Further to my article published in the August edition of International Fleet World, and following a flurry of late activity amongst EU stakeholders over the summer, the final compromise text of the Insurance Mediation Directive has been agreed. Recently renamed the Insurance Distribution Directive (IDD), the agreed text was circulated on 16 July 2015. It will now be put through the formal adoption processes of the European Institutions before it is transposed into national legislation by Member States.

What does it mean for leasing & rental?

This latest text can be cautiously welcomed by the industry. Although the text is yet to be filtered through the legal writers of the EU, it appears to have accounted for a number of our concerns, including those concerns expressed in my previous article.

First of all, while an ancillary insurance intermediary must be registered similarly to other insurance intermediaries, it is to be at the discretion of the Member States who will be responsible for that registration process.

Then there is Article 1, which is of interest for lessors in general and short-term rental companies in particular. This article details the scope of the new Directive and the conditions by which an ancillary insurance intermediary can claim to be outside its scope. Of crucial importance is the condition regarding the value of the contract. Under this text, ancillary insurance intermediaries selling insurances for a contractual period of less than three months that are of a monetary value of less than €200 per person – while satisfying the other criteria – will be out of scope.

Furthermore, the professional training and knowledge requirements, in so far as they apply to ancillary insurance intermediaries, appear now to be subject only to the requirement that ancillary insurance intermediaries possess an appropriate knowledge and ability to complete their tasks and perform their duties adequately. The specifics of these requirements are then to be prescribed by the Member States. As such the language of the text, as it applies to ancillary insurance intermediaries, has returned somewhat to the original ‘product orientated approach’ espoused by the European Commission, that being that training and knowledge requirements should primarily be suitable to the complexity of the products being distributed. This is something Leaseurope has argued for extensively.

A new requirement will be that, prior to the conclusion of an insurance contract, ancillary insurance intermediaries must provide the customer with suitable and objective information concerning the insurance product. However, we understand the responsibility for generating this information document (or webpage) will fall on the ‘manufacturer’ or the insurance intermediary. Finally, another significant revision of the original European Commission text is that remuneration disclosure requirements for ancillary insurance intermediaries in the current version of the IDD will only require ancillary insurance intermediaries to detail the nature of the remuneration received in relation to the insurance contract.

What is next?

In all likelihood, the Directive, as it has been agreed, will not satisfy any one particular sector. The original aim of the Directive was to tackle the fractured nature of the insurance distribution market and to harmonise regulatory requirements, thereby facilitating cross-border activity. It is questionable whether this has been achieved. As such, we can say with reasonable certainty that this Directive, which is subject to a review clause, will be looked at again in the near future.