“A good opportunity for the whole insurance market, but also a lost chance and a challenge as well”. Alessandro De Felice, Chairman of Anra (National Association of Risk Managers and Corporate Insurance Managers), has identified these three elements in the Insurance Distribution Directive (IDD), the new European regulation for transparency in the insurance sector, in force since October also in Italy. The Directive governs the design and sale of insurance products both by insurance intermediaries and directly by insurance companies, with a particular focus on transparency and investor protection.
According to De Felice: “In a country like Italy, traditionally under-insured, where the added value of a good insurance policy is not understood, this regulation can be a turning point”. Explaining the reasons, the first is the principle of advice as laid down in the legislation. Anra President explains: “The intermediary will no longer be the one who has to sell a product but rather a consultant to the policy holder. Its function will have an added value since it has to create an insurance product that complies with the customer’s needs. Insurance will no longer focus on placing policy, but on providing broad-based advice.” This is the great benefit of the legislation from which it also derives the enthusiasm with which it has been welcomed into the insurance world. The customer-centred approach of a specialist who understands and foresees needs could increase awareness towards insurance industry.
According to Alessandro De Felice, this aspect is also associated with a challenge: “Current intermediaries need to change their vision and broaden their knowledge of the customer”. Anra President focuses his attention on the new skills required to the category, in need of suitable training on advisory services that must take place right from University. “The number of intermediaries in Italy has risen from 15,000 to 10,000 in the last 4-5 years, a figure still very high for a country like ours. Thanks to the IDD implementation, the market will be required to make a further selection among those who have the required skills and will be able to effectively meet the needs of an increasingly demanding customer base”. As a matter of fact, consultative brokers are becoming more popular on the market, replacing the role of policy advisors with that of consultants who assess the customer’s needs and propose the most appropriate solution. As a result, in the coming years intermediaries will have to assess how to meet the changes that the introduction of the IDD in Italy will demand to these professionals.
As far as brokers in particular are concerned, according to Anra President, their role is linked to the regulatory ceiling. In particular, the Insurance Distribution Directive has failed to resolve the obligation of transparency for the direct or indirect remuneration of all brokers: “During the consultancy process – De Felice said – Anra approached Ivass to require brokers, operating on behalf of the policyholders, to disclose the amount of brokerage commissions to be collected”. An unsuccessful request that represents a missed opportunity in De Felice’s opinion as well. Transparency is a value that must be protected, even more when “conflicts of interest may arise between customers and brokers”, the expert points out. “The client must be allowed to choose the broker according to the remuneration level, since must be aware if the broker is offering the best solution for his/her needs or the most advantageous for the broker. Let’s consider a broker who wants to sell to the customer the policy of an insurer paying more than another: does this protect the customer or does it benefit the broker?”. However, Anra’s proposal has not been included in the Directive. It will be up to the broker’s discretion and the customer’s intuition to preserve the issues at stake and the correctness of the procedure in place..
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