FERMA wants its joint BIPAR protocol principles to be in new IMD

The principles should be included in the directive as ‘minimum standards to reduce conflicts of interests and increase transparency in the business insurance sector,’ FERMA stated in a letter sent at the end of February to the European Commission’s Internal Market and Services Directorate General. FERMA made the comments in its response to the EC’s recent consultation on its review of the Insurance Mediation Directive, or IMD. Large risks need to be included within the revised IMD, FERMA said. “The revised European Insurance Mediation Directive (IMD) should incorporate binding standards of transparency for brokers in their relationship with insurance buyers no matter what size the risks,” FERMA reiterated in a press release on Tuesday.hideThrough the recent consultation, which lasted from November to last month, the EC sought comments from stakeholders on the functioning of the current IMD, which dates back to 2002. The EC wants to revise the directive in part due to the ‘patchwork of national regulations’ across European Union member states, which has led to ‘significant gaps and inconsistencies as far as the activity of insurance mediation is concerned,’ according to its consultation document. In addition, the Solvency II Framework Directive also warrants revisions to the IMD in order ‘to extend the benefits of a risk-based solvency regime and increased transparency rules to policy holders’. FERMA and BIPAR worked together to devise their own industry solution by signing in November a groundbreaking transparency protocol that they hoped would prevent conflicts of interest in the relationship between brokers and corporate insurance buyers. But while the protocol showed that a consensus is possible between corporate buyers and intermediaries, FERMA noted in its comments to the EC that its application is ‘left to the goodwill’ of BIPAR and FERMA’s respective members, with ‘no guarantee of uniform application’. “The review of the IMD represents, therefore, a unique opportunity to incorporate undisputed standards of transparency into binding European legislation,” FERMA told the EC. Peter den Dekker, president of FERMA, said in an interview this week that by incorporating principles of the protocol into the IMD, FERMA was attempting to address the ‘patchwork’ of regulations already observed by the EC. “We want to have a level playing field across Europe,” Mr Den Dekker said. “We see the difference within Europe already. If you are in the UK or in the Netherlands or in France, you see a much more sophisticated broker and client relationship than in other markets.” In those more developed markets, it is normal for brokers and buyers to discuss transparency, remuneration and the management of potential conflicts of interest, he explained. “In other countries, it is not normal, and if you are a UK head office customer and you have operations across Europe and you need to manage your broker relationships in every country, you need at least a minimum level of transparency in each country to start with, and at this moment it is very difficult to do,” Mr Den Dekker said. At present, the voluntary adoption of the principles under the FERMA-BIPAR protocol varies from country to country. On the one hand, Mr Den Dekker noted the recently upgraded principles agreed by insurance buyers and brokers in France go much further than the minimum principles put in the federations’ protocol. On the other hand, Mr Den Dekker said he is traveling to the Czech Republic next month to help in discussions between the broker associations and ASPAR CZ, the local risk management association, ‘to get to at least a level of understanding and to assist in getting an agreement in place on the basis of the protocol’. Meanwhile, other insurance industry players weighed in on the IMD during the consultation period. The CEA, the European insurance and reinsurance federation, told the EC that if it decides to order improved transparency in the way intermediaries are remunerated then it should follow a ‘minimum harmonisation’ approach that would ensure that customers are told upfront about the form and source of the intermediary’s payment. It also said, however, that any changes made should be proportionate and take into account the manner of distribution and type of market affected. On its website, BIPAR also presents its views on the revised IMD. The broker federation says that the new IMD should be ‘as broad as possible and there should be no new exceptions, in the interest of consumer protection and in the interest of the level playing field’. BIPAR also says: “Clear, concise and relevant information relating to the product, services provided and price must be made transparent to the client.”

FERMA wants its joint BIPAR protocol principles to be in new IMD

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