New rules on Insurance Mediation will affect real estate professionals

The Commission has published proposals for a package of legislation intended to improve consumer protection in financial services. This includes the revision of Directive 2002/92 on insurance mediation which has consequences for the real estate professionals, so CEPI warns.

Insurance mediation means:

· the act of advising on, proposing, or carrying out any other work preparatory to the conclusion of insurance contracts, or of concluding such contracts, and
· the act of assisting in the administration and performance of insurance contracts, in particular in
the event of a claim.

Therefore if estate agents or property managers carry out such work in the course of their business they risk being classed as insurance intermediaries and so being subject to the legislation.

The aim of the proposal is to create common standards across insurance sales and ensure proper advice. The following changes are proposed:

· The same level of consumer protection will apply whether a consumer purchases a product directly from an insurance undertaking or indirectly from an intermediary (the current IMD only covers sales by intermediaries).
· Consumers will be provided in advance with clear information about the professional status of the person selling the insurance product. Rules will be introduced to deal more effectively with risks of conflict of interest and obliging an intermediary to disclose the amount of remuneration received.
· Insurance product sales will have to be accompanied by honest, professional advice.
· It will be easier for intermediaries to operate cross-border because there will be mutual recognition of professional knowledge and ability (as evidenced by registration and proof of professional qualifications acquired in another Member State).
· For non-life or pure life insurance the IMD will continue to apply minimum harmonisation (which means that Member States can apply stricter requirements). For life insurance products with investment elements (which are riskier) there will be additional, stricter requirements for conduct of business.

The revised Directive will apply to all market players, but certain intermediaries selling insurance on an ancillary basis could use (instead of registration) a simple declaration procedure with lighter information and organisational requirements under the supervision of an insurance undertaking or registered intermediary. This will bring SMEs which are currently outside the scope of the IMD (because insurance
mediation is not their main activity) within its scope, but subject to a lighter regime. This exemption does not apply to intermediaries selling life assurance.