Jean-François Salphati (Salphati avocats) and Agnès Goldmic (Burguburu Blamoutier Charvet Gardel Associé) – trace the most significant points of the transposition of the Insurance Distribution Directive and its impact on insurance intermediaries in France

What are the most significant points in the transposition of IDD in your country

 This is the first time that there has been any real consistency in the texts.

Consistency that comes from a new definition: that of insurance distribution, which includes not only intermediaries (brokers, agents, insurance representatives, etc.), but also insurance companies.

Thus, a chain of responsibility will be set up, from the manufacturer (the creator) of the insurance product to the end customer, and everyone will have to assume their own responsibility.

Nowadays, insurance intermediaries are often prosecuted, as are insurance companies, which are sued on the basis of insurance contracts only and not on the basis of their liability as manufacturers. This is the first salient point.

Secondly, as for the obligation to provide advice, Europe has adapted to what already existed locally: today, there are various gradations within this obligation, whereas it was quite general before. There is now a first type of advice, adapted to the demands and needs of the client. Then there is a second gradation, which consists in providing the client with advice adapted to his or her personal situation. Then, a third step consists in studying a large number of insurance contracts on the market and explaining to the client why this one is best suited to their demands and needs in relation to others.

The third salient point is above all the monitoring of these contracts: since today not only the subscription is highlighted, but also the monitoring of the insurance contracts because it is necessary to systematically check if they are adapted to the customer’s situation.

All in all, there are many reforms, intermediaries will have to adapt to them, and this is quite positive overall.

Have new categories of intermediaries emerged since the IDD came into force?

 There have been clarifications about some intermediaries, in particular about the fact that insurance can be sold or offered on an ancillary basis. Nevertheless, this was already provided for in previous French legislation, and I do not think that there are any new intermediaries emerging today. In any case, I think there are enough of them to avoid creating new ones.

Are these changes positive for insurance intermediaries, or do you think they could create new risks of liability? 

 In my opinion, these changes are positive for intermediaries and we must not contradict the positive side with possible claims, since each new obligation creates its corollary. Indeed new responsibilities will come into being; it’s a no-brainer.

Why positive? Positive for intermediaries since, as Jean-François said, we have moved from intermediation to distribution and, for the first time, all the participants are in the same loop. Furthermore, it is a guarantee of traceability of the advice provided by the agents and brokers. The intermediary may also have recourse against the insurance company that is the manufacturer/distributor of the insurance contracts. The difficulty lies in the practical application of these obligations by agents, but especially for small brokerage firms. Indeed, they can be administratively cumbersome, but also in terms of time, staff and therefore costs. That is the first difficulty.

The second drawback is that we do not have any visibility on the interpretation of these new obligations by the Courts and the Supervisory Authority. We do not know how the case law will be decided, although the Directive has taken care to specify that its implementation should not be too burdensome for small and medium-sized structures.

Are intermediaries ready to put these changes into practice?

 For large brokerage firms, there is no difficulty since they have the means that small firms do not have. For small structures, this will be complicated at first, but I think it is for a better future for them since once again they exercise a technical profession with real added value. They will thus be able to prove that they have properly fulfilled their mission at all stages. The Directive also tells us that a review will be made in 5 years from the implementation of these new rules: so in 5 years we will see how it has evolved!