Article 3.1 of the Directive allows for “insurance and reinsurance undertakings
and other bodies” to “collaborate with the competent authorities in registering insurance and reinsurance intermediaries and in the application of the requirements of Article 4 [i.e. professional requirements] to such intermediaries.” This collaboration may have several advantages, including
smooth implementation of the new rules with the support of market participants. Also, it could ensure that the industry’s comments are heard. Some of the countries in our study have adopted this option, although to different degrees. In France, for example, ACAM is the designated competent authority, although it is not responsible for creating and maintaining the public register of intermediaries introduced by the IMD. Instead, ORIAS – a newly created body which will benefit from the participation of professional organisations of insurance intermediaries, banks and insurance companies – is responsible for the register (see section A.3). In contrast, in Germany the option of setting up an industry body in charge of authorising and registering intermediaries was extensively discussed, but finally rejected in favour of the local Chambers of Commerce (IHKns). Opinion is still divided as to the merits of this. According to the trade association of insurance intermediaries, however, an industry-based solution would have been cheaper than the one actually decided.
In the Netherlands, the Stfd – a private organisation created during the process of bringing the IMD into Dutch legislation – helps its members (around 9,000 intermediaries in 2006) to perform the annual self-assessment, for which
the Stfd provides feedback to its members and highlights areas where improvement is needed. Lastly, it represents the industry during consultations with the AFM and may help with the acceptance of new regulation within the industry.
In the UK, industry bodies play no role with respect to the authorisation and supervision of intermediaries, which falls entirely within the FSA’s responsibility. The view of some interviewees is that this may have resulted in duplication of costs, since GISC accumulated considerable experience and knowledge of the sector from its creation in 2000 until it was dissolved in 2005. In a different role, GISC might possibly have been able to assist the FSA in maintaining the register (as ORIAS does in France) or help intermediaries comply with detailed regulations (as the Stfd does in the Netherlands). It should, however, be noted that some employees in GISC joined the FSA when GISC was dissolved.
Annex A: Case study for France
A.1 Introduction
The transposition of the IMD into the French legislation started with a bill drafted in 2004, which was approved by the Comité consultatif de la
réglementation et de la legislation financière on 28 January 2005.42 After
several amendments, the IMD was implemented with the Loi 2005-1564 du
15/12/2005 portant diverses dispositions d'adaptation au droit communautaire dans le domaine de l'assurance (Law 2005-1564 of 15
December 2005 concerning various provisions of adaptation to the Community legislation in the field of the insurance). The law primarily amended section 5 of the French Insurance Code (Livre V du Codes des
Assurances), which regulates insurance intermediaries, and entered into force
on 16 December 2005.43
The Décret 2006-1091 du 30 août 2006 relatif à l'intermédiation en assurance
et modifiant le code des assurances (partie réglementaire) (Decree 2006-
1091 of 30 August 2006 relating to the intermediation in insurance and modifying the insurance code) works out the provisions of the law in greater detail. It entered into force on 1 September 2006 and describes the scope of the law implementing the IMD, derogations for certain categories of intermediaries, procedures relating to registration, and definition of professional qualifications. It also defines the statute and tasks of the institute which is in charge of maintaining the register of intermediaries.
In addition to the decree, several orders (arrêtes) have been published on 3 and 18 November 2006 describing the information which intermediaries need to be listed in the register, the amount of registration fees and the minimum cover of the mandatory professional insurance.44
A.2 Regulation of insurance mediation in France before the IMD
A summary of the regulation of insurance mediation before the IMD in France is presented in Table 3. A register of brokers (courtiers d’assurances) existed in France since 1999 and was maintained by ALCA (Association de la Liste des
Courtiers d’Assurances), although registration in this list – costing €122 – was
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42 Implementation of the Insurance Mediation Directive, published October 2005, p. 1: http://www.freshfields.com/practice/disputeresolution/publications/pdfs/ 13289.pdf
43 ec.europa.eu/internal_market/finances/actionplan/transposition/france /f_d15_fr_en.htm. The law, decree and arrêtés transposing the IMD can be found at: http://www.minefi.gouv.fr/directions_services/dgtpe/intermediaires_assurance/index.php. 44 The Fédération française des sociétés d'assurances (FFSA) published a document (Intermédiation en Assurance: un nouveau Cadre d’exercice issue de la Directive Européenne du 9 décembre 2002) which gathers all laws, decrees and arrêtes about the implementation of insurance intermediation law into a single document.
not mandatory.45 The absence of mandatory registration meant that only
few intermediaries registered, rendering effective supervision difficult.
Table 3: Summary of key regulatory variables in France before the IMD
Key regulatory variable Position pre-IMD
Type of regulation: statutory or voluntary? Statutory Name and type and of the regulator, if
any
ACAM (Autorité de contrôle des assurances et des mutuelles). ACAM is only responsible for insurance companies. ALCA (Association de la Liste des Courtiers
d’Assurances) was responsible for maintaining a list of brokers. Only a few
brokers registered with ALCA as registration was voluntary Existence of a register of insurance
intermediaries? YES – registration was compulsory
Minimum professional requirements (e.g. clean police records, no past declarations of bankrupt, possession of a diploma)?
YES – Livre V of the Code des Assurances
Obligation of professional indemnity
cover? What was the minimum cover? YES – €1,500,000 per claim and per year Minimum disclosure requirements towards
customers?
NO – mainly defined by jurisprudence Existence of protection scheme of client’s
money?
YES – financial guarantee mandatory for brokers
Existence of a compensation scheme? NO
Existence of an established arbitration
procedure? NO
Amount of (one-off) fee to be paid by the
intermediary to obtain authorisation, if any €122 for registration at ALCA Amount of (annual/ongoing) fee to be
paid by the intermediary to retain registration, if any
Negligible
Source: CRA
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45 Report no. 2217 presented to the French National Assembly in March 2005 by MP Philippe Auberger, member of the Commission in charge of transposing the IMD, p. 31: http://www.assemblee-nationale.fr/12/rapports/r2217.asp. According to ACAM (Annual report 2005, p. 88), about 8,500 brokers were registered with ALCA in 2005, compared to 6,124 in 2004, 4,420 in 2003, and 3,660 in 2002.
Statutory legislation relating to competence and good repute, professional indemnity cover with minimum covers of €1.5 million per claim and €2 million in aggregate and financial capacity were already in place in the French legislation. In particular, brokers were required to provide advice and information to clients verbally before the conclusion of a contract. Professional requirements such as adequate training already existed before the IMD for all intermediaries. Hence, requirements for current authorisation and registration rules are not considered to be especially burdensome.
The large degree of similarity between the regulation pre-IMD and post-IMD implies that the implementation of the IMD did not lead to great changes for intermediaries, especially if the intermediaries were already complying with the pre-IMD regime. This has been confirmed in interviews with industry representatives. Indeed, a report presented to the French National Assembly in March 2005 by the Commission in charge of transposing the IMD noted that the bill under discussion at the time would not lead to a complete revamping or upheaval of French regulation.46 Accordingly, the French trade
association of insurance companies FFSA (Fédération française des sociétés
d'assurances) considered that the existing regulations already fulfilled the
basic requirements of the Directive and any attempt to go beyond this would penalise French intermediaries compared to their European counterparts.47
A.3 Implementation of the IMD in France
The implementation of the IMD into French legislation did not represent a significant change to the existing regime. Although the implementation of the IMD introduced the obligation to be registered, market participants did not consider that the requirements necessary for registration were burdensome. The main reason was that intermediaries already had to comply with similar requirements in the past. For example, market participants noted that the implementation of the concept of “appropriate knowledge” is relatively light and companies often go beyond what is required. Similarly, brokers were required to have professional liability insurance before the implementation of the IMD. Other intermediaries such as agents, mandataires (agents which have a mandate to sell insurances on behalf of an insurance company) and insurance representatives were not required to have professional liability insurance. This has not changed with the implementation of the IMD. The rules implementing the IMD, however, require advice to be given in writing and this is considered to be a major change for brokers because they were only obliged to give this advice verbally in the past.
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46 Report no. 2217 presented to the French National Assembly in March 2005 by MP Philippe Auberger, member of the Commission in charge of transposing the IMD, p. 5: http://www.assemblee-nationale.fr/12/rapports/r2217.asp.
47 The 2005 Annual Report of the FFSA, p. 54:
Given the relatively small changes in the rules governing insurance intermediation in France, it is not surprising that industry participants noted that the IMD will not have a significant impact on the distribution of insurance products in France. While interviewees agreed that the requirements regarding information will lead to greater costs of selling insurance (either because each intermediary requires more time or must work harder, in turn requiring a greater commission), the increase in costs was not considered large enough to force many intermediaries to exit the market. Nevertheless, one intermediary also noted that it is difficult to estimate the number of intermediaries which have exited the market as the lack of compulsory registration in the past meant that it was impossible to count the number of intermediaries. Intermediaries selling insurance as an ancillary activity (e.g. intermediaries who sell insurances to a small circle of friends or their relatives) were thought to be the most likely to exit the market. In addition, it was noted that one impact of increased requirements may be to encourage specialisation and concentration in the market for insurance intermediation. Nevertheless, some intermediaries also noted the benefits provided by the IMD. Intermediaries accept that the registration provides a service to insurance companies because it allows them to verify the professionalism of prospective employees. Moreover, before the implementation of the IMD, brokers were required to note on all documents handed to customers whether they were in possession of professional liability insurance. In the current regime, the broker merely needs to state his registration number. While interviewees were sceptical whether the IMD will lead to better informed consumers, most agreed that the rules implementing the IMD will render it more difficult for intermediaries to sell insurance solely for their own benefit and without considering the needs of the consumer.
The Distance Marketing Directive, (DMD, Directive 2002/65/EC) was implemented in France at the same time as the IMD. Market participants noted that they were implemented through separate processes which did not affect each other in a significant way, especially as the IMD regulates information to be provided by intermediaries, whereas the DMD regulates information provided by insurance companies.
A.3.1 Choice and style of the competent authority
The French regulatory authority for the insurance sector is the ACAM (Autorité de contrôle des assurances et des mutuelles). The ACAM, which was named CCAMIP (Commission de contrôle des assurances, des mutuelles
et des institutions de prévoyance) until December 2005, is the result of the
merger in August 2003 of two other agencies, the CCA (Commission de
contrôle des assurances) and the CCMIP (Commission de contrôle des mutuelles et des institutions de prévoyance).48 The Commission bancaire was
responsible for the regulation of banks.
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The ACAM’s mission is to supervise the French insurance sector, namely that industry players (insurers, intermediaries) comply with the rules in place and that they are able to meet their obligations towards clients. It was noted during an interview that a different approach to regulation exists in France compared to the UK: there is no permanent supervision of insurance organisations. Nevertheless, ACAM is allowed to visit intermediary offices as well as to sanction intermediaries. Sanctions include imprisonment and fines up to €37,000. According to industry sources, however, ACAM has not carried out regular checks yet. This may also be partly because ACAM only existed for a year as well as difficulties in checking whether intermediaries comply with all the regulations. Hence, interview participants indicated that ACAM is more likely to control access to the profession rather than engage in ongoing regulation.
Under the rules implementing the IMD in France, however, ACAM is not responsible for creating and maintaining a public register of intermediaries. According to consultations with market participants, it was initially proposed that ACAM should be responsible for the register, although the industry argued that the existing register under ALCA should be continued. Appointing ACAM to manage the register was thought to entail the risk that the €50 registration fee would be used for other purposes, as the fee would be rolled into the general budget of ACAM.
At the end of the consultation period, there was a consensus to create a new organisation, Organisme pour le Registre des Intermédiaires d’Assurances (ORIAS) to be in charge of the set-up, management and update of the (partly existing) register.49 A Commission within the ORIAS, which is composed
of representatives of professional organisations of insurance intermediaries and companies concerned, takes the decisions regarding registration, updating and refusal of registration. At present the Commission includes representatives from the following organisations:
• The Fédération française des sociétés d'assurance (FFSA, the trade association of insurance companies);
• The Chambre syndicale des courtiers d'assurances (CSCA, the trade association of insurance brokers);
• The Fédération nationale des syndicats d'agents généraux d'assurances (AGEA, the trade association of tied agents) ;
• The Groupement des entreprises mutuelles d'assurances (GEMA, an association of mutual insurance companies);
• The Fédération bancaire française (FBF, the French Banking Association); and,
• The Fédération nationale de la mutualité française (FNMF, the national federation of mutual companies).50
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49 http://www.orias.fr/internet/start.do?method=init for ORIAS’ website. 50 Arrêté du 18 novembre 2006: http://www.legifrance.gouv.fr/.
The law implementing the IMD foresees that there will be an exchange of information between the newly created organisation, ORIAS, and ACAM. Furthermore, all insurance companies who make use of the services of insurance intermediaries are required to check that they are properly included in the ORIAS register.
A.3.2 Scope of the rules implementing the IMD and exemptions
While the new law did not lead to an upheaval of French regulation, it extended the scope of the existing French Insurance Code. Article L 511-1 of the amended Insurance Code notes that intermediation involves all activities which consist of introducing, proposing or assisting in the conclusion of insurance or reinsurance contracts. The IMD rules, however, do not apply to intermediaries involved in the management of insurance contracts or to direct sellers (employees of insurance companies). This is defined in article L511-1 of the amended French Insurance Code. Hence, employees of insurance companies do not need to be registered; they must only fulfil requirements regarding professionalism. In general, an intermediary is defined as a person carrying out any of these activities for remuneration:
• soliciting a person to enter into an insurance contract; or • collecting applications for such contracts; or
• setting out orally or in writing the conditions for coverage under a contract; or
• all persons carrying out analytical or advisory work and who introduce, propose or assist in the conclusion of an insurance transaction. 51
It was noted by a market participant that French banks fall under the definition of insurance companies. In order to allow employees selling insurance on their behalf to register as brokers instead of employees, banks have created so-called “societés de courtiers” (brokerage companies) which employ the (bank’s) brokers. If the intermediaries were to remain employees of the banks, they would be prohibited from selling insurances as independent brokers under the rules implementing the IMD.
Derogations from the application of the IMD in France basically follow those listed in article 1.2 a) to f) of the IMD, e.g. intermediaries selling travel insurance policies with premiums below €500 are excluded from the IMD. According to the FFSA (Fédération française des sociétés d'assurances, the national association of insurance companies), derogations under French law – which only apply to the risk of breakdown, loss of or damage to goods, and travel insurance – are more restrictive than in the previous legislation. For example, all intermediaries selling insurance contracts linked to a loan now fall within the scope of the IMD.52 Interviews with the industry confirmed that
intermediaries which carry out insurance intermediation as an ancillary
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51 Article L 511-1 of amended Livre V, available at: http://www.legifrance.gouv.fr/.
52 See Fédération française des sociétés d'assurances (FFSA), Intermediation en Assurance: un nouveau Cadre d’exercise issue de la Directive Européenne du 9 decembre 2002, p. 5.
activity are now required to register. For example, persons selling motor insurance must be registered, unless the derogation of article 1.2 IMD applies.
A.3.3 Professional requirements
Requirements with regard to good repute
Insurance intermediaries must satisfy strict conditions with regard to good repute and competence. Some of these requirements (condition
d’honorabilité) were already listed in article L322-2 of Book V of the Insurance
Code before the IMD and therefore do not represent a major change.53 The
current Insurance Code states that persons condemned of certain crimes (including murder, theft, fraud or breach of trust, money laundering, and corruption) or declared bankrupt cannot exercise the profession of an agent or a general broker. It is noteworthy that the law transposing the IMD has introduced further types of crimes and infractions leading to the incapacity to exercise the profession and is somewhat stricter with respect to the past and the original text of the IMD.54 Consultation with the industry confirmed that
requirements regarding professionalism are not considered to be overly burdensome.
Competence
With regard to competence, the French law implementing the IMD distinguishes between three different categories of intermediaries, with increasing requirements for each category:
• Brokers (courtiers) and managers of brokerage companies (dirigeants) must have completed an internship of 150 hours, professional experience of two years in a managerial capacity with insurance agents, brokers or undertakings, 4 years running insurance contracts with insurance agents, or a specific diploma;
• Agents, including those employed by brokers must have completed an internship of 150 hours; and
• Intermediaries selling insurances as an ancillary product and who are not in possession of professional indemnity insurance must show completion of “adequate” training. The law does not define what is meant by adequate.
Further, although employees of intermediaries are not required to be registered, the IMD introduced new requirements with regard to training.55
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53 The updated Book V of the Insurance Code pursuant to the law implementing the IMD directive of December 2005 can be found at http://www.legifrance.gouv.fr/. The previously