COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251(2) of the EC Treaty concerning the common position of the Council on the adoption of a directive of the European Parliament and of the Council on insurance mediation

2000/0213 (COD)

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251(2) of the EC Treaty concerning the common position of the Council on the adoption of a directive of the European Parliament and of the Council on insurance mediation

1. BACKGROUND

Date of transmission of the Proposal to the European Parliament and the Council (COM(2000)511 final - 2000/0213(COD)) [1]: // 20.9.2000

[1] OJ C 29/E, 30.1.2001, p. 244.

Date of the opinion of the Economic and Social Committee [2]: // 30.5.2001

[2] OJ C 221, 7.8.2001, p. 121.

Date of the opinion of the European Parliament, first reading: // 14.11.2001

Political agreement: // 26.11.2001 (unanimity)

Date of adoption of the Common Position: // 18.03.2002

2. PURPOSE OF THE COMMISSION PROPOSAL

* The proposal for a directive aims to coordinate national provisions on insurance mediation in order to complete the internal market in insurance, especially as regards retail markets.

* It establishes a legislative framework designed to ensure: (i) a high level of professionalism and competence among insurance intermediaries in the Community; and (ii) a high level of protection of customers' interests by imposing fairly strict customer information requirements.

* It introduces a system for registering all intermediaries in their home Member State, subject to compliance with professional requirements (competence, good repute, professional indemnity insurance and sufficient financial capacity). Registration allows insurance mediation to be carried on by way of freedom of establishment and freedom to provide services in the Community, subject to monitoring by the home Member State (Articles 3 to 9). The proposal also lays down customer information requirements (Articles 11 and 12).

3. COMMENTS ON THE COMMON POSITION

3.1. General comments

The common position, adopted unanimously by the Council, preserves the essence of the Commission's proposal and the Commission accepts the amendments introduced.

The common position takes account of the amendments proposed by Parliament and accepted by the Commission. They have been incorporated, and some have been reworded for reasons connected with the internal coherence of the text or for legislative drafting reasons. Compared with the Commission's proposal, the common position clarifies the main provisions relating in particular to scope (Article 1), registration (Article 3), professional requirements (Article 4), notification of establishment and services in other Member States (Article 5), exchange of information between Member States (Article 8) and customer information requirements (Articles 11 and 12).

The amendments introduced by the common position are not such as to alter the nature of the Commission's proposal. They define more precisely and clarify the system proposed by the Commission and take their lead from those of Parliament's amendments adopted at first reading that were accepted by the Commission.

The main changes to the Commission's amended proposal contained in the Council common position are dealt with in the detailed comments that follow.

3.2. Response to Parliament's amendments adopted at first reading

Parliament adopted fifty amendments. The Commission accepted the text or spirit of twenty of them, in whole or in part.

3.2.1. Amendments accepted by the Commission and included in the common position

(a) Recitals

Recital 12 of the common position

This clarifies the Directive's scope. It specifies that certain activities involving the provision of information in the course of another professional activity do not constitute insurance or reinsurance mediation activities where their purpose is not assistance for the customer in concluding or fulfilling an insurance or reinsurance contract, the professional management of claims for an insurance or reinsurance contract, or the estimating and settlement of claims (e.g. by accountants, lawyers or insurance adjusters). This recital, which relates to Article 2(3), last subparagraph, and (4), last subparagraph, of the common position, takes account of amendments 1, 15 and 16.

Recital 14 of the common position

Amendment 4 expands recital 14 of the Commission proposal in order to align it with the Directive's substantive provisions, in particular Article 2(9) of the common position.

(b) Substantive provisions

Article 1 - Scope

Article 1(2)

This provision relating to the Directive's scope lays down the conditions under which certain persons offering mediation services for insurance contracts are not covered by the Directive. The common position rewords subparagraph (a) in the spirit of Parliament's amendment 7. The wording of subparagraph (e) reflects Parliament's amendments 8, 9 and 11. These amendments serve to clarify the characteristics of certain insurance contracts available on the market which contain life assurance and/or liability insurance cover ancillary to travel insurance taken out in connection with travel booked with the provider. The provision widens the field of application of the exclusion from the Directive's scope laid down in the Commission's proposal.

Article 1(3)

Article 1 determines the scope of the Directive. Article 1(3) clarifies its territorial scope. The Directive is based on Articles 47(2) and 55 of the Treaty, that is, on provisions establishing the internal market. Consequently, it does not cover insurance mediation business conducted outside the Union with intermediaries based in non-Community countries or the business of Community insurers and reinsurers conducted in countries outside the Community through local intermediaries. This provision takes account of amendment 27 relating to Article 3(5) of the Commission's proposal. However, since Article 1 concerns the general scope of the Directive, it seemed more appropriate, for legislative drafting reasons, to include this idea in a specific provision on the scope of the Directive.

Article 2 - Definitions

Article 2, points (3) and (4)

The definitions of "insurance mediation" and "reinsurance mediation" have been fleshed out compared with the Commission proposal and now specify that activities undertaken by an insurance or reinsurance undertaking or an employee of an insurance or reinsurance undertaking who is acting under the latter's responsibility are not considered as mediation. This clarification ensures consistency with the definitions of "insurance intermediary" and "reinsurance intermediary" given in points 5 and 6 of Article 2.

In addition, a third subparagraph has been added specifying that activities involving the provision of information on an incidental basis in the context of another professional activity (e.g. accountant, lawyer) are not considered as insurance or reinsurance mediation where their purpose is not assistance for the customer in concluding or performing an insurance contract, the professional management of claims for an insurance undertaking, or the estimating and settlement of claims. The two new subparagraphs incorporate the first part of amendments 15 and 16, accepted by the Commission, and reflect amendment 1, already included in recital 12.

The proposal covers insurance and reinsurance mediation per se, whatever the marketing technique used (such as electronic commerce). It is therefore unnecessary to include the last sentence of amendments 15 and 16 on the application of the Directive to insurance and reinsurance mediation business carried on electronically.

Article 2, point (7)

The definition of "tied insurance intermediary" that has been introduced incorporates amendment 17. The new recital 10, introduced by the Council, also refers to the concept of "tied insurance intermediary".

Article 2, point (12)

The second subparagraph specifies what is covered by the concept of "durable medium" defined in Article 2(12) of the common position. It takes account of the objective of Parliament's amendment 21 to facilitate distance marketing of insurance mediation business. The definition is consistent with other Community legislation, such as the common position on the Directive on the distance marketing of financial services.

Article 3 - Registration of intermediaries

Article 3(1)

Article 3 of the common position includes a number of changes to the Commission proposal. First, under the second subparagraph of paragraph 1, Member States may authorise insurance and reinsurance undertakings and other bodies to collaborate with the competent authorities in registering insurance and reinsurance intermediaries. In particular, tied insurance intermediaries may be registered by an insurance undertaking or by an association of insurance undertakings under the supervision of a competent authority. This provision takes up amendment 23.

The third subparagraph of paragraph 1 has been inserted to clarify the extent of the registration requirement as regards insurance or reinsurance intermediaries in the form of legal persons. It stipulates that the intermediary with legal personality must be registered, with mention made in the register of the names of the natural persons within the management who are responsible for the mediation business. This provision, together with the second subparagraph of Article 3(2), is in the spirit of amendment 26 and is worded in such a way as to be consistent with the other provisions of the common position.

Article 3(2)

Paragraph 2 allows Member States to establish more than one register for insurance and reinsurance intermediaries. However, they must set up a single information point allowing quick and easy access to information from these different registers, which must be compiled electronically and kept constantly updated. This takes account of amendment 5.

Article 3(3)

Paragraph 3 incorporates the first part of amendment 24. It requires Member States to ensure that registration of insurance and reinsurance intermediaries is made subject to fulfilment of the professional requirements laid down in Article 4. Where the requirements are not met, the intermediary must be removed from the register.

However, as regards the last sentence of amendment 24, setting a three-year limit on the validity of registration, the Commission has already indicated to Parliament that such an arrangement would be difficult to manage in practice and would undermine the smooth operation of the system. The Council common position does not include this part of the amendment for the same reasons.

Article 4 - Professional requirements for insurance and reinsurance intermediaries

Article 4(1)

Article 4(1) provides that all insurance and reinsurance intermediaries must possess appropriate knowledge and ability. The common position specifies that it is up to the intermediary's home Member State to determine the level of knowledge required. Home Member States may adjust the required conditions in line with the activity of the insurance or reinsurance intermediary and the products distributed, particularly if the intermediary's main professional activity is other than insurance mediation. In such cases, the intermediary concerned may carry on mediation business only if an insurance intermediary fulfilling the conditions laid down in this Article or an insurance undertaking assumes full responsibility for his actions.

The common position also provides that, where an insurance undertaking collaborates in the registration of intermediaries (e.g. tied insurance intermediaries), it must verify that their knowledge and ability comply with the requirements and, if need be, provide them with training which corresponds to the requirements in relation to the products sold by the intermediaries concerned. These provisions incorporate amendment 29.

Article 4(2)

Amendment 30 covers the requirement for insurance and reinsurance intermediaries to be of good repute. It tightens the requirements for them to have access to the register. The wording of this provision in the common position incorporates the essence of the amendment.

Articles 11 and 12 - Information provided by insurance intermediaries

Article 11(1)

The common position has adapted Article 11(1) compared with the Commission proposal to specify that the information must be provided prior to the conclusion of the insurance contract. The common position thus incorporates amendment 37.

Article 12(2) and (3)

The common position has amended these paragraphs to take account of insurance mediation conducted by telephone. It specifies how the information required under Article 11 is to be provided to the customer in cases of telephone selling. The provision, based on the rules set out in the common position on the Directive on the distance marketing of financial services, takes account of the objective of amendment 44.

3.2.2. Amendments accepted by the Commission and not included in the common position

Amendment 32 provides for a transitional rule covering any insurance or reinsurance intermediaries who, when the proposal for the Directive was submitted, were already registered and had a similar level of knowledge to that required by the proposal. Such persons should be automatically entered in the register that will be created by their home Member State under the Directive.

3.3. New provisions introduced by the Council

(a) Recitals

Recital 19

This recital is linked to Article 11(5) of the common position. It specifies the extent to which information requirements are to be harmonised and the limits on the Member States' freedom to maintain or adopt more stringent provisions than those contained in the Directive.

Recital 23

The Council has aligned this recital with the common position on the Directive on the distance marketing of financial services.

(b) Substantive provisions

Point 10 of Article 2 of the common position

The definition of "host Member State" was introduced for legislative drafting reasons since the Directive uses the term in several places. It is similar to that used in other Community legislation in the insurance field (such as Directives 92/49/EEC and 92/96/EEC).

Article 3(4) of the common position

Article 3(4) allows the competent authorities to provide the insurance or reinsurance intermediaries with a document enabling any interested party, by consulting the register(s) referred to in Article 3(2), to verify that they are duly registered. The document must at least include information on the intermediary's identity and address and the register in which he is entered and, in the case of a legal person, the name(s) of the natural person(s) within the management who are responsible for the insurance mediation business. The Member State must require the return of the document to the competent authority which issued it when the insurance or reinsurance intermediary concerned ceases to be registered.

Article 4(3) of the common position

The Commission's proposal required an insurance or reinsurance intermediary's professional indemnity insurance or comparable guarantee to cover at least EUR1 000 000 per claim. The common position lays down a minimum of EUR1 000 000 per claim and in aggregate EUR1 500 000 per year for all claims. The Council wished to ensure a level of cover of an intermediary's liability that matched the requirements of the single market, while taking account of the effort that intermediaries in some Member States which currently require a lower level of cover will have to make.

Article 4(4) of the common position

This provision lays down a financial capacity requirement for insurance intermediaries that handle funds belonging to customers. The common position makes two amendments to the Commission proposal. First, it stipulates as regards the first form of financial guarantee (Article 4(4)(a)) that Member States may lay down provisions by law or contract whereby monies paid by the customer to the intermediary are treated as having been paid to the undertaking while monies paid by the undertaking to the intermediary are not treated as having been paid to the customer until the customer actually receives them. The common position thus incorporates amendment 56.

Second, the common position amends the calculation basis and the rate applicable to the second form of financial guarantee, while maintaining the minimum of EUR15 000 proposed by the Commission. In the Council's view, this solution is better suited to attaining the objective. It is already in force in some Member States.

Article 4(7) of the common position

Under this provision, amounts expressed in euros are indexed.

Article 5 - Notification of establishment and services in other Member States

The common position allows the host Member State to waive notification by the home Member State of cases where an insurance or reinsurance intermediary intends to carry on business on the former's territory under the freedom to provide services or the freedom of establishment. Member States wishing to be informed must notify the Commission, which must in turn notify all the Member States.

Article 6 - Competent authorities

The common position specifies that insurance or reinsurance undertakings may not be competent authorities (Article 6(2)). Likewise, the common position adds to the Commission proposal by providing that, where there is more than one competent authority in a Member State, that Member State must ensure that they cooperate closely so that they can discharge their respective duties effectively.

Article 7 - Penalties; Article 8 - Exchange of information between Member States

The common position splits the content of Article 7 as proposed by the Commission into two. Article 7 of the common position covers penalties proper. The wording follows that already used in other financial services legislation.

Like such legislation, the common position deals with the exchange of information between Member States in a separate article laying down a general obligation on the competent authorities of the Member States to cooperate and a specific obligation to exchange information in certain cases (where the intermediary has been subject to a penalty or in the event of measures likely to lead to the intermediary's removal from the list).

Article 11 - Information provided by the insurance intermediary

In addition to the changes made to take account of amendment 37, the Council thought it useful to amend the presentation of paragraph 1 so as to make it clearer.

Paragraphs 2 and 3 were also reworded by the Council in order to clarify their scope and the extent of the information requirement imposed on insurance intermediaries.

Lastly, paragraph 5 was added by the Council in order to make it clear that the harmonisation introduced by this Article is a minimum. Member States may maintain or adopt stricter provisions regarding the information requirements. Recital 19 specifies that Member States may impose stricter provisions on insurance intermediaries pursuing mediation activities on their territories, irrespective of the intermediary's place of residence. Any stricter provision must comply with Community law. Recital 19 states that such provisions must comply with the Treaty and secondary legislation, including the electronic commerce Directive as regards activities to which it is applicable.

In order to guarantee a high degree of transparency, any such provisions are to be communicated to the Commission, which will ensure that they are communicated to consumers and insurance intermediaries.

Article 13 - Right to apply to the courts

The common position incorporates a provision already used in other insurance directives and the purpose of which is to confer on insurance and reinsurance intermediaries or insurance undertakings a right to apply to the courts for review of the measures taken by Member States under the Directive.

4. CONCLUSIONS

The Commission takes the view that the common position, adopted unanimously by the Council, preserves the essence of its proposal and the substance of those of Parliament's amendments which it accepted. It would none the less have wished to see amendment 32, which it accepted, included in the common position.

Compared with the Commission proposal, the common position clarifies the main provisions of the Directive. The Commission can therefore recommend that Parliament adopt the common position.