Brussels, 25 September 2000
Insurance: Commission adopts proposal for Directive on insurance intermediation
The Commission has adopted a proposal for a Directive on insurance intermediation aimed at improving the working of the single market in insurance. The proposal has a dual purpose: to make it easier for insurance intermediaries to avail themselves of the freedom of establishment and freedom to provide services while guaranteeing a high level of protection for the interests of customers. It will help improve the functioning of the single insurance market by increasing the supply of insurance products in the European Union while guaranteeing proper protection of consumers' interests. Furthermore, in order to ensure that the legal framework applicable is clear and coherent, the Directive, once it has been adopted, will replace a 1977 Directive, becoming the only binding Community instrument for insurance intermediaries. Adoption is one of the priority objectives of the Financial Services Action Plan (see IP/00/556). The Action Plan has three strategic objectives: to create a single market for wholesale financial services, to ensure that retail markets are accessible and secure, and to provide state-of-the-art prudential rules and supervision.
In the words of Mr Frits Bolkestein, Commissioner for financial services, "Insurance intermediaries are a vital link in the process of selling insurance products in the European Union. They also play a pivotal role in protecting the interests of insurance customers, primarily by offering advice and assistance to insurance customers and by analysing their specific needs. The aim of the proposal is to make it easier for insurance intermediaries to avail themselves of the freedom of establishment and freedom to provide services and to guarantee a high level of protection for the interests of the customers who deal with insurance intermediaries."
The main thrust of the proposal
The proposal establishes a system of registration for all insurance or reinsurance intermediaries based on the following professional requirements:
The proposal guarantees a high level of professionalism and competence on the part of insurance intermediaries in the European Union.
Taking its cue from other legislation adopted in the insurance sector, it lays down minimum rules. This means that Member States may adopt more stringent provisions, but only for intermediaries registered on their territory. On the basis of their registration in the home Member State, insurance or reinsurance intermediaries will be able to do business in other Member States by way of the freedom to provide services or by establishing a branch.
The proposal also contains requirements regarding practices and the nature of the information that insurance intermediaries must provide to potential customers. In particular, it is essential that customers know they are dealing with an intermediary working for one or more companies and that the intermediary is advising them on the basis of an analysis of all the available products on the market.
Insurance intermediaries in the single market
The single insurance market has largely been completed for insurance companies. Since July 1994, under the system set up by the Third Life and Non-Life Insurance Directives (Directives 92/96/EEC and 92/49/EEC), 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 European Union, either under the rules on establishment or under the rules on the freedom to provide services.
This system has increased the volume of activity in the insurance field, particularly in relation to transactions regarding major industrial and commercial risks. However, this opening-up has not had such a significant impact on private risks. This is due to the fact that the host Member State may impose general-interest requirements in such areas as consumer protection on service providers based in other Member States. It is also due to the lack of a European legal framework for insurance intermediaries enabling them to benefit from two fundamental freedoms, namely freedom of establishment and freedom to provide services in the single market. Intermediaries are therefore frequently unable to satisfy requests from customers wishing to insure a risk in another Member State.
Insurance intermediaries are likely to become more important because the creation of the single market will increase competition and because insurance policies sold within the single market will become more complex.
The Community provisions adopted for intermediaries (Directive 77/92 and Recommendation 92/48) have certainly helped to harmonise national rules.
However, given the limited scope of these instruments, discrepancies between national rules persist, with the result that markets continue to be partitioned. This prevents insurance customers - businesses and consumers alike - from having access to a wider range of insurance products that would enable them to obtain the cover best suited to their needs. Finally, consumers are prevented from enjoying the benefits that would result from increased competition between intermediaries.
The Financial Services Action Plan stresses the urgency of developing a truly integrated retail market in which the interests of consumers and service providers are properly protected. It therefore states that the Commission is to present this year a proposal for a Directive that should be adopted by the European Parliament and the Council by co-decision procedure during 2002.
The text of the proposal can be consulted on the Europa Internet site: