5 Financial services: insurance mediation
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; but conditional waiver granted to support a General Approach
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| Document details | Draft Directive on insurance mediation
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| Legal base | Articles 53(1) and 62 TFEU; co-decision; QMV
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| Department
Document numbers
| HM Treasury
(34089), 12407/12 + ADDs 1-2, COM(12) 360
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Summary and Committee's conclusions
5.1 The 2002 Insurance Mediation Directive aims to
achieve a market throughout the EU for insurance intermediaries.
This draft Directive would recast (consolidate and amend) the
Insurance Mediation Directive. We have considered the proposal
on a number of occasions and noted the reservations the Government
had about some aspects of the proposal. In March 2013, having
heard that Council consideration of the draft Directive had been
put on hold, we asked to hear in due course about progress in
the negotiations in addressing the points drawn to our attention
previously.
5.2 The Government now tells us that consideration
of the proposal has recently resumed and that it has negotiated
improvements to the text on most of the points of concern. It
says that it wishes to participate in agreement on a General Approach
that the Presidency may seek shortly, in order to secure these
improvements.
5.3 Given the improvements the Government has
negotiated and on the assumption that it is able to secure the
further improvements it seeks, including on aligning the draft
Directive with related legislation, we grant it a waiver, in terms
of the Scrutiny Reserve Resolution, to support a General Approach.
5.4 Nevertheless the document will remain under
scrutiny pending an account of the outcome on a General Approach.
Full details of the document:
Draft Directive on insurance mediation (recast): (34089), 12407/12
+ ADDs 1-2, COM(12) 360.
Background
5.5 Insurance mediation is the activity of advising
on, or proposing or carrying out other work preparatory to, the
conclusion of contracts of insurance, concluding such contracts,
assisting in the administration and performance of such contracts,
in particular in the event of a claim, and professional management
of claims and loss adjusting.
5.6 The Insurance Mediation Directive, Directive
2002/92/EC, aims to achieve a market throughout the EU for insurance
intermediaries. This draft Directive, presented in July 2012,
would recast (consolidate and amend) the Insurance Mediation Directive.
One specific proposal in the draft Directive is related to alternative
dispute resolution (ADR), which would impose requirements on the
operation of the UK's civil justice system, in terms of the operation
of limitation and prescription periods and the availability of
interim remedies.
5.7 We have considered this matter on a number of
occasions. In October 2012, we said that whilst efforts to improve
the protection of customers of the insurance industry were to
be welcomed, we noted the reservations the Government had about
some aspects of the proposal. Later, on the ADR issue, we reminded
the Government of our view that its insistence on applying the
opt-in protocol in the absence of a Title V legal base is without
legal basis in the Treaties. But we heard subsequently that "the
UK formally opted into this Directive … in accordance with
Article 3 of Protocol 21 to the Treaty on the Functioning of the
European Union (TFEU) on 16 October [2012]".[16]
In March 2013, having heard that Council consideration of the
draft Directive had been put on hold, we asked to hear in due
course about progress in the negotiations in addressing the points
drawn to our attention previously.
The Minister's letter of 27 October 2014
5.8 The Economic Secretary to the Treasury (Andrea
Leadsom) tells us now that this matter has largely stayed dormant
until negotiations restarted in earnest under the Italian Presidency
and that things have since developed quickly. She says that:
· a compromise text was tabled at a Council
working group meeting on 21 October which meets most of the Government's
negotiating points and similarly has the backing of the Presidency
and broad support of other Member States;
· in the days following this meeting discussions
have suggested that the Presidency will look to table a General
Approach in the very near future;
· although there are some issues still to
be finalised, including alignment of the draft Directive with
the Markets in Financial Instruments Directive (MiFID) and Packaged
Retail Investment Products (PRIPs) legislation, if the General
Approach text tabled is in line with the Government's wider negotiating
aims, it would look to support the text; and
· the Government's concern with any attempts
to delay agreement would be the potential for the text to be re-opened
in a way that might compromise its negotiating successes so far.
5.9 The Minister then turns to policy issues previously
highlighted to us, on which she says there has subsequently been
positive progress. She says first that:
· the Government was concerned that the
draft Directive included a provision on ADR, as there was a question
as to whether this properly related to the single market;
· further, it thought that this provision
would change the nature of the existing UK Financial Ombudsman
Service with out-of-court disputes and would reduce consumer protection;
and
· these concerns have been alleviated as
the Government's successful negotiations have resulted in the
deletion of the original provision in the Council text.
5.10 The Minister tells us further that:
· the draft Directive previously prohibited
tying insurance products with ancillary services, whereas the
Government was of the view that there was no strong evidence suggesting
this was needed;
· this prohibition has now been removed
in favour of firms informing customers whether the components
of a package are available to be bought separately;
· the Government view has been that sanctions
provisions in the Directive should be minimum harmonising and
it has achieved this in the current Council text;
· the Government was previously concerned
that full mandatory disclosure of commission for all insurance
sales would not benefit customers, as this would serve to overload
them with information; and
· it supports the position of the current
Council text on requirements for disclosure of commission, as
elements which it did not support have been removed.
5.11 The Minister concludes that the Government hopes
that we are now able to clear the document from, or waive, scrutiny
to allow it to support General Approach that is positive for the
UK.
Previous Committee Reports
Sixteenth Report, HC 86-xvi (2012-13), chapter 14
(24 October 2012); Thirtieth Report HC 86-xxx (2012-13), chapter
6 (30 January 2013); Thirty-Fourth Report HC 86-xxxiv (2012-13),
chapter 5 (6 March 2013) and Thirty-Sixth Report, HC 86-xxxvi
(2012-13), chapter 5 (20 March 2013).
16 This decision was announced to the House on 15 January
2013: see HC Deb, col. 29WS. Back
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