Insurance mediation: better consumer protection

SUMMARY OF:

Directive 2002/92/EC — insurance mediation

WHAT IS THE AIM OF THE DIRECTIVE?

The insurance mediation directive regulates the selling practices of all insurance products by agents and brokers.
It covers the regulation of general insurance products, such as motor insurance, as well as life insurance policies, including those which contain investment elements, such as unit-linked life insurance products*.

KEY POINTS

All individuals or companies who carry out insurance or reinsurance* mediation must be registered in their home EU country on the basis of a number of specific minimum requirements including:
- possession of appropriate knowledge and ability as determined by the relevant laws of their EU country,
- being of good repute,
- possession of professional indemnity insurance or any other comparable guarantee against liability arising out of professional negligence,
- 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.
EU countries may adopt stricter rules, but only for agents and brokers registered on their territory.
On the basis of their registration in their home country, insurance or reinsurance intermediaries will be able to do business in other EU countries.
Insurance intermediaries are required to give customers clear explanations for the advice they give on which products to buy. They must specify accurately and clearly in writing to the customer why they have recommended particular products in the light of the customer’s individual requirements.
EU countries must provide easy public access through a single information point to details of registered insurance and reinsurance intermediaries, the relevant EU country authorities with which they are registered and the EU countries in which they conduct business.
The directive encourages EU countries to establish appropriate and effective alternative dispute resolution procedures for out-of-court redress for dissatisfied customers, in particular via the FIN-NET network.

On 20 January 2016, the European Parliament and the Council adopted the insurance distribution directive (Directive (EU) 2016/97), which updates and replaces the insurance mediation directive. The new directive will cover the entire distribution chain, including insurers that sell directly to consumers (hence the new name). It will also further improve the way insurance products are sold including greater price transparency and better information for consumers.

FROM WHEN DOES THE DIRECTIVE APPLY?

Directive 2002/92/EC entered into force on 15 January 2003. EU countries had to incorporate it into their national law by 14 January 2005.
Directive (EU) 2016/97 on insurance distribution (recast) entered into force on 22 February 2016. EU countries will have to incorporate the directive into their national law by 23 February 2018.

BACKGROUND

More information available on the European Commission’s insurance mediation website.

* KEY TERMS

Unit-linked life insurance products: these give life insurance policy-holders the possibility of combining their money with that of other policy-holders in a unit-linked fund. This allows them to invest in a wider spread of investments (such as stocks and bonds) than they could on their own.

Reinsurance: where insurers transfer parts of their risk portfolio to other insurers so that they can spread the risk of having to pay out large amounts in the event of a claim.

MAIN DOCUMENT

Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation (OJ L 9, 15.1.2003, pp. 3–10)

Successive amendments to Directive 2002/92/EC have been incorporated in the original text. This consolidated version is of documentary value only.