On 30 January 2015, Jonathan Hill, the European Commissioner responsible for Financial Stability, Financial Services and Capital Markets Union, delivered a speech to the European Federation of Insurance Intermediaries, in Brussels.
In the first part of his speech, Commissioner Hill declared himself “confident” that “the trilogue negotiations between Parliament, Council and Commission [on the Insurance Distribution Directive] can be finalised … during the first half of 2015“.
According to Commissioner Hill, the Insurance Distribution Directive will:
- “create a level playing field so that whatever kind of insurance is being sold and however it is sold the same basic rules will apply … however customers buy insurance they [will] get the same standards of choice and service“;
- “provide for appropriate standards of transparency. This will help consumers make informed choices on the basis of meaningful data. It will also help build trust that the products [that] are being recommended are not just those that give the adviser the highest commission“;
- include “specific rules for insurance-based investment products … to give consumers who want to invest their savings comparable levels of protection“; and
- “help intermediaries to compete in a fair market, to sell services more easily across borders and build relationships with their clients on the basis of transparency and trust“.
However, whilst the Directive is a step forward in strengthening the single market, a number of open questions remain:
- “for packaged retail and insurance-based investment products, the recently adopted PRIIPS Regulation has introduced a common standard of transparency. But what is the situation when it comes to other insurance products …? … Consumers need information in a manner that allows them to make an informed decision. Can we be sure that the way information is presented is not being used as a means to shift responsibility from insurers to consumers?“
- “There are also issues around geographical limitations on insurance products in terms of coverage, validity and availability. Is this harming consumers moving between Member States or shopping across borders? Is it right that someone paying into a supplementary health insurance scheme for decades suddenly discovers that he can’t make use of it when he retires to another EU country?“
- “Most consumers can only buy insurance products in the Member State where they live … they don’t have access to insurance products in another Member State, even though [they] may be cheaper and better suited to them. Is this fragmentation of national markets still desirable in the single market of 2015?“
Whilst “I will always be led by the evidence and I think we should hear the evidence on this from both sides. It is the Commission’s duty to look at things from the consumer’s vantage point...” Commissioner Hill has therefore asked his colleague, Elzbieta Bienkowska, to gather this evidence and analyse the options. He has also committed himself to doing what he can to support her in her work.
What Commissioner Hill doesn’t do expressly, is tell us how this evidence will be gathered, nor when. But the direction of travel is clear. The result is that insurers may soon be challenged to offer new products, or existing products on different terms; and intermediaries may soon be expected to look much further afield for the products they will recommend to their clients. Those who have a special interest in this area, and those who may be affected, may wish to submit evidence to Commissioner Hill and Elzbieta Bienkowska sooner rather than later.