The Federation of European Risk Management Associations (FERMA) is calling on the European Parliament to ensure that all insurance buyers are entitled to a minimum European standard of disclosure in the revised Insurance Mediation Directive (IMD2).

This is the view FERMA has strongly expressed in a position paper to the Parliamentary Economic and Monetary Affairs Committee which will consider the draft directive before it goes to Plenary for a final vote in July.

As the draft currently stands, only individual policyholders and small businesses will be automatically entitled to disclosure of the intermediary's remuneration. Buyers of insurance for large risks and a new category of professional customers are excluded and would have to depend on voluntary agreements.

For large risks, the criteria remain the same as defined in the current IMD. They are based on Directive 88/357/EEC, which has never been updated. Two of the three criteria must be met: a balance sheet total of €6.2million, net turnover of €12.8 million and an average number of 250 employees.

For professional customers, the legislators have introduced separate criteria based on different Union legislation, Directive 2004/39/EC (MiFID). A large undertaking is defined as an entity meeting two of the three criteria – a balance sheet total of €20 million, net turnover of €40 million and own funds of €2 million.

President of FERMA Jorge Luzzi comments: "We ask the legislators to consider business customer concerns and, as a minimum, provide them with a legal basis on which to request information from their intermediary. This would enable them to make fully informed decisions about their insurance coverage."

FERMA believes that in principle large risks and professional customers should be included in IMD2, based on the views of a majority of its 22 national risk management association members. Failing that, all insurance buyers should have an enforceable right to request the information.

A provision in the draft currently allows professional customers to ask in writing for disclosure. There is, however, a proposed amendment to the Economic and Monetary Affairs Committee that even this protection for business should be removed.

FERMA also points out that the threshold for defining large risks and professional customers is quite low. Many medium sized businesses would be left without a legal right to information about their broker's remuneration if this proposal is adopted.

In response to its members' concerns, FERMA worked with the European Federation of Insurance Intermediaries (BIPAR), and in 2010 the organisations adopted a non-binding protocol for information disclosure by intermediaries. It has called for the principles of the protocol to be integrated into IMD2.

"Voluntary arrangements with the broker community are working well in a number of FERMA's member countries, but not all business insurance buyers are in a position to negotiate full disclosure," says Luzzi. "We would prefer to see all insurance buyers covered by the directive but at the least, they should be able to request disclosure and for that request to be enforceable."

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