The second day of debates at FIAR 2018 started with The Brokers' Conference, the event dedicated to the mediation market in Romania and in the CEE region. The first part of the conference focused on a market overview and also analyzed the challenges of the IDD implementation, as well as the potential impact of IPID for MTPL and PAD.
Mihaela CIRCU, Development Director, Media XPRIMM
- We are now 4 months away from the implementation of IDD and 10 days away from the implementation of GDPR.
- Apart from these two new challenges, each year we encounter new surprises, the latest being the law project aiming to eliminate guarantee insurance from public auctioning.
- Currently, on the Romanian market we have 310 active brokerage companies, which mediated premiums totaling 6.15 billion RON, representing 63.41% of the insurance market. The concentration is high: top 10 players have 45% of the market. The income from brokerage activity reached RON 969.6 m (EUR 212.3 m), with an average intermediation fee of 15.75%.
- IDD aims to harmonize the rules of selling insurance and increase transparency for customers. In Romania, at the end of September 2017, the Ministry of Public Finances published the draft law.
- IDD brings increased consumer protection, through the following aspects: 1) Distributors MUST act in the client best interest, 2) adds transparency to distribution / products / conflict of interest policies & remuneration rules, 3) Information requirements for non-life products, 4) Product Oversight & Governance arrangement, 5) Minimum professional training for distributors, 6) Conduct of business minimum standards.
- GDPR comes into effect on 25 May - Full compliance is IMPOSSIBLE and its effects are difficult to predict.
- A Veritas Technology study shows that 65% of consumers plan to request data from insurers, 71% plan to exercise the right to be forgotten, while 8% plan to exercise their rights just to annoy insurers.
- Through IDD, we move from overall conformity to supervision on activities. IDD brings a new mediation structure, and risk supervision is one of the main areas in which IDD will have an impact.
- We hope that brokers will be able to develop products, because they can rapidly adapt to the needs of each client.
- Distribution belongs to the insurer, mediation belongs to the broker. The broker must give constant feedback to insurers as far as products are concerned, in order to improve them.
- The first "exercise" for insurers is KID - it is an interesting exercise, which helps insurers prepare for IDD.
- Insurers should develop their own conduit codes, with very clear procedures which must be respected. It would be easier for all players involved to develop self-regulating methods, instead of very strict rules set by the authority.
- ASF - The Financial Supervisory Authority in Romania will monitor very carefully the online activity of companies.
- The consumer must receive clear information, not to be misled in any way. The client must be informed regarding the risks he/she is exposed to.
- The brokerage market is changing continuously. I would point out some of the challenges we had to face in the last. The capping of MTPL tariffs was painful, but the decrease of the brokers' commissions was even worse. We also faced the bankruptcies of insurers ASTRA and CARPATICA.
- We had started this year in an optimistic mood: we thought only of implementing GDPR and IDD - what could be so complicated? But we were "hit" by the guarantee insurance law project. The Government currently has in its possession a law project through which ANAP wants to eliminate the guarantees policies from the guarantee instruments - an important part of the public acquisitions processes. These guarantee policies represent approximately 8% of the total gross written premiums on the Romanian insurance market. I don't believe it will be catastrophic for the market, but certain players will definitely be affected. Many SMEs will not be able to participate in public auctioning anymore. The procedure of attracting European funds will also be affected. Together with UNSAR and UNSICAR we sent an address to the Romanian Government through which we have requested the momentarily elimination of the law project from the Government's voting list. We hope to be successful. We must see where this problem comes from.
- GDPR and IDD must be implemented soon - together with the national authority, we hope to be able to implement them in a way which is as close as possible to the Romanian reality.
- I am optimistic regarding 2018, I hope that this year will end well, I hope that we will be able to implement GDPR and finalize IDD. The professional training aspect is also very important as well. We want that the continuous professional training to include multiple lines - legislative, sales and products. We must sell the clients the products and services that fit their needs.
- Challenges and deadlines are waiting for us ahead - 25 May, 1 October. This does not mean that, from that moment on, the market will collapse. It is a continuous process, it is a process we are trying to implement and test.
- We spoke a lot about IDD, we had numerous meetings with the Authority, with the industry players, we had different points of view, and, in the end, we have reached a common point of view which became a law project and which, we hope, it will be adopted by the Parliament.
- IDD will scare us a little, but, with involvement and skill, the insurance market will find solutions.
- On 25 May GDPR will be implemented. We constituted a work group and we hope to have reached common ground, but the experience will show us if our point of view is a good one. It is a continuous process and we are trying to adapt to the new regulation.
- The law project aiming to eliminate guarantee policies from public auctions appeared overnight. There are certain insurance companies with a high share on the guarantee insurance segment. There are brokerage companies with a high business volume on this segment. We are trying to understand why this project was launched.
XPRIMM Circle of Debates - Are Romanian brokers ready for IDD and GDPR? Will insurance distribution be affected by Artificial Intelligence?
Cristian FUGACIU - CEO, MARSH Romania | Head of Central Region Central & South Eastern Europe, MARSH:
As far as brokers, and MARSH Romania, are concerned, we must wait for 1 July to see what the exact requirements that must be respected are. There is a European Directive and an implementation draft in the Romanian legislation as well, but, until we don't see the final version of the directive on 1 July, we cannot say for certain if we are ready and how ready we actually are. We have already started to study the Romanian legislation, we collaborated with the authorities in order to implement the directive. There is a study which analyzed the insurers' and brokers' readiness concerning the implementation of the directive and the results are optimistic.
Brokers seem a bit more ready. As far as insurers are concerned, I believe it will be a bit more difficult, if the implementation of GDPR and IDD in the national legislation will not also include some specific provisions for the insurance field. What would happen if IPID became necessary for mandatory insurance policies as well - MTPL and PAD (the mandatory household insurance)? That would be an exaggeration. We could find ourselves in absurd situation, including in our dialogues with clients, and a renewal proposal could be interpreted as unwanted by the client. We are hoping and waiting for reasonable transpositions in the national legislation and, if such specific provisions existed, all market players would be more relaxed. On medium and long term, IDD and GDPR will be beneficial.
We all need alternative distribution channels and, most definitely, the robots will become a part of our lives, sooner or later. From all the studies we have made so far, the Romanian client is very informed, he/she asks for assistance from an insurance consultant, either insurance agent or broker.
I think it would be too much to say that we are ready for GDPR and IDD. As far as GDPR is concerned, we only have 10 days left until something we can describe as a "big unknown". I don't believe we will have an avalanche of complaints from the clients but, of course, I am certain that some people might take advantage of this new regulation. We don't know if the complaints will have basis, because GDPR continues to remain unclear.
As far as GDPR and IDD are concerned, these two regulations are applied in all countries and there isn't much "room" left for provisions specific to a certain country. I believe all countries are making efforts to understand the legislation. But it's difficult to become 100% ready and 100% compliant until 25 May.