Legal
16 February 2018

New insurance distribution

A new Czech law transposing the EU Insurance Distribution Directive into our legal system will be adopted at the last moment. It should primarily enhance the transparency of intermediaries and the protection of consumers.

Iva Baranová
Linda Kolaříková

At the beginning of January, two long-awaited laws regulating insurance distribution were submitted to the Chamber of Deputies. Their primary objective was to transpose the EU Insurance Distribution Directive (IDD) into our legislation, which should be done by 23 February 2018 at the latest.

The adoption of these regulations, replacing the existing Act on Insurance Intermediaries, was delayed primarily owing to the autumn elections. The transposition deadline is not likely to be met; however, the submitted laws propose effectiveness from the above February date.

The new Act on Insurance Distribution together with an implementing statute should regulate the entire area of insurance mediation and offer. The most important change is the new categorisation of intermediaries: instead of the five categories currently in place, only separate intermediaries and tied insurance representatives should generally be involved, as in the case of the mediation of consumer loans or investments in unit funds. In addition, the act introduces new specific categories such as ancillary insurance intermediaries and insurance intermediaries established in another member state. In connection with this, the new law also institutes a new procedure for obtaining a licence to carry out the activities of an intermediary, as well as a time restriction on registrations and a reduction of mandatory registration fees.

The new law will also affect the performance of mediation, as it introduces new duties, e.g. applicable to information requirements, the provision of advice or the storage of documentation. Following the IDD, the maximum amount of penalties for administrative wrongdoings will also increase.

The proposed changes should result in the enhanced quality of insurance distribution, sorting through the network of intermediaries, as a large number of the 160 thousand currently registered persons have probably been inactive for some time.

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