Post Europe View from the Top: Sunlight drives away shadows
Major risks are not included in the existing European Insurance Mediation Direction. The Federation of European Risk Management Associations believes they should be, and is urging the European Commission to bring them into the current revision of the directive.
More specifically, we want to see the commission adopt, as a minimum standard, the core principles set out in the Protocol on the Transparency of Intermediation in Business Insurance agreed with the European Federation of Insurance Intermediaries in November. Both federations recommend their member associations use this protocol as a guiding framework to agree and issue guidance at national level.
Maintaining the exemption for large risks in the next IMD could jeopardise the effective application of the protocol by allowing uneven regulation of transparency across Europe. In the absence of minimum European Union standards, some member states could decide that they do not need any national rules on disclosure for large risks; and other member states could introduce less stringent rules than those in the protocol.
Conflicting legilsation
The result would be conflicting national legislation - a situation that the revised IMD is supposed to address - and as a result, an uneven playing field for European business in its purchase of insurance.
Intermediaries should receive fair remuneration for their services. The amount and nature of that payment is a matter for the parties involved, and negotiating them is part of the job of the risk and insurance manager. At the same time, the complexity of the market for business insurance creates possible conflicts of interest that may not be obvious during the negotiations.
Complex discussions
Developing the protocol has not been easy, the issues involved are complex and discussions have taken place over several months to reach agreement. The then New York State Attorney General, Eliot Spitzer, began legal action over brokers' contingent commissions in 2004, and there is no comprehensive agreement on broker remuneration in the US.
Businesses do not need the same consumer protection as the person in the street when it comes to buying insurance. Transparency addresses their concerns and this is why we want the principles of the Ferma-Bipar Protocol included in the new IMD. As a former CEO of Lloyd's, Ian Hay Davison, remarked - sunlight drives away shadows.
Peter den Dekker is president of the Federation of European Risk Management Associations
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