Opinion of the Economic and Social Committee on the "Proposal for a Directive of the European Parliament and of the Council on insurance mediation"
Date: 2001-05-30
Institutions: European Economic and Social Committee
Subjects: insurance, provision of services, reinsurance, right of establishment

7.8.2001

EN

Official Journal of the European Communities

C 221/121

Opinion of the Economic and Social Committee on the ‘Proposal for a Directive of the European
Parliament and of the Council on insurance mediation’

(2001/C 221/21)

On 3 November 2000 the Council decided to consult the Economic and Social Committee, under
Articles 47(2) and 55 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 10 April 2001. The rapporteur was
Ms Konitzer.

At its 382nd plenary session (meeting of 30 May), the Economic and Social Committee adopted the
following opinion by 77 votes to 14, with ten abstentions.

1.

Introduction

Independent

insurance intermediaries play a very
1.1.
important role on the financial services market. According to
figures from the International Association of Insurance and
Reinsurance Intermediaries (BIPAR), their share of the market
in the distribution of insurance products is over 50 % in many
Member States (1).

1.2.
For insurance undertakings, the internal market in
insurance has largely been completed thanks to the legal
framework set in place by the Third Directives (2). Since July
1994, each insurance undertaking has been subject to a single
regime of official authorisation and prudential supervision by
the Member State in which it has its registered office. However,
there is as yet no effective and uniform European legal
framework for insurance and reinsurance intermediaries. It is
not least this absence of a legal framework that prevents full
advantage being taken of the freedom to provide services and
the freedom of establishment. This is one reason why insurance
intermediaries are often unable to meet the wishes of their
customers. Examples include liability and risk insurance for
motor vehicles and property in another Member State. In the
vast majority of cases, such insurance is — and can only be —
taken out in the Member State concerned.

1.3.
In the explanatory memorandum to the proposed
directive, the Commission rightly notes that, while the current
Community provisions relating to intermediaries (Directive
77/92/EEC (3) and Recommendation 92/48/EEC) (4) have cer-
tainly helped to bring national laws closer together, insurance
intermediaries are nonetheless still subject to different legal
requirements in the individual Member States, and these
requirements isolate national markets and hinder cross-border
business.

(1) The statistics on market shares of

the various channels of
distribution set out on page 3 of COM(2000) 511 final have been
expanded by Bipar to include data from the Scandinavian countries
— see appendix.

(2) Directive 92/49/EEC (Third Non-Life Directive), OJ L 228,
11.8.1992, p. 1. Directive 92/96/EEC (Third Life Directive), OJ
L 360, 9.12.1992, p. 1.
(3) OJ L 26, 31.1.1977, p. 14.
(4) OJ L 19, 28.1.1992, p. 32.

1.4.
It should also be pointed out that Commission Rec-
ommendation 92/48/EEC (4) has not yet been transposed in all
Member States. Directive 77/92/EEC has proved an inadequate
basis for establishing a legal framework which affords freedom
to provide services and freedom of establishment, and thus
enables insurance and reinsurance intermediaries to engage in
cross-border business. In some Member States, intermediaries
can still set themselves up in business without any relevant
professional training or skills, and the term ‘intermediary’ as a
professional title is often not protected.

The Commission’s Proposal for a Directive of the
1.5.
European Parliament and of
the Council on insurance
mediation reflects the Community’s concern — as voiced in
the Financial Services Action Plan (5) — to establish a truly
integrated retail market in which the interests of customers
and suppliers in the field of insurance mediation are properly
protected.

2. Content of the proposed directive

2.1.
The Commission proposal covers admission to the
profession of insurance and reinsurance intermediary for all
persons (natural or legal) taking up or pursuing this activity
within the Community [Article 1(1)].

2.2.
The directive is designed to improve intermediaries’
freedom to provide services and freedom of establishment
within the Community.

2.3.
The directive reflects the fact that insurance intermedi-
link in the sale of insurance in the
aries are an essential
Community. Their share of the market in the distribution of
insurance is over 50 % in many Member States.

(5) COM(1999) 232 final, 11.5.1999.

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2.4.
The directive also takes account of the aims of the
Financial Services Action Plan (1) — endorsed by the European
Council in Cologne in June 1999 and reiterated in Lisbon on
23 and 24 March 2000 — to establish a truly integrated retail
market in which the interests of customers and suppliers are
properly protected.

2.5.
The directive also falls in with the European Parlia-
ment’s resolution on the Financial Services Action Plan, which
states that an overhaul of Community rules on insurance
intermediaries is of the utmost importance (2).

The directive establishes an unprecedented legislative
2.6.
framework designed to ensure a high level of professionalism
and competence among all
intermediaries
(Article 4). Insurance and reinsurance intermediaries are only
to be allowed to operate in the Member States if:

independent

— they possess appropriate general, commercial and pro-

fessional knowledge and ability;

— they are of good repute and, in particular, have never
committed a criminal offence in relation to the insurance
and reinsurance business and have never been declared
bankrupt;

— they hold professional

indemnity insurance or some
other comparable guarantee against liability arising from
professional negligence, for at least EUR 1 000 000 per
claim;

— they are subject to safeguards — under customer protec-
tion measures set in place by the Member States — to
ensure that they transfer premiums to the insurance or
reinsurance undertaking and the amount of any claim to
the insured party.

2.7.
In contrast to independent intermediaries for whom
their work is their principal professional activity, Member
States may impose lower professional requirements on persons
who take up or pursue insurance mediation as employees of
an insurance undertaking or of a registered intermediary, or
only as a sideline to their main occupation. There is an
obligation to provide such persons with relevant basic training
and to take on responsibility for their actions (Article 4(1)
subparagraphs 2 and 3).

the amount of the premium does not exceed EUR 1 000 per
year and the duration of the insurance contract is less than a
year [Article 1(2)].

2.9.
Under the directive, the taking-up and pursuit of the
profession of insurance or reinsurance intermediary are subject
to registration by the competent authority in the intermediary’s
home country; there must be easy public access to the register
(Article 3).

2.10.
may use the services only of
[Article 3(5)].

The directive stipulates that insurance undertakings
registered intermediaries

In order to guarantee the freedom to provide services
2.11.
and the freedom of establishment, the directive lays down
prior reciprocal information requirements between the home
country and the host country in cases where an intermediary
intends to offer services or establish a branch in a Member
State other than his or her home Member State. The competent
authority of the host Member State is to be required to inform
its counterpart in the home Member State of the conditions
under which, in the interest of the general good, the business
must be carried on in its territories (Article 5).

2.12.
The competent authorities which keep the register of
intermediaries must be public authorities, bodies recognised
by national law or bodies recognised by public authorities
expressly empowered for
law
(Article 6).

that purpose by national

2.13.
The proposed directive stipulates that Member States
must provide appropriate sanctions against non-registered
intermediaries offering or arranging insurance, and against
insurance undertakings that use the services of non-registered
intermediaries. In the event of infringements, the competent
authorities of the Member States are to work together by
exchanging information (Article 7).

2.14. Member States are required to set up a facility for
registering complaints and machinery for the out-of-court
settlement of disputes (Articles 8 and 9).

2.8. Moreover, Member States need not apply this directive
to persons providing insurance that is ancillary to the supply
of a good or service, where no specific knowledge is required,

2.15.
requirements laid down in the directive (Article 10).

Intermediaries must comply with the information

(1) See footnote 6.
(2) Resolution A5-0059/2000, point 11.

2.16. Member States must
31 December 2003 at the latest (Article 13).

transpose the directive by

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3. General comments

The Economic

and Social Committee

3.1.
expressly
endorses the Commission’s proposal which seeks (i) to ensure
a high level of professionalism and competence among
insurance and reinsurance intermediaries through the estab-
lishment of a legislative framework, (ii) to facilitate the cross-
border activities of
intermediaries under the freedom of
establishment and freedom to provide services by providing a
uniform system for their registration and (iii) at the same time,
to provide a high level of protection for insurance customers’
interests.

3.1.1.
The Committee has already made the point that,
despite its key importance for the operation of the insurance
sector in the single market, the business of insurance agents
and brokers is covered by only a single directive, dating from
1976, which ignored aspects such as professional liability,
financial guarantees, registration and other business con-
ditions (1).

3.1.2.
However, the Committee feels that the proposal for
a directive on insurance mediation does not always adequately
meet its basic objectives. This applies to:

— the high professional requirements for insurance and

reinsurance intermediaries;

— the freedom to provide services and freedom of establish-
ment, and the protection of customers and insured
persons.

3.2.
According to the Commission’s explanatory memor-
andum, the purpose of the directive is to establish a legislative
framework designed to ensure a high level of professionalism
and competence among insurance intermediaries (2). However,
all professional skills are based on appropriate theoretical and
practical training, the experience gained in this process and
the knowledge acquired as part of continuing training in the
course of one’s career. The Commission proposes (3) that the
knowledge and ability of intermediaries should be tailored to
the functions they perform and to market requirements and
that the Member States themselves should decide and lay down
the level and content of such knowledge.

3.2.1.
In the light of these objectives and reiterating a
point already made in Recommendation 92/48/EEC, the first
insurance and
subparagraph of Article 4(1) requires that
reinsurance intermediaries possess appropriate general, com-
mercial and professional knowledge and ability.

(1) Own-initiative opinion on consumers in the insurance market, OJ

C 95, 30.3.1998, p. 72.

(2) COM(2000) 511 final, point 1.2, paragraph 1, explanatory

memorandum.

(3) COM(2000) 511 final, point 2, comments on Article 4, explana-

tory memorandum.

3.2.2.
The Committee would refer to its opinion on con-
sumers in the insurance market (Single Market Observatory)
in which it pointed out that insurance brokers must have the
specialist training needed to perform their important task (4).
In this regard, the Committee would point to BIPAR’s Oporto
declaration (5), which leaves it to the Member States themselves
to decide the level and content of training, but requires a
minimum of 300 hours’ theoretical and practical training,
although credit may be given for any relevant professional
knowledge already acquired.

3.2.3.
The Committee proposes that insurance intermedi-
aries who have already acquired experience and knowledge of
insurance mediation over a certain period of time should not
be required to undergo renewed training under the first
subparagraph of Article 4(1), but that an additional provision
should be introduced giving them direct access to registration.

3.3.
The freedom to provide services under Articles 49ff
and the freedom of establishment under Articles 43ff TEC will
thus become a reality for insurance intermediaries only if they
are able — on the basis of their recognition and registration in
their home country — to also offer services in another Member
State and/or establish branches there. However, different
national rules within the Member States are manifested in the
compartmentalisation of the markets up to now. This situation
would be perpetuated by the adoption of the Commission
proposal — signalled in the last part of Article 5(3) — to make
the taking-up of an insurance mediation activity in another
Member State subject to conditions that relate to different
training practices. The aim should therefore be to lay down a
minimum standard for the training required in all Member
States under the first subparagraph of Article 4(1), without
specifying the content of that training in the directive, and to
ensure that the skills thus acquired — which give access to
registration in the intermediary’s home country — also make
it possible (following registration) to take up this activity in
another Member State.

The Committee therefore feels that

3.3.1.
freedom to
provide services and freedom of establishment can only be
brought about by laying down a minimum level of training
for insurance intermediaries wishing to acquire the requisite
professional skills, and that such training should culminate in
a state or state-recognised examination.

3.4.
The Commission proposal also seeks ultimately to
improve the protection of customers acquiring insurance
products via an intermediary. Such protection is to be provided

(4) OJ C 95, 30.3.1998, p. 72.
(5) BIPAR resolution (Oporto declaration), 7.10.1992, Germany:

Insurance mediation 1993, p. 69.

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inter alia by guaranteeing that all persons (natural or legal)
taking up or pursuing the activity of insurance or reinsurance
mediation have been registered on the basis of certain mini-
mum professional requirements. Initially, consideration was
given to making the directive applicable only to intermediaries
with a certain turnover, but this was quite rightly rejected in the
interests of protecting insurance customers. An intermediary
selling only one product a day must be no less skilled than one
selling ten. The basic skills required of intermediaries in the
interests of customer protection cannot be determined either
by the number of products sold or by the amount of time this
takes.

Unfortunately,

the Commission ignores its own
3.4.1.
conclusion in this regard (1)
in the third subparagraph of
Article 4(1), where it is stated that Member States need not
apply the requirements set out in the first subparagraph of the
same article to intermediaries whose principal professional
activity is not insurance mediation. The sale of insurance as a
secondary professional activity is found in both Portugal and
Scandinavia, but is particularly widespread in Germany where
some 300 000 people are involved in insurance mediation as
a sideline. If the Commission proposal is adopted, however,
the opening-up of the market and the freedom to provide
services will quickly enable people to take up this sideline in
other Member States as well. The issue does not therefore
affect just one Member State.

3.4.2. Moreover, the Commission’s proposal not to apply
the professional requirements to intermediaries for whom this
is not their principal professional activity also contravenes the
Amsterdam Treaty’s consumer protection provisions (2).

3.5.
The Committee feels that the insurance intermediary’s
record-keeping requirements under Article 10(3) are too one-
sided and, moreover, will fail to achieve the desired consumer
protection if, in the event of a claim, the only records available
are those of the insurance intermediary.

4.

Specific comments

4.1. Article 1 — Scope

cover liability risks [Article 1(2)(c)], but is ancillary to the
supply of goods or services as part of those persons’ principal
professional activity [Article 1(2)(d) and (e)]. The Committee
feels that such ancillary contracts should also include, for
instance, an insurance contract for a hire car booked together
with and for the duration of a holiday. The proposal stipulates
that the duration of the insurance contract must be less than a
year and that the amount of the premium must not exceed
EUR 1 000 [Article 1(2)(f)].

to (c). The specific mention of

4.1.1.1.
Since the life insurance contracts and contracts
covering liability risks referred to in Article 1(2)(b) and (c)
always require specific knowledge of insurance, they are also
covered by Article 1(2)(a). It is thus proposed to combine
liability
paragraphs 2(a)
insurance stems in the case of motor vehicle insurance from
the legal requirement to protect potential victims which exists
in all Member States and necessitates compulsory insurance.
Another reason for amalgamating the three paragraphs is that
other insurance contracts also require general and specific
knowledge in just the same way as contracts covering life and
liability insurance. The following new wording is proposed:

‘(a)
the contracts do not involve products relating to
retirement provision or investment funding such as life
insurance or pension schemes, do not cover any liability
risks and do not require general or specific knowledge of
insurance;’

4.1.2.
The proposal does not make clear whether the figure
given for the premium relates to the total number of insurance
contracts concluded per year or to each individual contract.
Under the proposed directive, the rules are not to apply only
where the mediation involves contracts which cover small
risks and are provided ancillary to a main product (e.g. loss of
or damage to spectacles and certain household electrical
appliances, or in connection with travel contracts); hence, it is
appropriate to limit the annual premium to EUR 100 with no
restriction on the duration of the contract. The following
wording is therefore proposed:

the premium does not exceed EUR 100 per year and

‘(f)
contract with no restriction on contract duration.’

The proposal allows Member States not to apply the
4.1.1.
provisions on professional requirements (Chapter II) or on
information requirements (Chapter III) to persons providing
insurance if that activity does not require any general or
specific knowledge of insurance [Article 1(2)(a)], does not
involve life insurance contracts [Articles 1(2)(b)] and does not

4.2. Article 2 — Definitions

(1) COM(2000) 511 final , point 2, comments on Article 1, para-

graph 5, explanatory memorandum.

(2) OJ C 340, 10.11.1997, p. 32, Article 2.17.

4.2.1.
the directive. Some of these definitions are not clear.

Article 2 defines the terms used in the application of

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4.2.1.1.
Article 2(3) defines insurance mediation as ‘the
activities of introducing, giving information, proposing or
carrying out work preparatory to the conclusion of, or
in concluding, contracts of insurance, or assisting in the
administration and performance of such contracts, in particu-
lar in the event of a claim’.
In the German version of
the proposal, the word ‘Vorschlagen’ (proposing) should be
(giving infor-
replaced by the term ‘Informationserteilung’
mation) to bring it more into line with the English version.
(Translator’s note: The English version already makes a distinc-
tion between giving information and proposing.) Furthermore,
the definition of insurance mediation should also include the
actual provision of advice connected with the conclusion of a
contract. The Committee considers that the administration of
insurance contracts does not constitute insurance mediation
within the meaning of the directive. The directive should
clearly state that it is not necessary for all the given criteria to
be met before an activity can be deemed to constitute insurance
mediation. The following wording is thus recommended:

“Insurance mediation” means the activities of intro-
‘(3)
ducing or carrying out work preparatory to the con-
clusion of, or in concluding, contracts of insurance, and
giving information and advice in connection therewith,
and assisting in the performance of such contracts,
particularly by providing advice in the event of a claim. It
does not include the establishment of contacts with the
customer. In order to constitute ’insurance mediation’,
only one of the given criteria need be met.’

The definition of

‘insurance intermediary’

4.2.1.2.
in
Article 2(5) only covers persons (agents, representatives of one
or several firms, brokers etc.) who pursue insurance mediation
independently, i.e. not as employees of an insurance undertak-
ing. This clarification obviates the need to exclude from the
definition insurance undertakings and their employees. In the
light of the proposal for Article 2(3) the following wording is
recommended:

‘(5)
“Insurance intermediary” means any person who,
for remuneration or in connection with a product and/or
service for which payment is received, takes up or pursues
insurance mediation in a self-employed/independent
capacity.’

In line with the proposal set out in point 4.2.1.2
4.2.2.
above,
forward for
the
Article 2(6):

following amendment

is put

“Reinsurance intermediary” means any person who,
‘(6)
for remuneration or in connection with a product and/or
service for which payment is received, takes up or pursues
reinsurance mediation in a self-employed/independent
capacity.’

4.3. Article 3 — Registration

4.3.1.
Given the proposal to delete the third subparagraph
of Article 4(1) (see point 4.4.3.4 below), Article 3(2) should be
worded as follows:

‘2. Member States shall ensure that registration of
insurance and reinsurance intermediaries is made subject
to the fulfilment of the professional requirements laid
down in Article 4.’

4.3.2.
Registration constitutes a legal act of admission to
the profession. Conversely, refusal to grant registration imped-
es such admission and thus touches on a fundamental right —
the freedom to choose an occupation. The directive must
therefore require Member States to administer the licensing
arrangements according to the rule of law, and must also make
provision for an opposition and complaints procedure to
challenge any rejection or withdrawal of registration. This can
be achieved by rewording Article 3(4) as follows:

‘4. Member States shall ensure that an appeals pro-
cedure is available to intermediaries whose application
for registration is rejected or whose registration is with-
drawn on the basis of a sanction under Article 7. Member
States shall also ensure that there is easy public access to
the register or registers referred to in paragraph 1.’

4.4. Article 4 — Professional requirements

insurance intermediaries;

The first subparagraph of Article 4(1) sets out the
4.4.1.
professional skills required of
it
does not specify either the duration or the content of the
arrangements for acquiring these skills, which give entitlement
to state registration as an insurance intermediary. The phrase
‘appropriate general, commercial and professional knowledge
and ability’ does not even make reference to the activity
of
insurance mediation. By leaving the requirements for
intermediaries’ knowledge and abilities open to wide interpret-
ation, there may be a risk that, in the event of national rules
diverging completely,
the
objective of securing better protection for insured persons —
particularly as regards the requirements for intermediaries’
professional competence. Unless basic skills are laid down that
provide customer protection, major distortions in competition
will ensue for intermediaries under the freedom to provide
services which this proposal seeks to establish. It would thus
seem that the proposed directive still fails to establish the
equivalence of national rules on insurance intermediaries
sought by Recommendation 92/48/EEC.

it will be impossible to meet

4.2.3.
Since the proposed directive does not define the term
‘parent undertaking’ used in Article 10(1) (c), it is proposed
that such a definition be added. The Committee is asked to do
this:

4.4.1.1.
On the other hand, however, given the very high
professional requirements for insurance intermediaries in some

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Member States,
it is also impossible to establish uniform
standards for insurance intermediaries’ professional training
by means of an EU directive. Hence, the Economic and Social
Committee would not advocate a directive laying down
uniform rules for professional training. However, it would
recommend an approach along the lines proposed by
BIPAR (1), namely to work out at least a ‘minimum standard’
on which Member States can build their national training
courses and which should lay down a basic number of hours
of appropriate theoretical and specialist training. It should be
left to Member States — in conjunction with professional
associations, insurance undertakings, various types of cham-
bers and workers’ representatives — to draw up, provide and
implement the training programme and to determine to what
extent credit can be given for any relevant professional
knowledge already acquired. At the end of the training, an
objective final examination should be set by the state or —
depending on Member States’ national set-ups — by a legally
empowered state-recognised body. It is therefore proposed
that the first subparagraph of Article 4(1) be worded as
follows:

‘1.
Insurance and reinsurance intermediaries shall pos-
sess appropriate general, commercial and professional
knowledge and ability in the insurance sector, which shall
be acquired by completing a total of at least 300 hours’
practical and theoretical training. Credit may be given
for relevant knowledge acquired by means other than
training. The training shall conclude with an examination
by a state or state-recognised body.’

insurance mediation whose principal professional activity
is not insurance mediation and whose income does not
predominantly depend on it, provided a party equipped with
the skills under the first subparagraph, or an insurance
undertaking, takes on full responsibility for their actions and
provides them with appropriate and relevant training.

4.4.3.1.
This exemption runs counter to the Commission’s
intention ‘to guarantee that all persons (natural or legal) taking
up and pursuing the activity of insurance or reinsurance
mediation ... (meet) a minimum set of professional require-
ments (3)’. It also goes against the Commission’s view that
effective protection of policyholders’ interests can be achieved
only if the directive and the requirements it contains apply to
all insurance intermediaries (4).

4.4.3.2.
The fact that national rules may require different
professional skills from insurance intermediaries, constitutes
unwarranted practical discrimination and thus contravenes the
principle of equality. It is of no consequence in this regard that
responsibility for any non-registered persons working for an
undertaking or a registered intermediary is to be borne by their
‘superiors’. This safeguard helps protect policyholders only
after damage caused by incorrect advice or mediation has been
done, but does not help prevent that damage from occurring
in the first place. To do proper justice to customer protection,
this directive must seek precisely to avoid incorrect advice
being given or a faulty contact being concluded.

4.4.2.
The Committee trusts that the provisions of the
second subparagraph of Article 4(1) are also applicable to
banks and savings institutions which take up or pursue
insurance mediation in addition to providing financial services,
thereby obliging the management of these bodies to meet all
the requirements of Article 4 and to be registered. Employees
of these undertakings who are directly involved in insurance
or reinsurance mediation, must have the product-related
knowledge and ability required for the insurance mediation
activities they take up or pursue, and must be supervised by
the registered management (2).

It is impossible to draw a clear distinction between
4.4.3.3.
a principal and secondary activity. Thus, it is a moot point
whether two-hours’ mediation a day constitutes a secondary
activity for a person with no other employment, or whether a
person may be considered to be involved in insurance
mediation in a secondary capacity if he or she works half-time
as an employee and half-time as an independent intermediary.

4.4.3.4.
The Economic and Social Committee therefore
calls for the deletion of the third subparagraph of Article 4(1).

4.4.3.
Under the third subparagraph of Article 4(1), Mem-
ber States need not apply the professional skill requirements
to natural persons taking up and pursuing the activity of

4.4.4.
The Commission proposal makes no transitional
arrangements for intermediaries who have already been work-
ing independently in the insurance sector for a long time. The
Committee feels it is inappropriate that these intermediaries
should also be required to undergo training as a condition for
registration and thus for carrying on with their work. The
Committee would therefore propose that the following grand-

(1) BIPAR resolution (Oporto declaration), 7.10.1992, Germany:

Insurance mediation 1993, p. 69.

(2) cf. also comments made by Commission representatives at the
insurance mediation study group meeting of the ESC Section for
the Single Market, Production and Consumption, 20 February
2001.

(3) COM(2000) 511 final, point 1.3, first paragraph, explanatory

memorandum.

(4) COM(2000) 511 final, comments on Article 1, explanatory

memorandum.

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father clause be included as the third subparagraph of
Article 4(1):

Article 4(4)(c). Moreover, the first sentence of Article 4(4)
allows each Member State to take action possible and permiss-
ible under national law to protect customers’ monies.

‘Member States need not apply the requirement referred
to in the first subparagraph to persons who, at the time
of the entry into force of the national legislation adopted
on the basis of this directive, have already been working
in the field of insurance mediation for more than three
years.’

Since the first sentence of Article 4(4)

4.4.6.3.
is very
broadly worded, the Committee advocates dispensing with the
in
open-ended list of possible security measures set out
sections (a) to (d), and, in any case, recommends the deletion
of Article 4(4)(b).

4.4.5.
Under the first subparagraph of Article 4(2), one of
the requirements for registration is that the insurance or
reinsurance intermediary must never have been declared
bankrupt. The concept of bankruptcy is not customary in all
Member States. In Germany it was abolished under the 1994
insolvency ordinance (1) and replaced by the term insolvency.
Apart from bankruptcy and insolvency, however, other pun-
ishable offences are also inconsistent with the reliability
insurance intermediary. These
required of a professional
include in particular money-related offences such as embezzle-
ment or misappropriation. To clarify and amplify this point,
the following wording is recommended:

‘... in relation to insurance and reinsurance business, they
shall not have previously been declared bankrupt, had
insolvency proceedings launched against them in court
or been sentenced for offences against the property of
a third party, unless they have been rehabilitated in
accordance with national law.’

4.4.6.
In Article 4(4)(b), the Commission proposes that, in
order to ensure the transfer of premiums and claims, Member
States may require that intermediaries have financial capacity
amounting, on a permanent basis, to 8 % of their annual net
retained revenue, subject to a minimum of EUR 15 000 .

This provision would not only require a profession
4.4.6.1.
to publish its income for the first time, but would also impose
a considerable economic burden. The provision is also too
vague to be workable. To ensure compliance, the competent
authority would have to carry out permanent checks, which
would require unforeseeable and unaffordable administrative
expense. Moreover, the level of the security to be retained
appears arbitrary and is not geared to any actual need for
protection.

4.4.6.2.
The Economic and Social Committee feels it is
enough to require intermediaries to strictly segregate cus-
tomers’ monies from company accounts in order to protect
client accounts in the event of bankruptcy, as required under

4.5. Article 5 — Notification of establishment and services in

other Member States

4.5.1.
Article 5 of the Commission proposal provides for a
notification system designed to guarantee the freedom to
provide services and freedom of establishment within the
Community. This article establishes the procedure to be
followed by registered intermediaries wishing to pursue their
profession in a Member State other than the one in which they
are registered. The procedure requires notification on three
fronts: (i) from the intermediary to his or her home-country
registration office;
(ii) from the home-country registration
office to its counterpart in the host country and (iii) from
the home-country registration office to the intermediary,
informing him or her that the host-country registration office
has been notified. Moreover, the competent host-country
authority must inform the home-country authority of the
conditions under which, in the interest of the general good,
the business may be carried on in its territories (Article 5(3)).
It is then necessary for the competent home-country authority
to forward these conditions to the intermediary. Under the
proposed directive, it will take at least three months before an
intermediary is able to become established in another Member
State or offer services there. It also involves several avoidable
layers of red tape.

Thus the Commission rightly points out

4.5.1.1.
that
this procedure could be modernised and that, taking into
consideration the interest of the general good, the registers
could be published on the website of each competent authority.
The Commission proposes discussing such a procedure togeth-
er with the Member States.

The Economic and Social Committee fully endorses
4.5.1.2.
the Commission’s assessment and would advocate pressing
ahead straightaway with the proposed simplification using
modern media.

4.5.1.3.
that Article 5(1) and (2) be reworded as follows:

The Economic and Social Committee thus proposes

(1) German insolvency ordinance (Insolvenzordnung), 5.10.1994,

(Federal Law Gazette BGBl. I. p. 2866).

‘1. Any insurance or reinsurance intermediary intending
to carry on business for the first time in one or more

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Official Journal of the European Communities

7.8.2001

Member States under the freedom to provide services or
the freedom of establishment shall inform the competent
authority of the host Member State. The competent
authority shall confirm to the intermediary within one
month that he or she may take up the activity or become
established. Failure to provide confirmation or to provide
it on time shall entitle the intermediary to take up and
pursue business in the host Member State.

4.6.2.
Under Article 10(1)(e), the intermediary is required
to provide information on the parties who may be held liable
in the event of a claim. Apart from the insurance intermediary
and his/her firm and/or partners, the only other parties to
whom this may apply are generally the insurance intermedi-
ary’s liability insurance and the company with which the
insurance contract is established. The Committee therefore
recommends that the paragraph be reworded as follows:

2. The competent authorities of the Member States shall
gather together the registers of insurance and reinsurance
intermediaries on a joint website and update them
regularly.’

4.5.2.
Article 5(3) of the Commission proposal stipulates
that the competent authority of the host country must inform
the authority of the home country of the conditions under
which, in the interest of the general good, the business may be
carried on in its territories. This point makes it clear that the
directive will not guarantee either freedom to provide services
or freedom of establishment. This, however, is supposed to be
the express purpose of the directive. Otherwise, any Member
State could isolate its own market by laying down additional
requirements that go beyond those set out in Article 4. The
directive should therefore make it clear that the conditions set
by the Member States may not relate to the training require-
ments under Article 4(1) (1). The following addition is thus
proposed to Article 5(3):

‘The conditions set by the Member States may not relate
to the training requirements under Article 4(1)’.

4.6. Article 10 — Information provided by the insurance inter-

mediary

4.6.1.
The German version of the Commission proposal
states that ‘before any contact is made’ (‘vor jeder Kontaktauf-
nahme’) an insurance intermediary is to provide the customer
with the information listed in Article 10(1). It is in fact
to provide information before any
impossible, however,
contact is made. The English version states that information
must be provided ‘prior to any initial contract’. The Economic
and Social Committee feels that the text must be brought into
line with the English version and proposes the following
wording:

‘1. No later than prior to the conclusion of any contract,
an insurance intermediary shall provide the customer
with at least the following information: ...’

(1) Footnote 17 also applies here. See point 1.3 of the explanatory

memorandum to the proposed directive.

‘(e)
the natural or legal persons (the intermediary’s
partners or firm, his/her liability insurance or that of
his/her partners or firm and the name and address of the
insurance company for which he/she operates) to be held
liable for any negligence, misconduct or inappropriate
advice by the intermediary in relation to the insurance
mediation’.

4.6.3.
Article 10(3) of the Commission proposal obliges
insurance intermediaries, prior to the conclusion of any
insurance contract, to specify in writing the demands and the
needs of the customer and to clarify the underlying reasons
for their advice. (Translator’s note: the words ‘in writing’ — in
German: schriftlich — do not appear in the English version of
the proposal). In most cases, this requirement is neither useful
nor practicable. People take out third-party motor vehicle
insurance when they buy or register a motor vehicle. They
take out travel cancellation insurance to cover the risk of
illness that might prevent them travelling. In most cases,
contracts are consistent with the clear, unambiguous will of
the party taking out the insurance, so that recording the
customer’s intention must be considered more as burdensome
red tape than useful consumer protection. The Committee
therefore feels that insurance intermediaries should only be
obliged to record these details if the customer so desires.
Customers should in that case also be required to inform
insurance intermediaries in writing of their wishes. In the event
of any claim, it is only possible to assess fault if written records
are available from both parties. Intermediaries should however
be required to point out their own obligation to keep records.
Hence, the Committee proposes that Article 10(3) be reworded
as follows:

‘3. The insurance intermediary shall inform the cus-
tomer that, at the customer’s request,
the insurance
intermediary is obliged to specify in writing the reasons
and needs underlying the conclusion of a contract or the
advice provided in that connection if the customer also
informs the intermediary in writing of his/her wishes and
needs.’

4.6.4.
Article 10(4) be expanded as follows:

The Economic and Social Committee proposes that

‘The information referred to in paragraphs 1, 2 and 3
need not be given when the insurance intermediary
mediates in the insurance of large risks, nor in the case of
mediation by reinsurance intermediaries or insurance
intermediaries tied to a specific firm in so far as they
carry out insurance mediation only for that firm.’

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4.7. Article 13 — Transposition

The Commission proposes that Member States bring
4.7.1.
into force the laws, regulations and administrative provisions
necessary to comply with this directive by 31 December 2003
at the latest and that they inform the Commission thereof
forthwith.

4.7.2.
The Economic and Social Committee feels that, in
addition to that, Member States should also inform the

Commission about the content and duration of the arrange-
ments they set
the training and skill
requirements under the first subparagraph of Article 4(1). It is
therefore proposed that the following sentence be added to
the first subparagraph of Article 13:

in place to meet

‘They shall in particular inform the Commission forthwith
about the duration and content of the national arrange-
ments made for the acquisition of the skills referred to
under the first subparagraph of Article 4(1).’

Brussels, 30 May 2001.

The President

of the Economic and Social Committee

Göke FRERICHS

APPENDIX

to the Opinion of the Economic and Social Committee

Market shares of the various insurance distribution channels in some countries of the European Union

Brokers

General agents

Banks

Direct insurance

Other

Country

Non-Life

Life

Non-Life

Life

Non-Life

Life

Non-Life

Life

Non-Life

Life

(%)

A (*)

B

D

DK

E

F

FIN

GR

IRL

I

NL

L

P

S

UK

14

70

15

15

18

19

10

65

18

60

10

16

70

11

50

12

18

7

15

50

3

1

48

5

15

72

43

39

10

4

76

80

59

18

3

10

65

11

10

17

42

12

5

77

8

12

5

15

5

31

25

17

5

51

45

Not available

15

36

80

1

15

5

4

Not available

15

3

3

5

40

20

2

80

30

5

20

5

14

10

53

5

5

35

4

6

30

33

19

4

2

1

4

6

41

35

5

7

2

2

10

6

42

25

1

33

(*) Banks can operate as a broker or an agent in Austria
Source: BIPAR 2001