24 May 2007
Gold-plated EU insurance mediation directive increasing costs
for small business
Research finds EU insurance mediation streamlining has had
mixed results
A new report commissioned by the City of London Corporation to
analyse implementation of the EU Insurance Mediation Directive
(IMD) will be launched at today’s British Insurance Brokers’
Association (BIBA) conference in London.
Comparative Implementation of EU Directives (III) –
Insurance Mediation by research firm CRA International surveys
IMD implementation across the EU15 and provides a detailed
comparative analysis of the process in four countries: France,
Germany, the Netherlands and the UK.
The report finds "gold-plating" the minimum requirements of the
directive is common, for example;
- information requirements differ with some Member States
requiring the provision of risk-sheets, policy summaries and a fee
disclosure by the intermediary
- views on competence vary widely, with the UK’s Financial
Services Authority adopting a flexible approach compared to the
other countries statutory regulators who require strict
qualifications and requisite training hours
- gold-plating the IMD requirements to match previous statutory
regulation eg minimum limits of professional indemnity cover in
France.
The IMD was designed to standardise professional requirements
for insurance intermediaries across Europe. The UK was one of only
four EU15 states to transpose the directive into national
legislation before the 15 January 2005 deadline.
The study has revealed that where a single regulator exists,
such as in the UK and the Netherlands, ‘direct selling’ has been
captured by the rules, in contrast to the approach of
sector-specific regulators in France and Germany which originally
focussed on intermediaries.
Ad-hoc automatic re-qualification on new national registers or
"grandfathering" was allowed by three of the four states covered.
It was not allowed in the UK, even for those intermediaries who
were already complying with the voluntary regime through the
General Insurance Standards Council (GISC) (approximately 6,000
intermediaries or one third of the market).
Available evidence suggests a wide variation in the cost of the
implementation of the IMD and compliance with the new rules. It
appears that implementation costs were significantly higher in the
UK than elsewhere based on the cost benefit analysis performed by
the FSA.
Commenting on the findings, Michael Snyder, Chairman of Policy
at the City of London said the IMD’s impact on small enterprises
was worrying.
"It appears that the IMD is increasing cost and regulatory
burden to the point where smaller operators could be driven from
the market," said Michael Snyder.
The report finds that in the UK, one of the implications of
insurance intermediaries being regulated by the FSA is that other
rules contained in the FSA handbook have also been applied, which
interviewees view as imposing a greater burden than in other
countries.
The FSA has in recent months been conducting a review of its
Insurance Conduct of Business (ICOB) rules for certain general
insurance products. As a result, the FSA is proposing to remove
most of the ICOB requirements that exceed minimum IMD rules.
Michael Snyder commented: "It is heartening to see the FSA
acting to reduce regulatory burdens. We must, however, strive
harder to ensure that the UK’s diligence in implementing EU
directives does not result in British businesses and consumers
facing heavier costs than those in other Member States."
The IMD report is the third in a series of independent
comparative studies of the implementation of EU directives,
commissioned by the City of London.
Ends
A
PDF copy of the report is available here.
For further information please contact:
Cubby Fox - City of London Press Office Tel 020 7332 3451
Mark Tilden or Kyla Malcom - CRA International Tel 020 7664
3700
Steve White – BIBA (insurance conference) Tel 020 7397 0222
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