Intermediaries are having to get to grips with new rules.
It has been almost a year since the Insurance Mediation Directive was implemented in Spain, a mere 18 months late. The implementation was effected by the enactment of the Law on Mediation of Private Insurance and Reinsurance of 18 July 2006, which came into force on 19 July 2006.
The Law laid down rules of conduct for the intermediaries’ market that are likely to last for many years to come. The new regime can be summarised in three basic principles: a clear separation of roles; similar treatment; and transparency.
The three basic principles
A clear separation of roles. It is widely recognised that there are many different types of intermediaries besides the classic insurance broker figure. The Law introduces and regulates two new entities:
- the reinsurance broker and the agent linked to several insurers (sometimes known as a ‘tied agent’). Intermediaries can therefore now be divided up into exclusive agents, tied agents, insurance brokers, exclusive bank-assurance operators, tied bank-assurance operators and reinsurance brokers.
Similar treatment. Intermediaries have similar (although not identical) rights and duties. For instance, they all have to obtain certain professional accreditation, but the detailed requirements differ between each type of intermediary.
Transparency. Like most (if not all) EU legislation, consumer protection is at the heart of this new statute. For instance, intermediaries must take certain measures to disclose their remuneration; the source and number of proposals (which should be at least three) offered to the insured; and their financial capacity.
The regulator has also agreed to post online the single register of intermediaries created under the Act. Traditional duties – such as helping the insured to complete the proposal form and (in the case of the insurance broker) presenting claims – remain unchanged.
Broadly speaking, the market has welcomed the new regime. However, as with any legislative reform, there are challenges and questions. The regulatory authority has adopted a novel approach in trying to resolve any such difficulties that might arise. Instead of enacting secondary legislation, it has chosen to deal with any questions via notes posted on its website. This is certainly a transparent process but some argue that it is hardly an orthodox way of implementing the Insurance Mediation Directive.
One issue that deserves particular attention is the new treatment of coverholders in Spain. Unlike some of its European counterparts, the Spanish regulatory authority has taken the view that insurance brokers cannot act as coverholders with delegated authority to bind risks on behalf of insurers.
The question is then whether a coverholder can act for a variety of insurers or should be restricted to act for one. The regulator has now chosen the second option. Because of Lloyd’s special nature and the fact that it is registered in Spain as a single insurance entity, though, it seems that the regulator will accept coverholders binding risks on behalf of various syndicates.
However, there is nothing to prevent a reinsurance broker from acting as a coverholder.
The one-year holiday given to intermediaries to adapt to the Law expired on 19 July 2007. The market appears to be happy about the new statutory requirements. Indeed, intermediaries have seen the Law as an opportunity to improve their internal processes and their external communication with insurers and insureds.
Nevertheless, there are still some grey areas about which it will be difficult to advise conclusively, at least in the immediate future. Guidance may have to be sought from the regulatory authority either via direct consultation or by interpreting the notes posted on its website.