The insurance distribution directive : its impact and challenges on local insurance undertakings

Abstract

The insurance industry is one of the most important industries of the economy. As part of an ongoing reform process, the European Commission has adopted the Insurance Distribution Directive with the aim of having equal levels of protection for consumers purchasing insurance products across the EU. This will inevitably have profound implications on the insurance industry and insurance markets as impact of reform measures runs much deeper than the direct and desired effects. The purpose of this study is to identify the impact and challenges of the Directive on local insurance undertakings. To this effect, a comprehensive examination is conducted on the insurance undertakings in Malta. Literature deals with the regulation of the single European insurance market and what led to the introduction of the Insurance Distribution Directive. Furthermore, the salient requirements of the Directive are analysed. On the basis of the requirements of the Insurance Distribution Directive and the impact assessments conducted at European level during the implementation phases, Chief Executive Officers/Managing Directors are asked to assess the impact and challenges anticipated on their respective insurance undertaking. Data analyses suggest that local insurance undertakings will be facing challenges to their business model, selling practices and distribution network. In addition to the above, moderate to high costs are expected in relation to administration and training. Besides, with no delegated acts yet implemented at the time of submission of this study and the limited communication issued in relation to the transposition of the Insurance Distribution Directive into local legislation/regulation, insurance undertakings have little time to fully prepare for the adaptation of the new requirements.