Insurance updater - Europe

A compromise text for IMD2 amending the original Commission proposal regarding scope, commission disclosure and professional requirements has been published. Last year, EIOPA issued guidelines on complaints handling by insurance intermediaries. Competent authorities now have two months to inform EIOPA whether they will comply with the guidelines. The latest FOS statistics show signs that PPI complaints are leveling off.

On May 13, a compromise text for a revised insurance mediation directive (IMD2) was published. Broadly the text revises the existing insurance mediation directive in order to reflect concepts and definitions found in both Solvency II and the revised Markets in Financial Instruments Directive (MiFID II). The Presidency compromise text also amends the original Commission proposal with the effect that:

• Claims managers and loss adjusters are excluded from scope.
• Insurance-based investment products are subject to an enhanced conflicts of interest and customer information regime for “insurance distribution” activities.
• Ancillary providers will be subject to a notification regime.
• Professional requirements are revised.
• Tying and bundling are allowed but intermediaries must explain whether each component may be purchased separately.
• The nature of remuneration must be disclosed and whether that remuneration is based on commission or fees etc, but the amount need not be disclosed.
• In accordance with MiFID II execution only services are limited to non-complex products.

Trialogue negotiations between the Council, the European Parliament and the Commission are expected to resume later in the year. If a draft text can be agreed, there is still a chance that the Directive will be adopted at first reading in the European Parliament plenary session, the date of which is yet to be announced.

For further information:

European Council publishes a Presidency compromise text of a revised Insurance Mediation Directive

On May 16, the European Insurance and Occupational Pensions Authority (EIOPA) issued a statement initiating the ‘comply or explain’ process on the Guidelines on complaints-handling by insurance intermediaries, published in November 2013.

National competent authorities must report to EIOPA whether they comply, or intend to comply, with the Guidelines within 2 months. Authorities that do not comply will need to inform EIOPA, stating the reasons. Guidelines or recommendations that a competent authority does not comply with will be made public and EIOPA may decide, on a case-by-case basis, to publish the reasons provided by a competent authority for non-compliance.

The Guidelines apply to national authorities competent for supervising complaints-handling by insurance intermediaries. The Guidelines are:

• Ensuring the right institution deals with the complaint
• Complaints management policy
• Complaints management function
• Registration
• Reporting
• Internal follow-up of complaints handling
• Provision of information
• Procedures for responding to complaints.

Competent authorities should ensure a proportionate regime when applying the Guidelines, taking into account the nature and size of intermediaries and whether insurance meditation is carried out as a principal activity or on an ancillary basis. The Guidelines should be read in conjunction with the Report on Best Practices by Insurance Intermediaries in handling complaints, also published last November.

For further information:

Guidelines on complaints-handling by insurance intermediaries

Report on Best Practices by Insurance Intermediaries in handling complaints

The Financial Ombudsman Service (FOS) has published its annual review for 2013/14. Headlines points include:

• The FOS took on a record 512,167 new cases
• 78 per cent of new cases related to payment protection insurance (PPI)
• Complaints about PPI rose 6 per cent from the previous year to 399,939
• Insurance complaints (excluding PPI) accounted for 6 per cent of total complaints
• Motor insurance accounted for 23 per cent of insurance complaints (excluding PPI), followed by buildings insurance and travel insurance
• 1,000 complaints were received about card protection policies
• Complaints about packaged bank accounts increased by more than threefold
• 58 per cent of cases were resolved in favour of the consumer.

While the FOS still has 400,000 PPI cases to resolve, there are signs that the volume of PPI complaints is now levelling off. PPI aside, the FOS states that it has not seen any major new issues arising but continues to work closely with the insurance sector on issues like non-disclosure and auto-renewal.

For further information:

FOS annual review of consumer complaints 2014

On April 1, 2013 the Jackson reforms brought into force sweeping changes relating to funding and costs in civil litigation.

One year on and one of the key changes introduced by the Jackson reforms – the requirement for parties to provide costs budgets for each of the 10 phases of the litigation – has been extended to all Part 7 multi-track cases issued on or after April 22, 2014 except where the claim is valued at £10 million or more. Many more claims are, therefore, set to fall within the costs budgeting regime going forward, meaning that how the courts approach costs management is going to be a key issue for practitioners and their clients.

Aside from the changes relating to funding, perhaps the most significant impact of the Jackson reforms has been on the courts’ approach to case management. There is now a much greater emphasis on compliance with the rules and court orders. This has led to the courts adopting a stricter approach to granting relief from sanctions, as demonstrated by the Court of Appeal’s decision in Mitchell v News Group Newspapers [2013] EWCA Civ 1537.

In this briefing paper, we examine some of the key case and costs management decisions over the last year and the impact that they have had and will likely continue to have on the way that parties conduct litigation.