Luxembourg counsel Eva Gyori-Toursel gave a recent interview to Delano in respect of the Insurance Distribution Directive that is set to come into force in October.
The aim of the directive is to "regulate the way insurance products are designed and sold both by insurance intermediaries and directly by insurance undertakings," and it sets down rules on the information to be given to consumers prior to the purchase of an insurance contract, transparency rules for distributors and clarifies the procedures for cross-border distribution.
Can you briefly describe in what ways the directive will impact insurance providers' business?
Luxembourg life insurance providers will need to be supportive towards their distribution channels. They have a good opportunity to assist their distribution network with the setting up of appropriate pre-contractual disclosure duties. Based on their existing experience of international business cases, they can help some of their external distributors to grow internationally and master the regulatory framework. Proactive and collaborative institutions will be best positioned.
Do you have the impression that companies in Luxembourg are getting ready?
Luxembourg companies have started the process early. Local providers know that they will have to adapt the implementation of the directive into a broad number of national laws due to their international activities.
It is important to note that many aspects of the directive's implementation will depend on the options taken by each member state. Not all have been decided yet. If one takes the example of "advice", and insurance-based investment products, implementation into national legislation might carry some interesting definitions. For example, in France (see Ordonnance n°2018-361 of 16 May 2018) where a contract's consistency with the customer's demands and needs forms an integral part of the advice, although customer's demands and needs are a prerequisite for the on-boarding of any customer, even in the absence of advice given, according to the terms of the directive.
What advice would you give them in this regard?
They should take the time to reassess their distribution models and make sure that the directive is well understood. The risk is to either underestimate the regulatory impact or to leave the distributors with what they will ultimately consider an additional administrative burden.
What are the aims of the directive?
The directive promotes a level playing field and competition on equal terms between intermediaries (either tied or non-tied to the insurance company). The ultimate goal is to ensure that in all cases the same level of consumer protection will apply.
MiFID 2 and IDD aim to strengthen the customer confidence. In practice, however, the specific nature of insurance contracts in comparison to investments products still needs to be carefully considered.
This feature was first published by Delano.
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