The Ministry of Public Finances has released the long awaited draft law on insurance distribution (the "Draft Law"), intended to transpose the Insurance Distribution Directive 2016/97 ("IDD") in Romanian legislation.
Once implemented, it is expected that the Draft Law will have a positive impact on the local market, triggering long-term market growth, by creating opportunities for more active competition between distributors and increasing the accessibility of insurance products for consumers.
Some of the most significant changes the Draft Law proposes are:
- A higher degree of consumer protection, irrespective of the insurance distribution channel;
- Fair competition between distribution channels;
- The implementation of specific procedures (by insurance intermediaries) to identify and inform clients of conflicts of interest that could occur in the course of insurance distribution;
- Unit linked life insurance products must meet the requirements of MiFID II;
- Distributors must inform potential clients of the option to buy insurance components separately;
- Insurance intermediaries must ensure that personnel professional knowledge is an ongoing concern;
- The responsibilities of the supervisory authority are better defined;
- Bancassurance providers will have a determined period to choose whether to continue insurance distribution as a main or secondary intermediary;
- Non-compliant parties will be subject to more severe sanctions.
It is expected that the Draft Law will come into force on 23 February 2018 and will repeal most of the current primary and secondary insurance distribution legislation in Romania. This date may change however, as the Draft Law still needs to be approved by the Romanian Parliament.
In a recent development, the European Parliament’s Economic and Monetary Affairs Committee ("ECON") recommended to the European Commission that the application of the IDD be delayed until 1 October 2018. Note, ECON did not recommend that the IDD transposition deadline change, but did ask the European Commission to consider extending the application date of the IDD, in order to allow sufficient time for the industry to implement the necessary technical and organisational changes.