BIPAR - Insurance Distribution Directive (IDD) (2022)

The aim of this article is not to provide you with the most up-to-date information on the subject but to give you a general insight in the subject and its importance for the sector.

The IDD introduces new rules on insurance distribution. It came into force on 23 February 2016 and had to be implemented into the national laws of the EU Member States by 1st July 2018. By February 2020, all EU Member States had implemented the IDD. The IDD is a minimum harmonisation Directive, meaning that Member States cannot implement less than what is required by the IDD but they may introduce additional measures to ensure the protection of their consumers.

The IDD empowered the European Commission to adopt two Delegated Acts to further specify IDD provisions on Product Oversight and Governance (POG) and Conflicts of interest, Inducements, Assessment of suitability and appropriateness and reporting for IBIPs. These Delegated Regulations are binding for Member States. The Commission also adopted an implementing technical standard (ITS) regarding a standardised format of the IDD Product Information Document (IPID), and a regulatory technical standard (RTS) reviewing the minimum amounts of PII/financial capacity[1].

(Video) Insurance Distribution Directive (IDD) - Customer Sustainability Preferences

According to IDD Article 41, by 23 February 2021, the Commission had to submit a report on the application of IDD Article 1 and to review the IDD. Because of the late adoption of the Directive and then the Covid-19 crisis, these reports have been postponed. They should be published by end of 2022.

The Commission will consult the industry on its report on the review of the IDD in early 2022. The EIOPA report on the IDD application (see below) will feed into that report.

EIOPA will also be requested by the Commission in June 2021 (or later this year) to provide its technical advice on the possible revision of the IDD. To this end, EIOPA will consult the sector accordingly.

Measures issued by EIOPA

(Video) FCA's Insurance Distribution Directive (IDD) consultation explained

The IDD empowers EIOPA (European Insurance and Occupational Pensions Authority) to adopt various measures and to carry out other reports and studies.

According to IDD Article 41, EIOPA was required to prepare a report to assess the application of the IDD by the end of 2020. EIOPA has postponed the delivery of this report to Q4 2021, mainly because of the delayed transposition and application date of the IDD and the impact of the COVID-19 pandemic. As a first step towards the preparation of its report, EIOPA consulted stakeholders at the end of 2020, asking for their feedback on the experience with the application of the IDD.

BIPAR key messages in response to EIOPA consultation on IDD application

  • It is too early to have a clear view and understanding of the impact of the IDD on the activities of insurance intermediaries and on consumers’ protection. The introduction of new requirements by the IDD is still too recent to allow for any meaningful conclusions about their application in practice.
  • The assessment of the impact of the IDD cannot be seen in isolation of other market developments and of many new EU rules which came into force in the last years (GDPR, AML, etc.).
  • The IDD is a good and balanced text that can bring real benefits to consumers and retail investors.
  • There is now a need for regulatory stability for insurance intermediaries.
  • There is room to update some outdated IDD requirements for example, that require precontractual information to be provided to consumers on paper by default.
  • The (lack of) application of the proportionality principle is a serious issue.
  • Regulatory convergence must be a key focus in addressing any issue going forward, in this regard EIOPA has a key role to fulfil.

In October 2020, EIOPA published a paper on the supervision of IDD POG requirements. EIOPA explains that the paper can be of useful support for distributors when implementing their own POG policies, so they can better engage with their supervisors. In its paper, EIOPA sets out the supervisory approach for assessing whether manufacturers have developed and implemented adequate systems and controls for their POG process and whether product distribution arrangements have been properly implemented by distributors, to be aligned with manufacturers’ distribution strategy and ensure products are sold within the right target market.

(Video) What are the main features of Insurance Distribution Directive (IDD) and how does it work?

In December 2020, EIOPA published its first report on administrative sanctions and other measures imposed under the IDD by NCAs. Under Article 36 (2) of the IDD, EIOPA is required to publish such a report each year. Overall, in eight Member States (Belgium, Bulgaria, Denmark, France, Germany, Hungary, Lithuania and Malta), NCAs imposed a total of 1,923 administrative sanctions or other measures. The vast majority of sanctions (around 75%) were for breaches of professional and organisational requirements in Article 10 of the IDD.Around 20% of sanctions were imposed for breaches of the registration requirements in Article 3 of the IDD.The most frequent sanctioning measure based on the information reported by each NCA, was to withdraw the registration of the intermediary followed by the use of administrative pecuniary sanctions.

In April 2021, EIOPA launched its IDD Single Rulebook. The IDD Single Rulebook is meant as a documentation tool and aims at promoting and ensuring the consistent application of the IDD (levels 1, 2 and 3) across the EU. It provides easy access to the IDD regulatory framework, legally binding and non-binding.

In April 2021, EIOPA published another set of Questions & Answers (Q&As) on the application of the IDD. EIOPA Q&As are a practical convergence tool to support “common supervisory approaches and practices”. EIOPA’s answers are non-binding and they are not subject to the “comply or explain” procedure. This latest set of Q&As provides, in particular, practical guidance on "appropriateness assessment, POG requirements (significant adaptation of an existing product, product testing and product review for existing products, manufacturer’s responsibility for adequate product oversight & governance), the application of the IDD in case of providing advice regarding existing contracts and to captive insurance undertakings".


Other measures already adopted by EIOPA

(Video) Webinar: The Insurance Distribution Directive guidance for law firms

  • Under Article 11(3) of the IDD, EIOPA must include on its website the hyperlinks to the websites of competent authorities where information on “general good[2]” rules is published. Such information is now available on the EIOPA website
  • According to the IDD, Article 11(5), EIOPA is also required to publish a report examining the general good rules in the context of the proper functioning of the IDD and of the internal market. This report was published on 30 July 2019. The report is accompanied by a country-by-country analysis.
  • Under the IDD, Article 3.4, EIOPA must establish and publish on its website and keep up to date a single electronic register containing records of insurance, reinsurance and ancillary insurance intermediaries which have notified their intention to carry out cross-border business in accordance with the IDD. This information is now available on theEIOPA website.
  • In December 2018, EIOPA published a report on the “Evaluation of the Structure of Insurance Intermediaries Markets in Europe” in accordance with Article 41(5) of the IDD (please click here for the Report and here for the annex). This Report provides an overview of the status of the European intermediaries markets up to 31 December 2017, relating to data for the period from 2013 to 2017.

BIPAR is monitoring the IDD implementation in the EU Member States and is assisting its member associations, for example, in case of wrong implementation of the text.

[1] The current figures are as follows:

  • the minimum amount of EUR 1 300 380 per claim;
  • the minimum amount of EUR 1 924 560 for all claims/year; and
  • the minimum amount of EUR 19 510 of financial capacity

This Regulation is binding in its entirety and directly applicable in all EU Member States.

[2] General good provisions are rules adopted by a Member State which introduce additional requirements addressing specificities of its market (e.g. consumer protection, prevention of fraud, preservation of the good reputation of the national financial sector etc..) and must be observed by insurance intermediaries providing cross-border services into that market.

(Video) Insurance 101: The Insurance Distribution Channel Overview

FAQs

Does IDD replace insurance mediation directive? ›

The Insurance Distribution Directive (IDD) replaced the Insurance Mediation Directive (IMD) on 1 October 2018. As a result, we have a number of requirements in our Handbook which apply to firms distributing insurance.

What are IDD requirements? ›

The IDD requires everyone selling insurance to do at least 15 CPD hours per year. If you already need to do 35 hours of CPD each year for retail investment activities, these 15 hours are included in that. The FCA also expects the training to cover specific areas which it refers to as 'minimum knowledge criteria'.

What is the aim of the insurance distribution directive IDD )? ›

The IDD aims to ensure that distributors take responsibility for consumer outcomes and that the products sold meet consumers' needs. The IDD sets out the information to be given to consumers before they sign an insurance contract.

Does IDD apply life insurance? ›

The IDD directive has three lists of subjects that the IDD must cover: general insurance, life insurance and insurance-based investment products. Neither the EU authorities nor the FCA have published any further guidance than these three lists.

Does IDD still apply to UK? ›

The current scope of the delegated regulations that have been made under the IDD will still apply to the UK after leaving the EU.

What is an IDD check? ›

The IDD sets out a minimum necessary knowledge requirements for every insurance professional across eight core competencies. The knowledge and understanding required at this basic level concern the fundamentals of insurance.

What is the IDD minimum level of professional indemnity cover? ›

The IDD requires that all intermediaries have in place professional indemnity insurance or a comparable guarantee with minimum levels of cover of €1,250,000 per claim per year, and €1,850,000 per year in aggregate for all claims.

What does IDD mean in insurance? ›

The Insurance Distribution Directive (IDD) replaces the Insurance Mediation Directive (IMD).

Does IDD apply commercial insurance? ›

The IDD will affect everyone within the general insurance market, including insurance companies, brokers, wholesalers and secondary providers. This means that even businesses that don't deal with insurance full time, such as travel agents and car hire firms, must comply with the new rules.

What is the main aim of the oversight and governance provision of the IDD? ›

The main objective of the IDD is to regulate which products are presented to the market and how these are sold. Article 25 of the IDD provides that insurance distributors are required to have in place an oversight and governance process for the approval of new products.

When did IDD come into effect? ›

The IDD came into force on 22 February 2016. Originally, it had to be transposed by 23 February 2018.

Which EU directive did the IDD replace and repeal? ›

The Directive on insurance distribution ((EU) 2016/97) (Insurance Distribution Directive or IDD) is designed to improve EU regulation in the insurance market. It repealed and replaced the Insurance Mediation Directive (2002/92/EC) (IMD) on 1 October 2018.

What is IDD EU? ›

Insurance. With the new Insurance Distribution Directive (IDD) the EU seeks to further harmonise rules on the sale of insurance in the single market. The directive creates a common framework for all types of insurance sales and has been implemented throughout most of Europe.

When was IDD implemented in the UK? ›

The Insurance Distribution Directive ((EU) 2016/97) (IDD) is designed to improve EU regulation on the sale of insurance products. The IDD came into force on 22 February 2016. Originally, it had to be transposed by 23 February 2018.

What does distribution mean in insurance? ›

Insurance distribution means to sell, propose to sell, advise on or prepare in any other way the conclusion of insurance contracts. It also covers sales of insurance products through websites, including comparison websites if they allow concluding an insurance contract.

Will IDD apply after Brexit? ›

The UK transition period according to the Withdrawal Agreement ends on 31 December 2020. Following this date, all Union primary and secondary law will no longer apply to the United Kingdom, including the Solvency II Directive as well as the Directive on Insurance Distribution (IDD).

What is the minimum CPD requirement for staff involved in insurance distribution? ›

The IDD requires that employees of insurers and insurance intermediaries complete 15 hours of Continuing Professional Development (CPD) per year. We have also applied the 15 hours CPD requirement to AIIs to retain a level playing field between firms and to reduce the risk of mis-selling.

Which Organisation oversees compliance with the insurance distribution directive? ›

Information Commissioner's Office (ICO)

What are 3 intellectual disabilities? ›

List of Potential Intellectual and/or Developmental Disabilities:
  • ADHD.
  • Apert Syndrome.
  • Autism.
  • Cerebral Palsy.
  • Developmental Delay.
  • Developmental Hearing Loss.
  • Down Syndrome.
  • Fetal Alcohol Spectrum Disorder.

Is a developmental delay a disability? ›

1. Developmental delays are usually caused by a variety of life-long conditions categorized as developmental disabilities (DD). Developmental disabilities include Down syndrome, autism spectrum disorders, and cerebral palsy, all conditions also referred to as special needs.

Is autism an intellectual or developmental disability? ›

Autism is NOT an Intellectual Disability. Deficits in Intellectual ability are not a part of the criteria for diagnosis of Autism and have never been. Autism delays developing Adaptive capacity, which presents an uneven trajectory in language, communication, and emotional states.

What limit of indemnity is required? ›

What is Limit of Indemnity? The Limit of Indemnity (LOI) is the maximum amount the insurer will pay under a policy during the policy period. Legal costs may be included within the Limit of Indemnity or may be covered as an additional amount, depending on the policy purchased.

What level of PI cover do I need? ›

Specific PI requirements

Membership for accountants and accountancy firms is typically reliant on a level of cover at least two and a half times their gross fee income for the last financial year.

What are the requirements for professional indemnity insurance? ›

The regulation requires policies to provide a minimum level of indemnity coverage of not less than $1 million for any one claim; and not less than $3 million in the aggregate, for all claims made during the period of insurance.

When must a demands and needs letter be provided to a client? ›

A statement of the demands and needs must be communicated to the customer prior to the conclusion of a contract of insurance.

Does MiFID II apply to insurance brokers? ›

Under MiFID II commodity businesses, insurance brokers, mortgage brokers, estate agencies, corporate finance businesses, investment firms and any business who deals with products that have an investment element, will also need to comply with the new regulation.

Which document will the ipid replace? ›

The IDD replaces the current Insurance Mediation Directive (IMD). One of the main provisions of the IDD requires firms to provide Insurance Product Information Documents (IPIDs), which will replace key facts documents, and are mandatory for consumers.

What is product oversight and governance? ›

Product oversight and governance refers to the systems and controls firms have in place to design, approve, market and manage products throughout the products' lifecycle to ensure they meet legal and regulatory requirements.

What is POG regulation? ›

This Regulation lays down rules for the maintenance, operation and review of product oversight and governance arrangements for insurance products and for significant adaptations to existing insurance products before those products are brought to the market or distributed to customers ('product approval process'), as ...

What is an ipid document? ›

This document is a summary of the benefits included, exclusions, restrictions, areas of cover, how your policy is paid and your rights and obligations.

What is meant by the term minimum Harmonisation? ›

Minimum harmonisation describes a piece of law (usually a directive but occasionally a regulation) that sets a threshold national legislation must meet. EU Member State national legislation may exceed the terms of minimum harmonisation law.

What does ipid stand for? ›

An IPID (Insurance Product Information Document) is designed to provide information on general Insurance products in a standardised format to help the customer make a more informed buying decision when comparing Insurance Products. This is to help ensure they choose a product that meets their needs.

Who are the distributors of insurance? ›

Insurance Distributors
  • Financial Institutions (Banks, Broker/Dealers,RIAs),
  • Independent Insurance Agents/Brokers,
  • Specialty Brokers (Termination and DC Annuities/BOLI)

Who regulates insurance in the EU? ›

At a national level, the government bodies regulating the (re)insurance industry are the national supervisory authorities in each respective EU member state. The extent of their powers is determined by EU Directive 2009/138/EC (Solvency II) and national insurance supervisory law.

What are the 4 types of distribution? ›

There are four types of distribution channels that exist: direct selling, selling through intermediaries, dual distribution, and reverse logistics channels.

What are the 3 types of distribution? ›

The three types of distribution channels are wholesalers, retailers, and direct-to-consumer sales.

How do you calculate distribution coverage? ›

The Distribution Coverage Ratio is calculated as Distributable Cash Flow divided by total distributions to be paid for the respective periods.

Which EU directive did the IDD replace and repeal? ›

The Directive on insurance distribution ((EU) 2016/97) (Insurance Distribution Directive or IDD) is designed to improve EU regulation in the insurance market. It repealed and replaced the Insurance Mediation Directive (2002/92/EC) (IMD) on 1 October 2018.

Which Organisation oversees compliance with the insurance distribution directive? ›

Information Commissioner's Office (ICO)

What is the IDD minimum level of professional indemnity cover? ›

The IDD requires that all intermediaries have in place professional indemnity insurance or a comparable guarantee with minimum levels of cover of €1,250,000 per claim per year, and €1,850,000 per year in aggregate for all claims.

Does IDD apply commercial insurance? ›

The IDD will affect everyone within the general insurance market, including insurance companies, brokers, wholesalers and secondary providers. This means that even businesses that don't deal with insurance full time, such as travel agents and car hire firms, must comply with the new rules.

What does IDD stand for insurance? ›

The Insurance Distribution Directive (IDD) replaces the Insurance Mediation Directive (IMD).

When did IDD come into effect? ›

The IDD came into force on 22 February 2016. Originally, it had to be transposed by 23 February 2018.

Does MiFID II apply to insurance brokers? ›

Under MiFID II commodity businesses, insurance brokers, mortgage brokers, estate agencies, corporate finance businesses, investment firms and any business who deals with products that have an investment element, will also need to comply with the new regulation.

What is the main aim of the oversight and governance provision of the IDD? ›

The main objective of the IDD is to regulate which products are presented to the market and how these are sold. Article 25 of the IDD provides that insurance distributors are required to have in place an oversight and governance process for the approval of new products.

When was IDD implemented in the UK? ›

The Insurance Distribution Directive ((EU) 2016/97) (IDD) is designed to improve EU regulation on the sale of insurance products. The IDD came into force on 22 February 2016. Originally, it had to be transposed by 23 February 2018.

What is IDD EU? ›

Insurance. With the new Insurance Distribution Directive (IDD) the EU seeks to further harmonise rules on the sale of insurance in the single market. The directive creates a common framework for all types of insurance sales and has been implemented throughout most of Europe.

What limit of indemnity is required? ›

What is Limit of Indemnity? The Limit of Indemnity (LOI) is the maximum amount the insurer will pay under a policy during the policy period. Legal costs may be included within the Limit of Indemnity or may be covered as an additional amount, depending on the policy purchased.

What level of PI cover do I need? ›

Specific PI requirements

Membership for accountants and accountancy firms is typically reliant on a level of cover at least two and a half times their gross fee income for the last financial year.

What are the requirements for professional indemnity insurance? ›

The regulation requires policies to provide a minimum level of indemnity coverage of not less than $1 million for any one claim; and not less than $3 million in the aggregate, for all claims made during the period of insurance.

What does distribution mean in insurance? ›

Insurance distribution means to sell, propose to sell, advise on or prepare in any other way the conclusion of insurance contracts. It also covers sales of insurance products through websites, including comparison websites if they allow concluding an insurance contract.

What is the minimum CPD requirement for staff involved in insurance distribution? ›

The IDD requires that employees of insurers and insurance intermediaries complete 15 hours of Continuing Professional Development (CPD) per year. We have also applied the 15 hours CPD requirement to AIIs to retain a level playing field between firms and to reduce the risk of mis-selling.

Videos

1. FIAR 2017 - Insurance Market Trends Conference Juan - Ramon PLA Secretary General, BIPAR Managing
(XPRIMM)
2. Insurance brokers and their role (29/10/20)
(QMULSchoolofLaw)
3. Conduct of Business: Promoting Good Conduct in Insurance Distribution
(IAIS)
4. ΟΔΗΓΙΑ IDD
(Insurance Innovation)
5. The Changing Landscape of Insurance Distribution
(Travelers)
6. Reimagining insurance distribution
(Accenture Insurance)

Top Articles

You might also like

Latest Posts

Article information

Author: Wyatt Volkman LLD

Last Updated: 01/15/2023

Views: 6421

Rating: 4.6 / 5 (46 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Wyatt Volkman LLD

Birthday: 1992-02-16

Address: Suite 851 78549 Lubowitz Well, Wardside, TX 98080-8615

Phone: +67618977178100

Job: Manufacturing Director

Hobby: Running, Mountaineering, Inline skating, Writing, Baton twirling, Computer programming, Stone skipping

Introduction: My name is Wyatt Volkman LLD, I am a handsome, rich, comfortable, lively, zealous, graceful, gifted person who loves writing and wants to share my knowledge and understanding with you.