The consultation for a draft bill implementing the Insurance Distribution Directive (IDD) in the Netherlands was launched on 23 December 2016. The IDD replaces the Insurance Mediation Directive (IMD). The IDD’s objectives are:
- to create a level playing field for all parties involved in selling insurance products
- to enhance consumer protection, including protection for the purchase of insurance-based investment products similar to the protection offered for the purchase of investment products under MiFID II
- to improve the internal market for financial services
Where the scope of the IMD was limited to insurance intermediaries, the IDD also includes insurers (direct writers). In addition, “ancillary insurance intermediaries” (such as car rental companies and travel agents), as well as online distribution intermediaries (including comparison websites) must comply with the IDD rules unless an exemption applies.
Draft implementing bill
Below, we have highlighted the most important provisions of the draft bill.
- Enhanced notification procedure
The current notification procedure for cross-border business will be enhanced.
- Intermediary register
EIOPA will publish new information on its website: a register of intermediaries that have notified their intention to perform cross-border business, links to the supervisory authorities´ current registers and links to supervisory authorities´ websites dealing with provisions in the interest of the general good.
- New sanctions measures available to AFM
If an insurance or reinsurance intermediary is registered in another Member State and has a branch or provides services in the Netherlands, the AFM can take measures. These measures include prohibiting trade if the Dutch Financial Markets Supervision Act (FMSA) is breached after the AFM has contacted the competent home authority, and this authority fails to take sufficient action. The AFM can also take immediate action if this is necessary for the protection of consumers.
- Comparison websites also qualify as intermediaries
The definition of “intermediation” in the FMSA will be broadened and will also include comparison websites. This clarifies the current interpretation in the Netherlands (click here for the guidance published by the AFM in 2014). Operators of comparison websites will qualify as intermediaries if they provide information about one or more financial products based on criteria selected by customers through the comparison website as well as a ranking of financial products based on price and product comparison, or a discount on the price of a financial product. The customer must be able to conclude the contract using the website or other media.
- Broadening of FMSA exemptions
Several parties and activities are, under certain conditions, exempted from the application of the FMSA, including:
- other professionals, such as tax experts, accountants or lawyers, who provide information in the course of their professional activities, provided that the purpose is not to help the customer conclude or fulfil an insurance contract or to assist with the execution of an insurance policy;
- professional handling of damage cases for insurers, claims settlement and claims expert appraisal;
- the mere provision of data and information on potential clients to insurers or insurance intermediaries as long as the provider does not take any additional steps to assist in the entering into of an insurance contract;
- the mere general provision of information about insurance or financial services providers to potential clients as long as the provider does not take any additional steps to assist in the entering into of an insurance contract; and
- financial services in insurances in relation to risks and commitments located outside of the EU.
- Possibility of acting under the responsibility of an intermediary (verbonden bemiddelaar)
According to the IDD, an insurance intermediary does not need to obtain a licence if it acts under the responsibility of an insurance intermediary which has a licence. Currently, this is only allowed under the responsibility of a licensed insurer.
- Additional pre-contractual obligations and a new standardised information document
Financial services providers must obtain information from the customer to determine the customer’s needs and demands, before entering into the insurance contract. Any proposal must be consistent with these needs and demands. If advice is given, the financial services provider must explain why the product would best meet the customer’s needs and demands. The details to be provided will depend on the complexity of the product being proposed as well as the type of customer. The same requirements will apply if an insurance product is offered together with an ancillary product or service which is not insurance, as part of a package or the same agreement.
- Conflicts of interest and transparency about inducements
An insurer will need to inform its customers about the nature of the remuneration received by its employees in relation to the insurance contract, before the insurance contract is entered into. Further details will be implemented in an existing conduct supervision decree and are not part of the consultation.
- Ancillary products and services (package deals)
Undertakings offering an insurance product ancillary to a non-insurance product or service, as part of a package or the same contract, must allow the customer to purchase the product or service separately.
- Maintaining records
A record, including the documents agreed between the customer and the insurer or insurance intermediary setting out the rights and obligations of the parties, as well as any other terms applicable to the services to be provided – whether incorporated by reference to other documents or legal texts or not – will need to be maintained.
- Other obligations to be implemented in decrees
Several provisions of the IDD will be further implemented in decrees. These subjects are not covered by the draft bill and will likely be consulted separately. These subjects are:
- conflicts of interest and transparency on inducements (please see the above explanation about this subject);
- the expertise requirements for certain employees and managers of insurance intermediaries and insurers;
- product development and governance;
- requirements relating to information to be provided to consumers in the pre-contractual phase, including the standardised information document (IPID) in relation to which EIOPA published draft Consultation ITS.