Insurance Europe has expressed concern that the level 2 delegated acts for the Insurance Distribution Directive do not respect the original agreed framework in the legislative text with significant implications including a potential de facto ban on commission.
IE, which is the body representing national insurance associations across Europe, has published a response to EIOPA's July 2016 consultation paper on draft delegated acts under the IDD. In its response IE has identified a number of instances where it believes that the proposals in EIOPA's draft technical advice go beyond the level 1 requirements in the IDD.
IE's primary concerns are summarised in the accompanying pressrelease:
- Product oversight and governance. IE said that "consumers should remain free to purchase insurance products that meet their individual demands and needs, even though they fall outside of the pre-set target market. Distributors should therefore be able to sell outside of the pre-set target market where appropriate". IE is concerned that requirements that prohibit sales outside the "target market" run against the interests of consumers and exceed the level 1 requirements. IE also states that there should "not be a requirement to specify a ‘negative’ target market" and that the "proposals are not intended to lead to any price controls or detailed provisions on product design, as this clearly goes beyond the identification of a target market".
- Commission-based remuneration should not be viewed as a conflict of interest. IE stated that "there is no overarching ban on commissions under the IDD" and that "EU co-legislators decided to leave it explicitly as an option for member states". IE stated that notwithstanding that position EIOPA was effectively seeking to introduce rules that will give rise to a de facto ban on commission as they are proposing to specify "a broad list of inducements that are considered to pose a high risk of detriment to the quality of the service" (including commission-based remuneration).
- Assessment of suitability and appropriateness. IE also stated that "EIOPA’s list of high-level criteria to assess non-complex insurance-based investment products will result in a de facto ban on execution-only products". IE pointed out that such an approach would also "undermine another explicit member state option in the IDD that permits the execution-only sale of non-complex IBIPs".
IE was clear that in its view it was "extremely important that the overall process for finalising the delegated acts is completed as soon as possible" because "many of the requirements will require significant changes to current business models and organisational structures, which will take time and significant costs to implement". Firms will therefore need time between the finalisation of the level 2 delegated acts and their implementation of the new rules.