Understanding The Role Of Ancillary Insurance Intermediaries Under Directive (EU) 2016/97

“Ancillary insurance intermediary” means an ancillary insurance intermediary as defined in Article 2(1), point (4), of Directive (EU) 2016/97. This definition, set out in the Insurance Distribution Directive (IDD), highlights the role of ancillary intermediaries in the insurance market. Understanding this role is crucial for comprehending the broader landscape of insurance distribution and regulation within the European Union.

Definition and Scope

Under Article 2(1), point (4), of Directive (EU) 2016/97, an ancillary insurance intermediary is defined as a person or entity who, although not primarily engaged in the distribution of insurance, undertakes insurance distribution activities that are ancillary to their primary business. This means that their primary function is not related to insurance, but they provide insurance services as a secondary activity.

The IDD provides this definition to clarify the status of entities that offer insurance products or services as a supplementary aspect of their main operations. These entities may include travel agencies, car dealerships, or other businesses where insurance distribution is not the core activity but an ancillary service provided to their customers.

Roles and Responsibilities of Ancillary Insurance Intermediaries

Ancillary insurance intermediaries play a unique role in the insurance distribution ecosystem. While their primary business does not revolve around insurance, they contribute to the accessibility and distribution of insurance products in various sectors. The IDD sets out specific guidelines to ensure these intermediaries operate within a framework that protects consumers and maintains market integrity.

• Provision of Ancillary Insurance Services: The primary role of an ancillary insurance intermediary is to offer insurance products as an additional service to their customers. For instance, a travel agency might provide travel insurance to clients booking holiday packages, or a car dealership might offer car insurance as part of the vehicle purchase process. These intermediaries facilitate the distribution of insurance products in conjunction with their main services. The IDD requires ancillary insurance intermediaries to provide clear and accurate information about their insurance products. They must ensure that their clients understand these products' terms, conditions, and costs, even though insurance is not their main business focus.

• Adherence to Regulatory Standards: Although ancillary insurance intermediaries are not primarily engaged in insurance distribution, they must still adhere to specific regulatory standards set out by the IDD. This includes complying with transparency requirements, business conduct, and consumer protection. The IDD ensures that even ancillary intermediaries meet certain standards to safeguard consumers and maintain the integrity of the insurance market. For example, ancillary intermediaries must disclose relevant information about the insurance products they offer, including coverage details, exclusions, and costs. They must also manage any conflicts of interest that may arise and ensure that their activities do not compromise the quality of the insurance products or services provided.

• Training and Competence: While ancillary insurance intermediaries are not required to undergo the same level of training as primary insurance distributors, they must still demonstrate a basic level of competence in insurance matters. This ensures that they are capable of providing accurate information and handling insurance transactions appropriately. The IDD requires that ancillary intermediaries have sufficient knowledge to effectively assist clients with insurance products, even if insurance is not their core business. This helps in maintaining a high standard of service and ensuring that consumers receive accurate and reliable information.

Professional Requirements and Compliance

The IDD outlines several professional requirements for ancillary insurance intermediaries to ensure that they operate within a regulated framework and uphold standards of professionalism and consumer protection.

• Registration and Oversight: Ancillary insurance intermediaries must be registered with the relevant national authorities. This registration process helps ensure that they meet the necessary requirements and operate in accordance with national regulations. The IDD also provides for oversight to ensure that ancillary intermediaries comply with regulatory standards and maintain the integrity of the insurance distribution process.

• Disclosure and Transparency: Transparency is a key requirement for all insurance intermediaries, including those operating in an ancillary capacity. Ancillary intermediaries must provide clear and comprehensive information about the insurance products they offer, including details of coverage, exclusions, and any associated costs. This ensures that consumers can make informed decisions and are aware of what they are purchasing. The IDD emphasizes the importance of transparency in maintaining trust and confidence in the insurance market. Ancillary intermediaries must ensure that their clients receive all necessary information in a straightforward and understandable manner.

• Conflict of Interest Management: Ancillary insurance intermediaries must manage any conflicts of interest that may arise in their dealings with clients. This includes ensuring that their insurance activities do not unduly influence their primary business or lead to biased advice. The IDD requires that intermediaries disclose any potential conflicts of interest and take steps to mitigate them, ensuring that their clients receive impartial and fair service.

Challenges and Opportunities For Ancillary Insurance Intermediaries

While ancillary insurance intermediaries contribute to the insurance distribution landscape, they face unique challenges and opportunities in their operations.

• Balancing Primary and Ancillary Activities: One of the primary challenges for ancillary insurance intermediaries is balancing their main business activities with their insurance distribution responsibilities. Since insurance is not their core focus, they must ensure that they allocate sufficient resources and attention to their insurance activities without compromising their primary business. However, this challenge also presents opportunities. By offering insurance products as an ancillary service, these intermediaries can enhance their value proposition, attract additional customers, and create new revenue streams. Effective integration of insurance services can strengthen their overall business model and improve customer satisfaction.

• Adapting to Regulatory Changes: Ancillary insurance intermediaries must stay informed about regulatory changes and adapt their practices accordingly. The IDD represents a significant shift in the regulatory landscape, and ancillary intermediaries need to ensure that they comply with its requirements. This may involve updating their processes, training staff, and implementing new procedures to meet regulatory standards. While this can be a complex and resource-intensive task, it also provides an opportunity for intermediaries to enhance their professionalism and improve their service offerings.

Conclusion

The definition of "ancillary insurance intermediary" under Article 2(1), point (4), of Directive (EU) 2016/97 underscores the important role that these intermediaries play in the insurance distribution ecosystem. Although insurance is not their primary business, ancillary intermediaries contribute significantly to the accessibility and distribution of insurance products across various sectors. By adhering to the regulatory standards set out in the IDD, ancillary insurance intermediaries ensure that they provide transparent, competent, and consumer-focused services. This helps to maintain the integrity of the insurance market and protects the interests of consumers. As the insurance market continues to evolve, ancillary intermediaries must navigate the challenges and opportunities presented by regulatory changes and market dynamics. By doing so, they can effectively integrate insurance services into their primary business operations, enhance their value proposition, and contribute to a fair and transparent insurance market within the EU.