A Balance between professional rules and consumer protection

1
REGULATING INSURANCE INTERMEDIARIES

• A Balance between professional rules and consumer
  protection
• by
• Victor ROD
• Director, Insurance Commission, Luxembourg
• Sofia, 7 June 2007

2
General

• Different selling techniques for insurance
  products
• Direct selling by Insurance Company
• Mail, Phone, Online
• Via Bank (Linked or not to the Ins. Cy.)
• Tied Agents (exclusive or not)
• Independent Brokers or Financial Advisers
• Other (i.e. Car sellers, Travel agents,)

3
What should be regulated?

• An Intermediary should be fit and proper
• Good reputation and morality (no criminal record)
• Professional knowledge
• Financial background and guaranties offered to
  clients in the case of fault, error or financial
  failure of the intermediary

4
European Harmonisation

• Council Directive 77/92/EEC of 13 December 1976
  conc. agents and brokers.
• Parliament and Council Directive 2002/92/EC of 9
  December 2002 on insurance mediation

5
Directive 77/92/EEC

• Main issues
• Mutual recognition of professional qualifications
  acquired in an other Member State ( MS)
• Freedom of Establishment (FoE) and Freedom of
  Services (FoS) for agents and brokers. (no
  precise rules)
• Directive repealed by Directive 2002/92/EC

6
Directive 2002/92/EC

• Main issues
• Scope of the Directive
• Definitions of intermediaries
• Registration requirements
• Professional requirements
• FoE FoS for intermediaries
• Notifications and Exchange of information between
  competent authorities
• Information requirements for intermediaries
• Sanctions

7
Scope

• The Directive lays down rules for the taking-up
  and pursuit of the activities of insurance and
  reinsurance mediation by natural and legal
  persons which are established in a MS of the EU
  or whish to become established there.

8
Scope (continued)

• The Directive is not applicable
• To certain insurance contracts complementary to
  an other product or service
• To mediation services provided in relation to
  risks situated outside the EU
• To mediation services carried out in third
  countries

9
Definitions

• The Directive provides for a number of
  definitions
• Insurance and reinsurance undertaking
• Insurance and reinsurance mediation
• Insurance and reinsurance intermediary
• Home and host MS and competent authorities

10
Registration

• Insurance and reinsurance intermediaries must be
  registered with the competent supervisory
  authority in their home MS
• All registered intermediaries must figure on a
  publicly available register allowing for on line
  consultation
• Insurance undertakings may only use mediation
  services of registered intermediaries.

11
Professional requirements

• Intermediaries must possess appropriate knowledge
  and ability, as determined by the home MS (no
  harmonisation between MS)
• Intermediaries must be of good repute (clean
  police record, no serious criminal offenses
  linked to crimes against property or other crimes
  related to financial activities, no prior
  bankrupcy,)
• Intermediaries must have a sound financial
  back-ground (Capital, Bank guaranties, PI
  insurance)

12
FoE and FoS

• The Directive allows for all intermediaries to
  carry on business under FoE and/or FoS in one or
  more MS other than his home State
• Conditions
• Being registered in his home State
• Having informed his home authorities of his
  intention do operate via FoE in one or more MS
• Waiting one month after his home authority
  informed him that the host authority has been
  notified of his intention

13
Exchange of information

• Each MS must designate one or more competent
  authorities empowered to insure implimentation of
  the Directive (In most cases The insurance
  supervisory authority)
• Designated competent authorities must exchange
  information on intermediaries, specially if they
  have been subject to sanctions which could lead
  to a removal of the register

14
Information for consumers

• The Directive provides for a number of detailed
  information an intermediary must provide to a
  consumer prior to the signing of the policy.
• Information required
• Identity, address, status and registration of the
  intermediary
• Independent from or tied to an insurance company

15
Open Issues in the Directive

• Day to day oganisation of collaboration between
  competent authorities
• Definition of FoE and FoS
• Content of PI insurance policies
• Implimentation of the Directive
• Mutual recognition of professional knowledge and
  abilities
• May be Amendments to the Directive

16
Implementing the Directive

• The Lamfalussy framework and CEIOPS
• CEIOPS Insurance Mediation Expert Group
• - Past Activities
• - Work plan 2007

17
The Lamfalussy framework

• The four level model of the new EU frame
• I Framework principles (EU legislationDirectives
  )
• II Implementing measures (EU legislation by a
  comitology procedure)
• III Actual Implementation (supervisory measures)
• IV Enforcement (traditional infringement
  procedure)

18
The actors at the first three levels
Economic and Finance Committee
Financial Services Committee
Economic and Finance Committee
Financial Services Committee
Parliament Committees
Council Working Groups
Council Working Groups
EIOPC Insurance Pensions
EBC Banking
ESC Securities
FCC Financial Conglomerates
Regulators level 2 committees
EIOPC Insurance Pensions
EBC Banking
ESC Securities
FCC Financial Conglomerates
Regulators level 2 committees
CEIOPS
CESR
CEBS
Supervisors level 3 committees
CEIOPS
CESR
CEBS
Supervisors level 3 committees
3L3
3L3
18
19
CEIOPS objectives

• CEIOPS was established by the Commissions
  Decision of 5 November 2003 as Level 3 Committee
  in the Insurance and Pensions field. Its
  objectives are
• Level 2
• Contributing to develop EU legislation by
  advising the Commission, on request or under its
  own initiative, for the preparation of EU
  legislation.
• Level 3
• Fostering consistent implementation of EU
  Directives,
• Promoting adoption of best practices and
  convergence in supervisory practices,
• Facilitating exchange of information and
  supervisory cooperation.

20
Working Methods

• CEIOPS is an independent committee of
  supervisors
• Accountability
• Transparency
• Consultation

21
IMEGI. Past activities

• Protocol relating to the Cooperation of the
  Competent Authorities of the Member States of the
  European Union in Particular Concerning the
  Application of Directive 2002/92/EC of the
  European Parliament and of the Council of 9
  December 2002 on Insurance Mediation (Luxembourg
  Protocol)
• Cooperation and exchange of information in
  cross-border mediation activity
• Facilitation of the single registration of the
  insurance intermediaries in the EU
• Templates for registration and notification
  procedures
• - Joinder Agreement signed by the Dutch Authority
  for the Financial Markets (Autoriteiten
  Nederlandse Markten - AFM)

22
IMEGII. Work Plan 2007

• Report on the implementation of the key issues of
  the IMD
• Proposals for a definition of the freedom of
  services under the IMD
• Proposals for possible amendments of the IMD
  and/or Luxembourg Protocol
• Ongoing sharing of information on practical
  supervisory issues

23
IMEGII. Work Plan 2007

• Report on the implementation of the key issues of
  the IMD, including information on the
  registration and notification procedures,
  professional requirements, sanctions, complaints
  and out-of-court settlement
• Presented to the Members meeting in March 2007

24
IMEGII. Work Plan 2007

• Proposals for a definition of the freedom of
  services under the IMD
• - EIOPC Meeting Nov 2006
• - Definition proposed by the EC services
• - Respond different definitions / Pro and
  cons / Examples
• IMEG meeting of 23 May 2007
  Results

25
CONCLUSIONS

• Questions?
• Suggestions?
• Comments?
• www.ceiops.org
• www.commassu.lu
• Victor.rod_at_commassu.lu