288.

  55. Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions, Action Plan: Financing Sustainable Growth, COM/2018/097 final, 8.3.2018, Action 4.

  56. Commission Delegated Regulation (EU)…/…amending Delegated Regulation (EU) 2017/2359 with regard to environmental, social and governance preferences in the distribution of insurance-based investment products, Ares(2018)2681527, published on 24.5.2018.

  57. PRIIPs, Art. 8(3)(c)(ii).

  58. IDD, Art. 41(1)–(3).

  59. DMD.

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Correspondence to Dieter Pscheidl.

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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official view of VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe.

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Pscheidl, D. Implementing IDD across the EU—first findings and the way forward. ERA Forum 19, 205–217 (2018). https://doi.org/10.1007/s12027-018-0524-5

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