On 2 February 2016, the Insurance Distribution Directive (IDD) was published in the Official Journal of the EU. The Directive entered into force on 22 February 2016, Member States are required to implement the new requirements by 23 February 2018. However, on 20 December 2017, the European Commission announced a proposal to push back the application date of the Insurance Distribution Directive (IDD) by seven months to 1 October 2018, following requests from the European Parliament and Member States for a postponement. Member States are still required to transpose the IDD into national law by the original date, 23 February 2018. However, under the current proposals, firms will not be required to comply with the IDD until 1 October 2018. The Commission is also preparing to postpone the application of two delegated regulations adopted under the IDD. The European Parliament and the Council will need to agree and confirm the new application date in an accelerated legislative procedure.

The European Parliament is to consider the proposed delay to the IDD application date at its February 2018 plenary session.

The IDD aims to improve the regulation of retail insurance sales and distribution practices across the single European market and aims to bring greater transparency and improved, more comprehensible, information to consumers, to help people ensure that they buy products that suit their needs. It will continue to be a minimum harmonisation Directive, meaning that Member States may gold-plate it (impose higher standards/requirements) if they wish.

To enhance cross-sectoral consistency, certain parts of the IDD are aligned with the rules under the MiFID II Directive. 

Key changes to IMD regime

  • Scope: The IDD extends the scope of the IMD to all sales of insurance products, covering all participants in the sale of insurance products. The IDD will apply to not only (re)insurance intermediaries but also to distributors of insurance products that sell directly to customers without the use of an intermediary i.e. insurers and reinsurers Insurance undertakings which sell insurance products directly are brought within the scope of this Directive. In order to guarantee that the same level of protection applies regardless of the channel through which customers buy an insurance product, the IDD also covers other market participants who sell insurance products on an ancillary basis, such as travel agents and car rental companies, unless they meet the conditions for exemption.
  • Minimum professional knowledge and competence requirements: Individual managers and employees possess an appropriate level of knowledge and competence appropriate to product complexity and nature of activities conducted (includes minimum 15 hours CPD requirement). The IDD introduces provisions that recognise the importance of guaranteeing a high level of professionalism and competence among firms involved in insurance distribution and their employees.
  • Passporting: The IDD provides greater detail and clarity on the procedure for cross-border entry by intermediaries into insurance markets across the EU. EIOPA is to establish a single electronic public register containing records of all intermediaries that have notified their intent to carry on cross-border business.
  • <Enhanced information and conduct of business requirements: Firms must establish organisational arrangements to prevent conflicts of interests, and inform clients if those arrangements are insufficient to prevent a conflict with regard to a particular contract. The IDD significantly amends the IMD information and conduct of business requirements, taking the MiFID II Directive into account to ensure cross-sector consistency.
  • Insurance-based investment products. In addition to the conduct of business standards defined for all insurance products, insurance-based investment products are subject to specific standards aimed at addressing the investment element embedded in those products. Such specific standards must include provision of appropriate information, requirements for advice to be suitable and restrictions on remuneration.
Topics covered by Better Regulation include
  • BRRD
  • Banking Structural Reform
  • Basel
  • Benchmarks Regulation
  • Brexit
  • Capital Markets Union
  • Capital Requirements Legislation
  • Central Securities Depositories Regulation
  • Credit Rating Agencies Regulation
  • Deposit Guarantee Schemes Directive
  • Dodd-Frank
  • EMIR
  • GDPR
  • Solvency II
  • Insurance Distribution Directive
  • Interchange Fees Regulation
  • Liquidity
  • Market Abuse/Insider Dealing
  • Markets in Financial Instruments Legislation
  • Money Laundering Directives
  • Money Market Funds Regulation
  • Mortgage Credit Directive
  • Payment Services Directive
  • PRIIPs Regulation
  • Prospectus Directive
  • Ring-fencing
  • Securities Financing Transactions Regulation
  • Securitisation Regulation
  • Senior Insurance Managers Regime
  • Senior Managers Regime
  • UCITS Directive