The delayed Insurance Distribution Directive: proposed timing and effect across EU member states

The Insurance Distribution Directive (IDD) must now be transposed into national law by member states by 1 July 2018 (pending formal adoption) instead of 23 February 2018. As a result of recent EU proposals, insurance undertakings and insurance distributors could have until 1 October 2018 to prepare for the IDD but a number of member states are opting to transpose the IDD before this European Commission deadline. This bulletin highlights the different approaches taken in various member states.

The Insurance Distribution Directive

The IDD will repeal and replace the Insurance Mediation Directive (IMD). The IMD covers the activities of insurance agents and brokers selling insurance and reinsurance products, but does not cover direct sales by insurers and reinsurers. The IMD was a minimum harmonising directive setting a minimum standard; member states had the f lexibility to introduce additional provisions in order to protect consumers. The IDD seeks to further harmonise how insurance distribution activities are regulated across the single market to improve consumer protection standards and promote a single market for insurance sales.

For an overview of the provisions of the IDD please see our briefing and bulletin. This bulletin sets out the current timeline for the IDD, together with an overview of the proposed transposition of the IDD across the EU.

Delay to the legislative proposal

There have been concerns across a number of member states regarding the delayed publication of the delegated acts in the Official Journal of the EU and therefore the ability of member states to implement the IDD rules properly and the readiness of insurance undertakings and insurance intermediaries to comply with those rules. Accordingly, fifteen member states called upon the European Commission to request an extension of time for member states to properly adjust the proposals for implementation as well as for insurance distributors to adapt their businesses to the new insurance distribution regime.

These member states called on the European Commission to adopt a proposal postponing the date of transposition and application of the IDD (without any change to the substance of the Directive) until at least 1 October 2018.

The Council's Working Party on Financial Services (made up of representatives from the member states and chaired by the Bulgarian Presidency) met earlier this month to discuss the delay and to determine the date of application of the IDD. The Working Party ultimately decided that 1 July 2018 would serve as the deadline for transposition into national law and that the application date would be amended to 1 October 2018. The European Parliament's ECON Committee voted on the delay last week and, as expected, have taken the same position as the Council. A report, containing identical text on the IDD delay to that of the Council, will be put before the European Parliament for a final vote. Pending formal adoption from the Council, the proposal in respect of the IDD delay will be published in the Official Journal of the EU. The IDD is expected to be published shortly after the original transposition date (ie. 23 February 2018).

The IDD will have retroactive effect. However, although the date that the IDD must be transposed by member states into national law is 1 July 2018 (it will not bind insurance undertakings and insurance distributors until 1 October 2018), a number of member states are opting to implement the IDD before the EU deadline. The ability of member states to transpose the IDD sooner arises as a result of the Council's request for "reasonable amendments" to be made to the text of the IDD. In particular, the Council added the words "at the latest" to the implementation date of the IDD to allow those Member States who are ready for implementation to do so earlier.

This potentially causes issues where insurance undertakings and insurance distributors operate in multiple EU jurisdictions. In these circumstances it may be that those firms choose to comply with the provisions of the IDD in all member states that they operate in.

The following table provides an indicative view of the current implementation date of the IDD across EU member states.

Simplified procedure and next steps

The legislative process for the IDD is unusual as compared to other EU legislation and a simplified procedure will be followed to deal with the short timeframe. In light of the urgency in postponing the application dates, the Commission advised that the Parliament and the Council must agree on the new legislative proposals in an accelerated legislative procedure.

The ECON Committee has voted to grant its non-objection and, in parallel, a procedure is started where representatives from the European Parliament will propose amendments, identical to those proposed by the Council. An objection period will follow during which time other members of the European Parliament can object. Following this period, provided that there are no objections, the text of the IDD will be automatically adopted by the ECON Committee and will be sent to the European Parliament for the final vote in February 2018. Pending formal adoption from the Council, the IDD will be published in the Official Journal of the EU shortly after the 23 February 2018 deadline.

The Parliament's ECON Committee has also launched the procedure for the early non-objection of the Delegated Acts on IDD-POG and IDD-IBIPS. The decision not to object on 24 January will allow these Delegated Acts to come into force at the same time as the amended IDD.