IMD II is set to outlaw product ‘tying’ and tighten up bundling and cross-selling rules

The European Commission has published radical new changes to brokers in the draft of the revised Insurance Mediation Directive (IMD).

The new draft version of the IMD is designed to create new standards for intermediaries across Europe.

Generally, the draft IMD lays out rules on how intermediaries should be regulated, how they should give advice and information, and calls for professional standards.

Suggested changes include:

  • A rule that (re)insurance intermediaries have to hold professional indemnity (PI) insurance covering the whole of the EU for at least €1.12m (£900,000) per claim, unless this is already provided for them by insurers or others.
  • Tying - where a client can only get access to a particular service by using another service from the same provider - will be outlawed completely. Bundling products is permitted, but customers will have to be told if they can buy them separately.
  • Cross-selling practices by brokers will have to comply with future guidelines to be drawn up by the European Insurance and Occupational Pensions Authority (Eiopa).
  • Mandatory general insurance commission disclosure, possibly from 2019/20.

The draft IMD will have to be approved by the European Council and European parliament before being made law in 2013 and coming into effect from 2015, according to law firm Norton Rose.

The IMD has also been extended to cover direct writers and “certain activity” by aggregators. Loss adjusters are also included under the new laws, requiring them to have “appropriate knowledge and ability”.

Chartered Institute of Loss Adjusters president Simon Burley said: “I don’t think any of the loss adjusters have much fear of this potential regulation. We think what we are doing for clients will be more than sufficient to satisfy whatever is in the directive.”

In addition, the UK government must make sure “the competent authorities” set up a system to encourage and protect whistleblowers reporting breaches of the new IMD.

Talking points …

● How much will the IMD II really improve standards in UK broking, given the high levels of regulation brokers currently have to adhere to compared to their European counterparts?
● What will the new directive mean for direct writers and aggregators acting as intermediaries who have not previously been regulated outside of the UK before?