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.
Note : only the implementing decree will make it possible to know all the powers conferred on the associations in order to circumscribe its material scope of application.
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.