Biba blog: On the pitch

Now that we’re in the thick of autumn, football fans’ minds turn to the European Champions League and, in my case, Arsenal’s perennial pursuit of the ‘trophy with the big ears’.

For the insurance industry, all eyes are also on Europe as the revision of the Insurance Mediation Directive (IMD2) starts its journey through the European legislative process. This is the most important European directive for insurance intermediaries in the past 10 years.

As active participants in the European Federation of Insurance Intermediaries, known as BIPAR, my colleagues and I at Biba have had numerous meetings in Brussels about IMD2.

The value of these meetings is now being realised, as at pan-European level, insurance intermediaries have very similar views on all the major issues. One of the most interesting aspects of my role at Biba over the past four years or so has been this European engagement and piecing together the different approaches to similar concepts across the 27 states.

No two European markets are the same, and therefore like-for-like comparisons are difficult to make, especially as the treatment of investment business around Europe has not been separated in the same way we in the UK did back in the 1990s.

The revision of the MIFID Directive (MIFID2) currently underway in Europe will have knock-on implications for our IMD2, so the broader picture experience we have gained through working with BIPAR is extremely useful.

One area in particular that links investments and general insurance is of course ‘advice’. In the UK, the FSA has decided, through its Retail Distribution Review (RDR), to ban the payment of commission on investment products from January 2013, where advice is given.

At European level, the discussions around MIFID have not copied the FSA approach – the latest proposal bans commission where ‘independent advice’ is given.

Advice is needed

In the general insurance arena, there is a view in Europe that there is no such thing as a ‘simple insurance contract’ – a concept that we at Biba support.

Customers need advice when arranging their insurances, and insurance brokers are best placed to facilitate this.

There is also evidence from around Europe, most recently from Germany, that customers are not prepared in any great numbers to pay for advice. This should lead policy makers to reassess the regulatory treatment of the advice activity.

The UK system of commissions allows customers to receive ‘free’ advice, and for this reason there are strong grounds for the insurance broking sector to fight for the right to be remunerated in this way.

Like the Champions League, there will be twists and turns in the plot before the outcome is known, but rest assured that Biba will be actively involved, not just an armchair viewer.

Steve White is head of compliance and training at Biba.