Insurance Attorney – What Is Insurance Distribution Directive
Insurers and distributors of insurance products have a new set of rules to adhere to, according to the Insurance Distribution Directive (IDD). This Directive replaced the IMD, which was in force until 2014.
The IDD is intended to improve consumer protection standards and the level of consumer information for individuals looking to buy insurance. It also aims to increase consistency throughout the European Union.
The IDD is the most crucial step to date in bringing the insurance industry in line with consumer protection laws. This Directive applies to all insurance undertakings, including insurance companies, brokers, wholesalers, loss adjusters, secondary providers, reinsurers, and intermediaries.
While the IDD is a minimum harmonizing directive, it has the potential to bring about further improvements. For example, the EIOPA is now required to publish reports on the structure of the markets of insurance intermediaries in Europe. Moreover, certain areas need to be updated to account for the effects of digitalization. These changes will help consumers make better decisions, compare products and understand the costs of different insurance policies.
The Directive also contains more prescriptive rules for products with an investment element, which are intended to protect customers from detriment. Moreover, it focuses on the management of conflicts between insurers and distributors.
Insurers will have to conduct a thorough study to determine whether their distribution strategies suit their target market. In addition, they must be able to register their intermediaries on the internet. Also, they must disclose their remuneration structures. They must provide written recommendations to clients. Lastly, distributors must test their products to ensure they meet customer needs.
Several areas in the Insurance Distribution Directive need to be updated, primarily to reflect the impact of digitalization. These include the requirements for new policy documents, the introduction of an Insurance Product Information Document, and the need to replace the Key Facts document.
Another change that insurance companies must address is the requirement for a minimum of 15 hours of continuing professional development (CPD) annually for staff in distribution. Continuing professional development can take the form of classroom-based training, online product knowledge assessments, or individual coaching. Employees who do not meet the CPD requirements may be prevented from participating in distribution.
Insurers will be required to develop a strategy to assess the impact of IDD on their business. Furthermore, they will need to identify the persons responsible for supervising their activities. They must provide the EIOPA with aggregated information on their activities and appeals. Finally, they must register with the competent authority in their home state.
Even though the IDD is not the end of all the changes, it is intended to encourage firms to offer more products, streamline their procedures and improve their consumer services. Moreover, it aims to keep the industry in line with consumer protection rules and encourage cross-border trading. By improving consumer information and enhancing competition, the Directive will allow consumers to make better insurance decisions.