This follows the publication of the directive in the Official Journal of the European Union on Tuesday, which means the 28 member states of the EU have two years to render the IDD into national laws.
The directive, previously called the Insurance Mediation Directive (IMD), contains regulatory requirements for insurance intermediaries – including independent financial advisers – within all EU member states.
It applies to all sellers of insurance products, including insurance undertakings that sell directly to customers: any person whose activities consist of assisting in the administration and performance of insurance contracts, including those acting on behalf of insurer; and ancillary insurance intermediaries.
It is designed to level the playing field across all distribution channels and all insurance-based investment products in order to improve consumer protection, market integration and competition across the EU.
According to Paul Stanfield, chief executive of the Federation of European Independent Financial Advisers (FEIFA) implementation of the IDD is at least as important to the IFAs in Europe as the proposed new Markets in Financial Instruments Directive (Mifid II).
Law firm Pinsent Masons said IDD covers all sellers of insurance products, including insurance undertakings that sell directly to customers.
“This will reportedly result in the IDD covering about 98% of the market, compared to about 48% of the market covered by the IMD,” it said.
“In the UK, the change will not significantly impact the market due to ‘gold-plating’ of the IMD – however, the new directive does contain specific information provisions that may add cost and complexity to insurers’ direct sales processes,” the firm said.