On 16 February 2017, the Spanish Insurance Regulator (the ”DGSFP”) submitted to the interested parties the final Draft of the Insurance Distribution Act (the ”ALDS”), which implements in Spain the Directive 2016/97 of the European Parliament and of the Council of 20 January 2016 on Insurance Distribution (the ”IDD”).
The objectives of the ALDS are (i) to lay down the rules concerning the taking-up and pursuit of the activities of distribution of insurance and reinsurance distribution; (ii) to regulate the conditions in which such distribution activity shall be carried out; and (iii) to establish the applicable supervision regime. The new regulation will lay down the requirements that shall be complied with by the insurance and reinsurance distributors to adapt to the IDD concerning product oversight and governance requirements, conflicts of interest and transparency rules.
The main novelties introduced by the ALDS with respect to the current Spanish Insurance Mediation Act are the following:
- The new Distribution Act will apply, not only to insurance and reinsurance intermediaries, but also to insurance undertakings when they pursuit direct distribution activities.
- The definition of insurance distribution is extended to the activity carried out by the insurance comparers, who shall be subject to the Distribution Act in those cases where their activity implies the possibility for the client of entering into an insurance contract, either directly or indirectly.
- The limitation of Article 25.1 of the current Insurance Mediation Act, according to which the credit or financial institution could only make its distribution network available to a single bank-assurance operator, has now been removed.
- Where advice is provided prior to the sale of an insurance product, a personalised recommendation should be provided to the customer explaining why a particular product best meets the customer’s insurance demands and needs. This obligation applies not only to brokers (like in the current Insurance Mediation Act) but also to the rest of distributors.
- The distributors’ information duties are reinforced, especially when it comes to insurance-based investment products.
- Insurance intermediaries and insurers distributing insurance-based investments products must meet additional requirements (regarding prevention of conflicts of interest and assessment of suitability and appropriateness and reporting to customers).
- For the first time, the ALDS regulates ”cross-selling”.
- The infringements and sanctions regime is hardened.
The Insurance and Reinsurance team in Madrid has drafted a document making Comments on the Draft Insurance Distribution Act, which can be read here.