AFTER A LONG LEGISLATIVE PROCESS, FRANCE IMPLEMENTS A MAJOR BROKERAGE REFORM

After a legislative process of almost 3 years, France implemented last April a regulatory new regime of supervision of the brokerage sector, which will come into force in spring 2022 for more than 24 000 insurance brokers and their representatives. This reform – designed to address regulatory failures in the marketing and distribution of contracts – is of major importance to French brokers, as it aims to reorganise the conditions of access to the profession, their activity and to protect clients.

After a chao­tic legis­la­tive pro­cess, punc­tua­ted by the health cri­sis, the reform of the bro­ke­rage sec­tor, which affects more than 50,000 bro­ke­rage pro­fes­sio­nals (30 000 ban­king inter­me­dia­ries on the one hand, and 24 000 insu­rance inter­me­dia­ries on the other hand, as well as their repre­sen­ta­tives), seems to have final­ly come to frui­tion. In its annual report for 2019, the ACPR noted short­co­mings in regu­la­to­ry com­pliance and stres­sed the need to streng­then vigi­lance and control of the condi­tions under which insu­rance pro­ducts are dis­tri­bu­ted, as well as the super­vi­sion of the bro­ke­rage busi­ness in gene­ral. In order to address these concerns, this reform, cal­led for by the govern­ment, will enable insu­rance bro­kers to be bet­ter sup­por­ted in mee­ting the many chal­lenges they face, in par­ti­cu­lar regu­la­to­ry changes (IDD, GDPR, etc.) and tech­no­lo­gi­cal changes (digi­tal, new players, etc.). This is the­re­fore a major struc­tu­ral reform for bro­kers, aimed at ensu­ring that the sec­tor can effec­ti­ve­ly regu­late itself, and that the sector’s pro­fes­sio­nal orga­ni­sa­tions can effec­ti­ve­ly contri­bute to a moder­ni­sa­tion of the profession’s role and mis­sions. The govern­ment and pro­fes­sio­nal orga­ni­sa­tions are now wor­king on the draft imple­men­ting decree, which should be publi­shed by sum­mer 2021. The high­lights of this long awai­ted reform in the inter­me­dia­tion sec­tor will be :

– the crea­tion of a sys­tem of “self-regu­la­tion” for the bro­ke­rage pro­fes­sion by set­ting up pro­fes­sio­nal asso­cia­tions appro­ved by the Auto­ri­té de Contrôle Pru­den­tiel et de Réso­lu­tion (“ACPR”), the French wat­ch­dog. These asso­cia­tions will be res­pon­sible for making sure that bro­kers are cor­rect­ly imple­men­ting the new regu­la­tions, but also for control­ling com­pliance with the trai­ning requi­re­ments and good prac­tices of the profession.

– an exten­sion of the pro­vi­sions on consu­mer pro­tec­tion in the case of cold cal­ling for insu­rance contracts.

A NEW SELF-REGULATION FRAMEWORK FOR THE BROKERAGE PROFESSION

The new reform makes it man­da­to­ry for eve­ry insu­rance bro­ker licen­sed in France to join a pro­fes­sio­nal asso­cia­tion. Indeed, the Act of 8 April 2021 on bro­ke­rage reform now requires the 24,000 or so insu­rance bro­kers and their repre­sen­ta­tives to join an appro­ved pro­fes­sio­nal asso­cia­tion before they can regis­ter with the regis­ter of French inter­me­dia­ries (Orias) and car­ry out their acti­vi­ties. 30,000 inter­me­dia­ries in ban­king and pay­ment ser­vices (IOBSP) will also be affec­ted by this new law. The esti­ma­ted cost of an annual sub­scrip­tion to a pro­fes­sio­nal asso­cia­tion would be in the order of €100 to €500.

The pro­fes­sio­nal asso­cia­tions which will be acting under the autho­ri­ty of the French regu­la­tor, ACPR, will be res­pon­sible for moni­to­ring the acti­vi­ty and sup­por­ting their mem­bers. In this context, these asso­cia­tions will be able to :

• veri­fy the condi­tions of access and exer­cise of the bro­ke­rage acti­vi­ty as well as com­pliance with pro­fes­sio­nal and orga­ni­sa­tio­nal requirements ;
• offer bro­kers a media­tion service ;
• create a ser­vice of sup­port and obser­va­tion of pro­fes­sio­nal acti­vi­ty and prac­tices, in par­ti­cu­lar through the col­lec­tion of sta­tis­ti­cal data ;
• issue recom­men­da­tions on the pro­vi­sion of advice, sales prac­tices and the pre­ven­tion of conflicts of interest ;
• impose sanc­tions against bro­kers, except in the case of breaches fal­ling within the exclu­sive com­pe­tence of the ACPR ;
• ter­mi­nate the mem­ber­ship of one of its members.

In addi­tion, pro­fes­sio­nal asso­cia­tions will have to pre­pare an annual report on their acti­vi­ties and those of their mem­bers in aggre­gate form, which they send to the ACPR, in order to bet­ter unders­tand the French bro­ke­rage sec­tor through qua­li­ta­tive and quan­ti­ta­tive studies.

INTRODUCTION OF A REGULATION OF DISTANCE SELLING

The French Regu­la­tor has high­ligh­ted that in the context of dis­tance sel­ling, the pro­tec­tion of consent is not always gua­ran­teed, as the prac­tices of some insu­rance pro­fes­sio­nals do not always res­pect cus­to­mer pro­tec­tion rules, and often tar­get vul­ne­rable pros­pects, such as the elder­ly. This is why the Reform brings ano­ther major contri­bu­tion to the bro­ke­rage sec­tor, in that it regu­lates cold cal­ling.

In this context, new rules will come into force for bro­kers, who – when contac­ting a poten­tial poli­cy­hol­der by tele­phone with a view to sel­ling an insu­rance contract – will now have to :

• Obtain at the begin­ning of the conver­sa­tion the prior agree­ment of the pros­pec­tive poli­cy­hol­der to conti­nue the com­mu­ni­ca­tion. Other­wise, they shall ter­mi­nate the call and not contact him or her again.

• If the offer concerns a risk alrea­dy cove­red : ensure that the pros­pec­tive poli­cy­hol­der can ter­mi­nate his or her cur­rent contract at the same time as the pro­po­sed contract comes into force ;

• Ensure, prior to the conclu­sion of the contract, that the pros­pec­tive poli­cy­hol­der has recei­ved the requi­red pre-contrac­tual docu­ments and infor­ma­tion requi­red for the conclu­sion of the insu­rance contract. The dis­tri­bu­tor must res­pect a mini­mum per­iod of 24 hours bet­ween the receipt of the docu­ments and infor­ma­tion by the pros­pec­tive poli­cy­hol­der and any fur­ther contact by tele­phone (the so-cal­led “two-step sale”, which is now man­da­to­ry);

• Obtain the signa­ture of the poli­cy­hol­der, either by hand or elec­tro­ni­cal­ly. Fol­lo­wing the signa­ture of the contract, the bro­ker shall inform the poli­cy­hol­der, in wri­ting or by ano­ther durable medium, of his com­mit­ment, the dates of conclu­sion and com­men­ce­ment of the contract, his pos­sible right of renun­cia­tion and the pro­ce­dures for exer­ci­sing this right.

• Dis­tri­bu­tors are requi­red to record for two years tele­phone com­mu­ni­ca­tions made prior to the conclu­sion of the insu­rance contract.

Non-com­pliance with these new rules may be sanc­tio­ned by the ACPR.

This Reform will cer­tain­ly consti­tute a miles­tone in the French bro­ke­rage land­scape, impo­sing new obli­ga­tions on insu­rance bro­kers. It should be noted that in the rest of Europe, mem­ber­ship of an asso­cia­tion of insu­rance inter­me­dia­ries is most of the time optio­nal, or is no lon­ger man­da­to­ry. Indeed, Spain had impo­sed a simi­lar obli­ga­tion on insu­rance inter­me­dia­ries in the past, but the law was amen­ded in 1992 and since then this obli­ga­tion no lon­ger exists.