New rules would require intermediaries to offer minimum choice of three products
Spain is the latest European country to have introduced more onerous disclosure requirements under an Insurance Mediation Directive. Shelley Robertson, international marketing manager at Skandia, said it will require IFAs to present clients with a choice of products.
Robertson said: "Spain has recently published a bill to implement the Directive. This provides that a fair analysis entails that advisers present their clients with a minimum of three products. Logically, they will then recommend a particular product for reasons that they state.
"It also provides that intermediaries have the choice of charging the client a fee for their services or advising that they will receive commission from the insurer. In the latter case, it seems the insurer will have to disclose the amount of commission before the contract is made. We are keeping a watching brief on this particular development."
There are minimum levels of disclosure for IFAs across Europe under the Directive. But there will also be discretion for individual countries to make more onerous requirements.
Robertson said all IFAs must provide clients with six pieces of information before concluding an insurance contract (see box). These range from an IFA's identity through whether the insurance company owns 10% or more of the IFA business, to whether the adviser is independent or tied.
This information will normally have to be provided on paper and has to be in the official language of the country in which the client normally lives, unless another language is agreed and allowed by that particular country.
Intermediaries are advised to produce a standard letter detailing this information. Dublin-based Skandia Ireland suggests they amend their letterheads and business cards to show registration details.
Robertson said: "They could show, for example, who the IFAs are regulated by and where they are authorised to conduct business."
The Insurance Mediation Directive states that "before the conclusion of the contract, the intermediary shall provide reasons for recommending the contract based on the information provided by the client's needs and demands". However, no further guidance is provided.
Robertson suggested that IFAs' recommendations, which must be based on the information provided by the customer and identifies their needs, relative priorities and attitude to risk, should be documented in a written fact find. "This will act as a record of the client's responses. Since it is signed by the client, this should provide satisfactory proof that this step has been carried out."
If the intermediary is independent, then the directive states that advice must provide "fair
identity & Status requirements
Your identity and address.
The register in which you are included and the means for verifying that you are registered.
Whether you have a holding, direct or indirect, of 10% or more of the voting rights or the capital in a given insurance undertaking.
Whether a given insurance undertaking has a holding of 10% or more of the voting rights or the capital of your business.
Procedures allowing customers to register complaints about insurance advisers, out-of-court complaint and redress procedures. If you are passporting under the Freedom to Provide Services, this means any procedures put in place by your home country regulator.
The basis on which advice will be given - as an agent, tied agent or independent intermediary.
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