- The Bill, which transposes a European directive, establishes conditions of fair competition for all operators
- The customer must be informed of all costs and expenses associated with the product as well as its risks
- The regime of infractions and sanctions is reinforced, with a notable increase in the latter
- The standard modifies the market structure and recognizes as distributors more actors, such as insurance entities
The Council of Ministers has approved the Draft Law on the Distribution of Private Insurance and Reinsurance, which transposes Directive 2016/97 of the European Parliament and of the Council of January 20, 2016. This new European regulation, which begins its Parliamentary procedure to adapt it to the Spanish legal system, pursues two fundamental objectives. On the one hand, to increase the protection of the insured by increasing transparency, avoiding conflicts of interest or designing more suitable products for the consumer. But, in turn, it is about establishing conditions of fair competition for all operators in the sector, which are adequate and proportionate to the different types of distribution channels.
For this, the rules of conduct and transparency are reinforced and additional requirements are established for the distribution of investment products based on insurance. Conflicts of interest that could harm the client will be avoided. In this regard, the insured must be informed of all associated costs and expenses; warn you about the risks associated with insurance-based investment products or certain proposed investment strategies; and provide you with a periodic evaluation of the suitability of the investment product when advice is offered.
The concept of linked and combined sales is introduced, that is, those that offer insurance products together with services or products other than insurance as part of the same package or agreement. The insurance distributor must inform in this case if the different components can be purchased separately, and indicate the corresponding proof of the costs and expenses of each component.
Product governance requirements are established, particularly in the design, approval and control of these: insurance distributors who design their own products for sale must develop, maintain and review an approval process for each of these products , as well as the modifications that these may suffer over time. They must also identify the market to which the product is intended.
In turn, the regime of infractions and sanctions is reinforced. Specific procedures are established to channel public complaints against infractions in the area of insurance and reinsurance distribution, thus encouraging the collaboration of professionals working in the sector, without implying labor risks for those who report these irregularities. But the supervisory powers of the authorities of the Member States are also strengthened, so that the protection of private insurance users is improved. To all this is added a notable rise in current sanctions (by provision of the Directive).
This Bill modifies the market structure of the insurance and reinsurance distribution, setting the type of distributors and the requirements to access this activity. In total, it will affect more than 3,200 insurance brokers and 77,000 insurance agents subject to the supervision of the General Directorate of Insurance and Pension Funds, those subject to the supervision of the Autonomous Communities, and all insurance entities that distribute insurance directly.
Thus, insurance and reinsurance distributors, beyond traditional mediators (agents and brokers), are considered insurance and reinsurance entities; to complementary insurance mediators, including market participants who distribute insurance products on an ancillary basis; and to insurance comparators. In addition, in the case of banking-insurance operators, the credit institution or the financial credit institution may make its distribution network available to more than one banking-insurance operator.
The standard provides that insurance mediators can use websites or other distance marketing techniques through which the customer is provided with information comparing prices or coverage of a certain number of insurance products from different companies.
Regarding the requirements to access the activity, the professionalism and competence of the insurance and reinsurance mediators are reinforced, as well as the employees of insurance entities that intervene in the distribution of insurance, so that their professional knowledge is in in line with the level of complexity and nature of its activities.