The European Parliament has formally adopted the text of the Insurance Distribution Directive (the Directive). A copy of the European Parliament’s legislative resolution adopting the Directive can be found on their website1.

The Directive will replace the Insurance Mediation Directive and, among other things, will extend the scope of regulation to all persons who sell insurance products directly to customers, introduce stricter rules on the management of conflicts of interest and the conduct of business, and impose specific disclosure requirements.

The Directive was heavily negotiated during its drawn-out passage through the European legislative process. One key development was the amendment from a maximum harmonising Directive, which would have prevented state regulators imposing a higher standard, to a minimum harmonising Directive. As a minimum harmonising Directive, the UK will be free to impose stricter requirements than those contained in the Directive, and it will come as no surprise if the UK takes this approach.

The Directive now needs to be adopted by the Council of the EU, which is anticipated to happen before the end of 2015. If this timeline is met, it should be published in the Official Journal of the EU this month or early next year. The Directive will come into force 20 days after publication, but member states will have a further two years to transpose and implement it. Accordingly, firms will not be required to comply with the Directive, as transposed into the law of the relevant member state, until late 2017 or early 2018. We will report on the UK’s proposals for transposition as and when they are published.