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Interview of the week



"We must be realistic, we are living in an economically difficult market, the crisis will have its consequences over the next years, we will have to deal with that, but may be it is in times of crisis that added value is, very often, even more important than price. Competition becomes more important, competition on the quality of the service."

XPRIMM: What is the role and the history of BIPAR, the Federation of Insurance Intermediaries in Europe? You have quite an impressive history.
Indeed, we have been functioning since 1937 and we are based in Brussels since 1989. We have here a small permanent secretariat of 6 people, and the fact that we came to Brussels in 1989 was of course because of the growing importance of Europe. We have now 27 member states in the European Union and BIPAR represents 32 member states, actually, because we also have a couple of member states around the Mediterranean area. We represent 45 national associations in those 32 countries. Taking into consideration these national associations of insurance agents and insurance brokers, we can say that we represent about 50 to 70 percent of the insurance distribution market. All together, our intermediaries, who are members of our national associations, have around 200.000 employees. UNSICAR, in Romania, is an active member, we were already in Romania for some of the UNSICAR Conferences, where we have met some politicians and regulators, too, and we felt really welcome there. Bogdan ANDRIESCU is an active representative in our meetings and a member of our working parties, so we are very glad to have this intreview and the opportunity to make BIPAR known to the Romanian members of our associations and to the Romanian insurance public.

XPRIMM: Tell us about your activity and your main purpose, as a Federation, at the moment.
We are the representative body and the single voice of insurance intermediaries in Europe, in relationship with the European regulators. Our main purpose is to dialogue with all those who, at European level, have a decision making or are opinion makers in terms of insurance mediation regulation. We are in contact with the European Commission, we are the voice of insurance intermediaries in relationship with the European Commission, with European Parliament, with Council, but also in relationship with, for example, CEIOPS - CEIOPS is the European Committee of Insurance Supervisors and they are working together with the European Commission on future regulations. That is our main purpose. Here in Brussels, almost every sector of the economy is represented, because this is one of the main public affairs centers in the world, not only dealing with European affair, but also international affairs. That is were our main activity goes to. Of course, there is always an interaction with our national associations. We are the bridge between our national association and the European institutions, but the role of national associations is increasingly important. It is very important and, in the same time, it is our strength that we speak with one voice on almost every subject that we have on our agenda – one single voice of the European intermediaries in relationship with the European institutions. On the other hand, the insurance markets and, in particular, the insurance mediation markets still have some differences, there are differences from one market to another and there are, of course, nuances that must be taken into consideration. But that is based on a very good cooperation between us and the national associations, so we have – and that is another aspect of our role – meetings, on regular basis. We exchange information, we watch new developments, because we are in a world where today, a development in France is very quickly spreading to Romania or vice-versa. All the parties involved in this European process are talking to one another on an almost permanent basis. It’s a permanent European debate that is going on. That is where we find our role in, that is why we are representing, defending and promoting the interests of insurance intermediaries. Making sure that the role of intermediaries is recognized as an important role in the economy and as an important role in the insurance process is something that has to be done on a daily basis. Insurance intermediation is not on top of the agenda of all the politicians, but in the meantime we are part of the financial sector, of the insurance sector, and it is very important that, before people take decisions - because they are the decision makers -, they are informed. So, we have the role to make sure, together with our national associations, that decision makers understand exactly, firstly, what the real value that we bring to the economy is, for the consumer, for the insurer. Based upon that, we hope that they make the right decisions.

XPRIMM: What are the key challenges that affect the insurance intermediaries market in the current economical situation? What are the forthcoming regulations which are being discusses now at European level?
Since last year, we have been focusing on trying to ensure that decision makers understand very well the difference between the investment banking world and the insurance world. There are many nuances in that, but it was necessary to stress that over the last year, in particular in the context of the crisis. This indeed reflects in future regulations, but we do not want regulators to take decisions that have an effect on the non-life market, which are based upon an experience in the investment market. These are two different markets, two different business models, completely different, even historically. Of course, the crisis has had an impact on the regulatory perspectives on the other hand, so many of the deuces that we see today on the table at European level are issues which were already there before the crisis. Due to the crisis, some of the concepts and issues have been prioritized, others have been delayed and others have been taken together into a wider picture. But, basically, the issues were there already, most of them were there before the crisis. An extra aspect that is brought in here, which was also a reality before the crisis, but which has been emphasized due to the crisis, is the international impact. G 20, for example, is giving the high level guideline, and then the USA and the countries from Europe have to bring that into real life. This international aspect has been emphasized now, it is a real interaction where many players are now involved. So, for us the challenge was to make sure that regulators take into consideration the differences, the nuances.
This is where we are talking about PRIPs – in general terms, if life with investment element insurance (a unit-linked insurance) is more an investment product than an insurance product. That will have an impact on future regulations, on sales and distribution of these products and also, on their transparency. From our perspective, we believe that some of these products may have some of the aspects of an investment product, hence there may be more transparency in terms of information requirements to the client, but it should also be taken into consideration that they are an insurance product. So, you cannot completely compare them, but some of these aspects must be taken into consideration.
In what IMD (Insurance Mediation Directive) is concerned, the revision of the Directive has been on the table since before the crisis. The current IMD was adopted in 2002, and then implemented in various member states in the years after 2002. In that national implementation, there have been differences in interpretation, differences in implementation, and now the European Commission is considering that the IMD may need some changes, in order to create more legal certainty and to have less differences. So, the IMD revision is not so directly linked to the crisis but, of course, some of the influences of the crisis play their role and will be taken into consideration, for IMD II.

XPRIMM: Which of these aspects will influence the Central and Eastern Europe insurance intermediaries (as there are differences between the state of the current intermediary market in the CEE, in the emerging economies, and the state of the same market in Western Europe)?
All over Europe, there are still many differences in the insurance intermediation and the insurance distribution landscape. One of the differentiating aspects for the CEE markets, but also for some other markets, is that intermediation is maybe younger, since the 90’s. I must say that this market has developed very quickly. This is a fantastic thing. Intermediaries, in these new markets, have picked up very quickly and have really shown that they add value to the insurance market. But, besides that, I really don’t see, from a regulatory perspective, any major differences between the Romanian market and the French market, for example. Of course there are some differences, but each market has developed in a certain way and the current IMD has tried to bring some level of harmonization in that. Of course, each national market or each national regulator has adopted measures at national level which are reflecting the state of specificity of a certain market. IMD has two objectives: one – consumer protection; and secondly - the creation of a single insurance market. So, in order to create a single market, you have to build bridges, you have to make sure that people understand one another, even if they are coming from different countries. That is on the agenda for the next step and that means an IMD II, so the revision of the regulation on intermediation.
For example, one of the issues that will be considered and it is under consideration is scope. Scope of IMD – very specifically, must this scope be further broadened? From our perspective, the scope must be very broad, because one of the reasons for an intermediation directive is to protect the consumer. So, that means that everyone who is in contact with somebody who wants to intermediate, sell, offer advice in insurance, must more or less fall under the same regulation. You need a level playing field. And the consumer must be protected, in the same way.
A second aspect that will probably be revised within the IMD is dealing with the freedom of services. The concept of freedom of services is in the current IMD but, in order to create more legal certainty, a few things must be clarified. For example, what is the triggering element, when are you doing a cross-border activity. Is that when the Romanian broker crosses the border in order to sell a product or to intermediate a product to a Belgium client, or is the moment when he sends a fax or an e-mail? These are the kind of things that are, for the moment, clear, but which we have different interpretations, from one country compared to another. And we believe that IMD II will bring some further clarifications, which is a good thing.
A third aspect that is into consideration is related to qualification requirements. Regarding the qualifications requirements necessary in order to be an intermediary, there is a big variety of systems in the different markets. In some markets you have a compulsory state exemption, in other markets you have certifications, in other markets our national associations are setting up training systems or institutes, there are some commercial training institutes – so, it is a very broad, diversified landscape. It would be difficult to regulate that into more nuance, but still the regulators are looking and finding common denominators, so may be there can be established some high level principles that would be applicable to qualifications. It is an area where there is probably some work over the next couple of years.
Then, there are a couple of other aspects, like the reduction of the administrative burden, so we are going to look in the registration and notification procedures, to see what could be optimized. We are very much in favor of keeping the registration system, as an intermediary must be registered. In order to register, you have to comply with a couple of professional requirements. We believe that is a very good system because the consumer can check whether you are really registered or not. The bulk of the work is already done in any case, so we just want to continue what exists.
One other aspect that will be looked at is the transparency. This is a debate that is going on all over the world, not only in Europe. There is the whole aspect of transparent remuneration. We have nothing against transparency, but we believe that insurance is not only about price alone. So, what we are promoting is transparency upon request. If your client asks you what your remuneration is on that particular contract, then you tell your client. That cannot be an issue. Transparency is a key, indeed, but transparency upon request. Why? Because, as I already said, insurance is not about price alone, so the price (premium, and also remuneration) must be seen in the context of the services that are related to that. An insurance premium must be seen in the context of the quality of the insurance. And this is important for the client, because sometimes there are nuances which make a product much better for a certain client, even if it is a little bit more expensive, then for another client. We are talking about personal lines. In the SMEs market and the more commercial lines market, many of these products are tailor-made, the dialogue between the client and the intermediary is much more intense, so, again, transparency is almost a fact. But if the client is interested to know whatever about the premium, he should be able to ask. There must be a dialogue, because there are so many aspects to insurance that the client does not immediately see, so it must be a dialogue, there must be a conversation and explanations about that. We, in BIPAR, are indeed in favor of transparency upon request, but all kinds of remuneration systems must continue to exist and be possible.

XPRIMM: What is your message towards the CEE and the Romanian insurance intermediaries? We are speaking about developing markets, but very different markets.
You know that better than I do, but I believe that the general message for every intermediary is to never take it for granted. The client is the purpose of our existence. Wherever you are, in business, and in insurance intermediation business in particular, if you focus on your client, if you build your own strategy, if you choose your segment, if you know where you want to go to, between now and five years, then I am certain whether you decide to remain small, working on a local level, or weather your ambition is to become big, working on a national or international level, as long as you have your strategy built and you are capable of giving your client the added value that he expects, but also capable of giving the insurer the added value that he expects from you as intermediary, business will go well. We must be realistic, we are living in an economically difficult market, the crisis will have its consequences over the next years, we will have to deal with that, but may be it is in times of crisis that added value is, very often, even more important than price. Competition becomes more important, competition on the quality of the service.

XPRIMM: Thank you!

Editor: Alexandru CIUNCAN | Published on 12.08.2010

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