New Act on Insurance Distribution will bring changes to several sectors

August 21, 2018

New Act on Insurance Distribution will bring changes to several sectors

The Act on Insurance Distribution takes effect on 1.10.2018. The law applies to all entities distributing insurance. In addition to insurance companies, changes are coming for insurance agents and brokers, regardless of whether insurance distribution is the primary business of the company or mediator or whether insurance is offered in addition to other services, such as bookkeeping, leasing or rental service, real estate business, or various products like car sales.


The Act on Insurance Distribution 20.4.2018/234 implements the Directive on Insurance Distribution 2016/97 (IDD). The Act on Insurance Mediation will be repealed, and there will be amendments to e.g. Insurance contracts Act and Act on insurance companies. In this article we will review the most relevant changes affecting the business of agents and ancillary intermediaries.

Changes for all players

Players in the insurance sector include

  • insurance companies, which act as insurance providers
  • insurance brokers, who receive an assignment from the party obtaining insurance
  • agents, who distribute insurance on behalf and under the responsibility of the insurer

As in the current act, the term “insurance intermediary” is used both for insurance brokers and insurance agents.


The breakdown of insurance intermediaries, from insurers independent insurance brokers and agents, also remains unchanged. The prohibition on the acceptance of fees by insurance brokers is also retained. Insurance intermediaries can carry out business also on an ancillary basis if their primary professional business is something other than the distribution of insurance.


The scope of the regulation is also specified in more detail, and distributing insurance online through comparison sites will become more clearly within the scope of the regulation. Non-life insurance products shall be provided by way of a standardized document.


Insurance distributors will be obligated to maintain a product oversight and governance system, i.e. a process for the approval of new insurance products and changes to them. The process must specify an identified target market for each insurance product. Sales of insurance-based investment products will include inducements, the management of conflicts of interest, and assessment of suitability and appropriateness requirements. The rules related to product oversight and investment-based products will have likeness with the investment services-related MiFID II regulation.

“Certain ancillary insurance intermediaries” is a new term in the Act

“Certain ancillary insurance intermediaries” refers to players to which the law is applied only in a limited manner, provided that;


1) the amount of the premium paid for the insurance product doesn’t exceed 600 euros calculated on a pro rata annual basis, if the duration of the trip or other service mentioned in section 3 is a maximum of three months, the amount of premium paid per person does not exceed 200 euros;


2) the insurance is complimentary to the product or service sold by the ancillary insurance intermediary; and


3) it covers the risk related to defectiveness, loss or breakage of goods sold or supplied by the ancillary insurance intermediary, or the non-use of a provided service or travel reservation.


Previously these players were excluded from the prescribed law on insurance mediation. The scope of what is covered in the more lightly regulated category will also change. This will especially impact travel agencies, opticians, and cell phone and home appliance stores, which often sell product- or service-related insurance and usually are within the scope of this more lightly regulated category.

Cross-selling will be limited

The following changes, among others, target agents, ancillary agents and certain ancillary insurance intermediaries:


Changes to ways of operating

  • Sales targets and remuneration arrangements that are in conflict with the best interests of the customer are prohibited. A fee or benefit must not be an incentive to recommend to a customer anything other than the insurance that would best meet the customer’s needs.
  • Cross-selling will be prohibited in consumer sales or in sales that are comparable to it.  The customer must be offered the possibility to buy the insurance, the product or service separately. The service provider may, however, require that the customer insure the product or service they have purchased or leased. However, the offering cannot be contingent on the customer concluding an insurance contract with a specific insurer.
  • The consumer or person treated as such must be provided with an adequate description of the different components of the agreement or package, information on the cost of each component, and the way their interaction modifies the risk or the insurance coverage. This applies also to non-consumer customers if it is possible to purchase the insurance and product or service separately.
  • Cross-selling will be limited and the related information disclosure requirement will be expanded to also non-consumer customers. In this case, cross-selling is prohibited only if the insurance is an ancillary product.

Information disclosure further specified

  • Information to be disclosed to the customer includes, e.g., contact information, whether the representative is acting in the role of a broker or an agent on behalf of the insurance distributor, and whether the agent is representing one or more insurance distributors.

New requirements for agents whose primary activity is insurance distribution

  • Good repute requirements will extend to the management and owners of insurance undertakings.
  • A collective professional competence requirement will be imposed for the management of insurance intermediaries.
  • An annual 15-hour training obligation for persons participating in insurance distribution and for those responsible for insurance distribution.
  • The registration requirement of personnel will decrease from 50 percent to 30 percent.
  • The agent must define the professional qualifications required for the job duties of the individual participating in insurance distribution.
  • The agent must specify the function and it must have internal policies and procedures, as well as assessment systems that are used to ensure and monitor the appropriate realization of professional qualifications. The policies and procedures and the assessment systems must be used and updated regularly.
  • The customer must be informed about the nature of the fees.
  • The disclosure of information has been further specified; information must be provided in a permanent format.

New requirements for ancillary agents

  • Persons responsible for the distribution of insurance must be reputable.
  • Persons participating in insurance distribution and persons accountable for insurance distribution must have adequate professional competence and knowledge in terms of the quality and scope of the job duties.
  • The professional qualifications required to perform the job duties of a person engaged in the distribution of insurance must be specified.
  • There is no minimum number of hours of ongoing training required for ancillary insurance intermediaries, but the professional competence must be maintained in the manner required by the nature and scope of the work.
  • The customer must be informed about the nature of the fees.
  • The disclosure of information has been further specified; information must be provided in a permanent format.


We are happy to assist in the implementation of the new requirements and in the training of personnel.


Further information:

Katja Flittner, Associate, tel. +358 50 410 0512, [email protected]


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