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Brussels, 30th September 2002

Insurance: major step to integrated EU financial market as Insurance Mediation Directive approved

The European Commission has welcomed the approval by the EU's Council of Ministers of the Insurance Mediation Directive, which will improve choice and reinforce protection for customers while helping insurance intermediaries such as insurance brokers, banks and car dealers - to market their services across borders. The Directive requires that all intermediaries be registered in their home Member State. To obtain that registration, they will need to meet strict requirements. Once they have done so, they will be free to sell their services anywhere in the EU. Once it comes into force in late 2004 the Directive, which is based on a September 2000 proposal from the Commission (see IP/00/1048), will replace a 1977 Directive and become the only binding EU law covering individuals or companies selling insurance products on behalf of others. This is a priority measure under the EU's Financial Services Action Plan, which ultimately aims to establish a truly integrated European market for financial services in which customers can have confidence. The Directive will be considered formally adopted as soon as it has been signed by the Presidents of the Parliament and Council.

Internal Market Commissioner Frits Bolkestein said: "This well balanced legal measure will benefit considerably the European insurance market. Insurance intermediaries are a vital link in the process of selling insurance products. The Directive will make it easier for intermediaries to operate anywhere in the European Union they want to. At the same time, it will increase the choice of insurance products available to customers and help ensure they can trust the advice they are getting from intermediaries".

The main provisions of the Directive

The Directive will require 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.

These minimum requirements guarantee a high level of professionalism and competence. Member States may adopt more stringent provisions, but only for intermediaries registered on their territory. On the basis of their registration in the home country, insurance or reinsurance intermediaries will be able to do business in other Member States.

The Directive will also require 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.

The Directive will allow Member State financial authorities and other bodies (i.e. insurance undertakings or professional associations) to be involved in the registration process by, for instance, registering insurance intermediaries under the supervision or control of the competent authority of that State.

Under the Directive, Member States will be committed to providing easy public access through a single information point to details of registered insurance and reinsurance intermediaries, the competent authorities with which they are registered and the Member States in which they conduct business.

Finally, the Directive encourages Member States to set up appropriate and effective Alternative Dispute Resolution procedures for out-of-court redress for dissatisfied customers, in particular via the cross-border FIN-NET network launched by the Commission in 2001 (see IP/02/1258 and IP/01/152 and

The text of the Directive approved by the Council today includes all the amendments made by the European Parliament at second reading and The full text can be found on the Europa Internet site: Background: insurance intermediaries in the Internal Market

The Internal Market has largely been completed for insurance companies. Since July 1994, under the system set up by the Third Life (92/96/EEC) and Non-Life (92/49/EEC) Insurance Directives, insurance companies have been subject to a single set of administrative authorisation and prudential control arrangements imposed by the Member State where they are based. This "European passport" enables the insurance company to carry on business anywhere in the EU, either under the rules on establishment or under the rules on the freedom to provide services (Articles 43 and 49 of the EC Treaty).

This single market legislative framework has facilitated the growth of cross-border insurance activity in relation to major industrial and commercial risks, but has not had such a significant impact on private risks (i.e. private individuals). This is partly due to the fact that service providers who operate legally in one Member State may be discouraged from expanding their business into another Member State by requirements imposed by the host Member State for consumer protection reasons.

It is also due to the absence until now of an EU legal framework for insurance intermediaries enabling them to benefit from the freedom of establishment and to provide services anywhere in the Internal Market, once they meet legal requirements in their own home country. Insurance intermediaries have thus frequently been unable to satisfy requests from customers wishing to insure a risk in another Member State. However, the demand to buy insurance products across borders, using the services of intermediaries, is likely to grow because competition has increased and because insurance policies have become more complex.

The current EU rules (Directive 77/92/EEC and Recommendation 92/48/EEC) have certainly helped to harmonise national rules. However, discrepancies have persisted and the European market continues to be fragmented. The Directive adopted today will help remedy this by giving insurance customers access to a wider range of products that will enable them to obtain the cover best suited to their needs and to enjoy the better value for money that will result from increased competition between intermediaries.

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