Worse Than Death?
Woody Allen once wrote: “There are worse things in life than death. Have you even spent an evening with an insurance salesman?”
The brand-new Insurance Distribution Act tries to improve things for consumers a least a little.
Consumer protection and education requirements
Consumers shall benefit from a higher level of knowledge of insurance products as the obligation to inform them became much broader. For a start, this means performing extensive analysis to provide consumers with proper information and keeping records of the contractual process. The consumer has to be provided with professional advice prior to conclusion of an insurance contract. Also, the consumer has also to be given a suitable range of insurance products to choose from. Apart from that, increased levels of mandatory education and expertise of insurance intermediaries shall protect the consumer as well. Intermediaries are required to pass a professional exam and obtain a respective diploma. Besides, the intermediaries shall keep on educating themselves to ensure a continuous and appropriate level of knowledge.
The categories of insurance distributors went down from six to four. According to the new act, only independent intermediaries, representatives, ancillary insurance intermediaries and insurance intermediaries established in another member state (benefiting from the so called European passport) are eligible to distribute insurances apart from insurance companies. To continue providing services, intermediaries registered under previous legislation have to apply for a new registration until April 1, 2019. The remuneration of the insurance distributors has changed dramatically. The previous practice of rewarding pyramid schemes or conditional remuneration shall no longer be admissible.
Insurance intermediaries have to be enrolled with the Czech National Bank, i.e. have to hold a respective permission and be listed in the evidence. Moreover, such permission has to be renewed every twelve months. The Czech National Bank expects to lower the number of insurance distributors presuming that many inactive distributors will be eliminated from the evidence.
An insurance adjuster is no longer considered to be performing an activity under the Insurance Distribution Act. This is now rather a regulated activity under the Trade Act and a respective trading license has to be obtained.
In conclusion, the Insurance Distribution Act enables the Czech National Bank to supervise and insure a transparent structure of the insurance market, enhances consumer protection and increases professional standards for insurance distributors.
Mgr. Bc. Karolína Szturc