On August 16, the Czech Republic published Act No. 170/2018 on Insurance Distribution (“Act”), which transposes the EU Insurance Distribution Directive (“IDD”) into local law, and comes fully into force on 1 December 2018.
The law, which replaces the existing Act on Insurance Intermediaries, introduces a new classification for intermediaries. According to the Act, the main players in the industry will be independent intermediaries and tied insurance representatives accompanied by ancillary insurance intermediaries and insurance intermediaries established in other member states.
The Act also introduces new procedures for obtaining a licence including the prerequisites for qualifications. All intermediaries registered under the old regime must apply for a new registration under the Act until 1 April 2019 in order to be able to continue with providing intermediary services. The features of the register managed by the Czech National Bank, the main supervisory body, and the credentials of those authorised to organise qualification exams and coordinate educational programmes are also listed.
Last but not least, the Act provides thorough and detailed guidelines on obligations regarding the handling of information including requirements for confidentiality, clarity and intelligibility along with the overall duty of insurance professionals to act and advise with expert care.
Beyond the objectives set by the IDD, the Act also aims at achieving a unified approach in the regulation of insurance distribution in the Czech Republic as a whole. In this way, lawmakers also responded to current problems in the Czech financial sector. The law updates structures of control and establishes clear margins for the competencies of intermediaries (e.g. prohibiting insurance agents and brokers from the concurrent holding of offices). Overall, the law provides for a more transparent structure, thus enabling the Czech National Bank to keep track of the respective players more clearly.
In short, the Act unifies regulation and consumer protection across the financial market, creates an enhanced but equal level of consumer protection for different distribution channels, emphasises the clarity and comparability of information for financial products (with special attention to information on life insurance costs), aims at decreasing the number of regulated subjects, and addresses the increasing demand for professionalism among the people working in the field.