BIPAR – European Regulatory Updates
Thu Aug 18 2022
The Bipar (European Federation of Insurance Intermediaries) annual meetings took place in Brussels on the 23rd and 24th of June. It was great after the Covid induced hiatus to attend these meetings in person and have the opportunity to listen to important updates from the European Commission, EIOPA and meet with representatives from associations from twenty countries throughout Europe.
The meetings kicked off with updates from various representatives on developments in their markets, which included updates on AML, developments in Professional liability, and issues with the sale of bank assurance. It was interesting to speak to other brokers from other countries and hear the issues that they are facing are similar to our members, such as the addressing sustainability requirements, hardening of the PII market and the need for proportionate regulation.
It is clear that Europe continues to be a primary source of legislative and regulatory change for the broker market and that is set to continue. Updates were provided by the European Commission on issues like the Retail Investment Strategy, the review of the Distance Marketing Directive, and the review of the Consumer Credit Directive. A presentation on behalf of EIOPA outlined that they have finalised their report on the application of the IDD, it was indicated that due to the short period of application of the IDD that there is a lack of data on the affect of its application. It did find that the IDD has had a positive impact on the quality of advice but there were problematic practices in relation to the sale of unit-linked life insurance. It was advised that mystery shopping (which takes place in all jurisdictions) will provide more data on the quality of advice going forward. It was indicated that it was challenging for EIOPA to distinguish between the impact of the IDD and other factors such Covid and digitilisation. Given this outcome, it is planned to again reassess the application by the end of next year.
EIOPA’s ongoing work includes the development of guidelines on the integration of sustainability preferences into the IDD suitability assessment, at the time of writing, these are due for publication. They are also working on two calls for evidence from the European Commission in respect of amending the SFDR in respect of product disclosures to include fossil gas/nuclear and amendments to entry level disclosures and inclusion of further product disclosures on decarbonisation targets. Another area for review is the minimum levels of Professional Indemnity Insurance required under the IDD, this review is required to be carried out every 5 years, with the next review due by 31st December 2022. Under the IDD, the adjustment of the levels required is based on Eurostat index of consumer prices (HCIP). Given the current high rate of inflation it is clear that the increase in levels will be much greater for the coming 5-year period compared with the period 2018-2022.
Discussions also took place about the remuneration of intermediaries, the commission-based model remains the prevailing practice in most Member States for the distribution of insurance products through brokers. Six member states have limited/prohibited the acceptance of fees/commissions in relation to the distribution of any insurance products, whilst nine Member States (Ireland being one of these countries) have prohibited or further restricted the acceptance of fees/commissions in relation to the provision of insurance advice on Insurance Based Investment Products (IBIPs).
In April, EIOPA published its final report on Technical Advice to the European Commission relating to retail investor protection. It found that more needs to be done to tackle damaging conflicts of interest throughout the life cycle of an IBIP and that more needs to be done to address the risk of inducements (commission) leading to product bias. Whilst both the EU Commission and EIOPA suggest further action on inducements/commission, it is not clear if there is strong appetite for an outright ban on commissions. One option is the continued co-existence of commissions and fees in the market with a fee regime for independent advice – this is the current situation in Ireland.
Through our membership of BIPAR, Brokers Ireland will continue to monitor developments at EU level particularly in relation to the remuneration of intermediaries in the context of the Consumer Credit Directive, IDD and MIFID reviews. Brokers Ireland will also contribute to lobbying and submissions to influence legislative developments at their inception.