But under plans for the IDD the Parliament has not called for a mandatory disclosure of how much they get paid
Brokers could be forced to disclose the nature and basis of their pay to clients, following a recent vote by the European Parliament (EP) on the Insurance Distribution Directive (IDD).
But the Parliament stopped short of calling for brokers to disclose exactly how much they were paid.
According to a press statement, the EP also agreed that brokers must disclose any conflicts of interest before they complete the sale of insurance to their clients.
Before any of the changes can come into force the European Council has to approve the changes.
If the IDD is approved without further change, the new regime is likely to be implemented in late 2017/early 2018.
The Parliament said that brokers’ remuneration arrangements should not provide incentives to recommend a particular insurance product when a different one would better meet the customer’s needs
The other changes that the European Parliament voted on include:
- Insurance intermediaries taking out insurance contracts to provide cover of at least €1.25m (£880,000) against professional negligence claims applying to each claim and in aggregate €1.85m (£1.3m) per year for all claims.
- Intermediaries taking appropriate measures to protect clients in the event that they are unable to transfer a premium or a claim between the insurer and the customer.
- Before signing a non-life insurance contract, all buyers must be given a free-of-charge product-information document (PID) containing standard information on the type of insurance, obligations under the contract, risks insured and excluded and means of payment and premiums, in clear, plain language.
Biba head of compliance and training David Sparkes said the call for a disclosure of all conflicts of interest did not reflect the full wording of the IDD, which says that brokers should manage their conflicts of interest properly to prevent any detriment to the customer.
He added: “Brokers should not be too concerned because it is likely to be something they are doing any way. Regarding cover for professional negligence it won’t be as big an effect, as brokers will typically have cover in excess of that limit.”
The IDD will also extend the scope to cover all sales of insurance products, including proportionate requirements for those who sell insurance products on an add-on basis.
Other planned changes include insurance sales staff being well-trained and brokers undertaking at least 15 hours of continuous professional training a year.