Insurance Distribution Directive (IDD)

Directive (EU) 2016/97 of the European Parliament and of the Council on insurance distribution (IDD) entered into force on 23 February 2016. The Directive repealed the Insurance Mediation Directive.

The objective of the IDD is to harmonise national provisions concerning insurance and reinsurance distribution in the EU. However, the Directive is aimed at minimum harmonisation and does not preclude Member States from introducing more stringent provisions in order to protect customers. Equality of treatment between operators and customer protection require that the various types of insurance distributors, such as agents, brokers, ‘bancassure’ operators, insurance undertakings, travel agents and car rental companies be covered by the IDD.

The IDD took effect on 1 October 2018.

A working group was set up by the Ministry of Social Affairs and Health to prepare the transposition of the IDD into national law. A Government proposal for an Act on Insurance Distribution was circulated for comments until 12 June 2017. LRelated opinions and other documents. (in Finnish)

The Act on insurance distribution and the Act amending the Insurance Contracts Act entered into force on 1 October 2018.

The Act on Insurance Distribution repealed the Act on Insurance Mediation. The IDD has also required more detailed provisions to the Act on the Financial Supervisory Authority and other laws (Acts 235–237/2018 and 239–246/2018. The Act on Insurance Distribution and the other related Acts entered into force on 1 October 2018.

Some key points of the Acts
  • The Acts apply to insurance distribution by the insurer (= insurance undertaking) itself and by an insurance intermediary.
  • Insurance distribution using a website or other media has been brought more precisely within the scope of regulation. For example, comparison sites with links to an insurance company’s website for the conclusion of an insurance contract are required to register as insurance intermediaries.
  • Insurance intermediaries are registered by the FIN-FSA. Insurers and their employees are not subject to the registration requirement. They are, however, subject to requirements on professional competence and good repute, for example. The preconditions for registration have been expanded so that the good repute requirement extends to the management and owners of insurance intermediary undertakings. The management is also subject to a collective professional competence requirement.
  • Insurers’ and insurance intermediaries’ personnel directly involved in insurance distribution must be of good repute and continuously maintain and develop their professional skills. Personnel are subject to an obligation of at least 15 hours of professional training or development per year.
  • The registration requirement for an insurance intermediary’s personnel directly involved in insurance intermediation has declined from 50% to 30%. Only registered insurance intermediaries can be used as subcontractors.
  • The Acts contain more detailed provisions on conduct of business and the obligation to provide information. For example, the customer must be provided with a standardised Insurance Product Information Document.
  • Insurers are required to maintain a process for the approval of insurance products (product oversight and governance process).
  • Insurers and insurance intermediaries may not have sales targets, benefits or remuneration schemes that could provide them with an incentive to recommend an insurance product other than the one best suited to the customer’s needs. The customer must be informed of the nature of the remuneration received by the insurance company employee, insurance agent and the ancillary insurance intermediary. Insurance brokers are prohibited from taking a fee from a party other than the customer. Similar provisions have already been issued earlier in respect of undertakings providing investment services.
  • Insurance-based investment products: insurers and insurance intermediaries must have in place arrangements for the prevention and management of conflicts of interest. They must also assess the appropriateness and suitability of the product for the customer.
  • Administrative sanctions: in line with the IDD, the FIN-FSA has been granted powers to impose new administrative sanctions for the breach of requirements concerning registration, maintenance of professional competence and conduct of business.

Legislation supplementing the Act on insurance distribution:

  • Government Decree (293/2018) on the method for providing insurance-related information (Finnish, Swedish)
  • Government Decree (294/2018) on the drawing up, data content, presentation and communication to the customer of a non-life Insurance Product Information Document (Finnish, Swedish)
  • Ministry of Social Affairs and Health Decree (295/2018) on minimum professional knowledge and competence requirements for insurance distributors, persons involved in insurance distribution and persons responsible for insurance distribution (Finnish, Swedish).
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Level 2 regulation

Powers delegated to the European Commission

The IDD has also empowered the European Commission to adopt delegated acts in a number of related issues. The European Insurance and Occupational Pensions Authority (EIOPA) has provided the Commission with technical advice on the following matters:

  • product oversight and governance arrangements
  • management of conflicts of interest and inducement in respect of insurance-based investment products
  • assessment of suitability and appropriateness and reporting to customers in respect of insurance-based investment products
  • Insurance Product Information Document (IPID) for non-life insurance products

Product oversight and governance (POG) requirements for insurance undertakings and insurance distributors

  • Commission Delegated Regulation (EU) 2017/2358 (Finnish)
  • Commission Delegated Regulation (EU) 2017/2358 (Swedish)
  • Commission Delegated Regulation (EU) 2017/2358 (English)

Information requirements and conduct of business rules applicable to the distribution of insurance-based investment products

  • Commission Delegated Regulation (EU) 2017/2359 (Finnish)
  • Commission Delegated Regulation (EU) 2017/2359 (Swedish)
  • Commission Delegated Regulation (EU) 2017/2359 (English)

The Commission issued the above-mentioned Delegated Regulations on 21 September 2017. They were published in the Official Journal of the European Union on 20 December 2017. The application date of the Delegated Regulations was changed to 1 October 2018 by Delegated Regulation (EU) 2018/541; Finnish, Swedish, English.

Standardised presentation format for the Insurance Product Information Document (IPID)

  • Commission Implementing Regulation (EU) 2017/1469, (Finnish)
  • Commission Implementing Regulation (EU), (Swedish)
  • Commission Implementing Regulation (EU), (English)

The Commission Implementing Regulation was issued on 11 August 2017.

The Commission has issued Commission Delegated regulation (EU) 2019/1935 amending Directive (EU) 2016/97 of the European Parliament and of the Council with regard to regulatory technical standards adapting the base euro amounts for professional indemnity insurance and for financial capacity of insurance and reinsurance intermediaries. It shall apply from 12 June 2020.

  • Commission Delegated regulation (EU) 2019/1935, (Finnish)
  • Commission Delegated regulation (EU) 2019/1935, (Swedish)
  • Commission Delegated regulation (EU) 2019/1935, (English)
Level 3 regulation

On 11 October 2017, EIOPA published Guidelines on insurance-based investment products that incorporate a structure which makes it difficult for the customer to understand the risks involved.

EIOPA's press release  and Final Report on the Guidelines

EIOPA has published the Guidelines in the official languages of the EU.

On 11 December 2017, EIOPA published an editable template for the IPID in all official langugaes of the EU.

EIOPA has issued an Opinion on monetary incentives and remuneration between providers of asset management services and insurance undertakings.
Opinion EIOPA-BoS 17/295, English

EIOPA’s Q&A on the application of the IDD (in English):

11 July 2018 Requirements for product oversight and governance arrangements
11 July 2018 Insurance-based investment products
29 Nov 2021 Directly involved, inducements and conflicts of interest

Questions & Answers on the Insurance Distribution Directive

See also