The European Insurance and Occupational Pensions Authority (EIOPA) published today its first report on the application of the Insurance Distribution Directive (IDD), which regulates how insurance products are designed and distributed in the European Union.
Amongst others, this report examines:
- any changes in the insurance intermediaries' market structure;
- any changes in the patterns of cross-border activity;
- the improvement of quality of advice and selling methods and the impact of the IDD on insurance intermediaries which are small and medium-sized enterprises; and
- whether competent authorities are sufficiently empowered and have adequate resources to carry out their tasks.
EIOPA’s main findings are the following:
- Notwithstanding limitations in terms of evidence and experience on the impact of the IDD on the quality of advice and selling methods, the IDD generally had a positive impact on how insurance is distributed to consumers. Nevertheless, EIOPA has identified some difficulties in applying the demands-and-needs test, and continues to raise concerns related to the sale of unit-linked life insurance products and mortgage and consumer credit protection policies.
- A decrease in the number of registered intermediaries has occurred over the period from 2016 to 2020, but the number of intermediaries with a passport to carry out cross-border business, has increased in most Member States over the same period.
- Insurance distributors faced some challenges in applying, and national competent authorities (NCAs) in supervising, the IDD rules on digital disclosures due to a lack of additional guidance. For instance, the IDD requires, by default, certain disclosures to be made to consumers on paper and this rule has not been able to keep pace with digital developments.
- In EIOPA's view, not all NCAs have sufficient powers to carry out effective conduct of business supervision. In particular, some NCAs lack intermediate powers between adequate remedial measures and product intervention powers. In addition, several NCAs would like to perform mystery shopping activities, but are not empowered to carry out such activities.
The report also includes a detailed country-by-country analysis.
Under Article 41(4) of the IDD, “EIOPA shall prepare a report on the application of this Directive” every two years. The IDD entered into application in most Member States on 1 October 2018. It sets out minimum regulatory standards across the EU insurance market and aims to enhance consumer protection.