New Spanish Insurance Distribution Act (DSIDA)
The Spanish Government is in the process of drafting a new Spanish Insurance Distribution Act (‘DSIDA’), which would replace the current Insurance Intermediaries Act. A first draft has been circulated within the insurance market, in order to obtain feedback from those insurance distributors who might be affected by the provisions of the proposed Act.
The main purpose of the new Act is to incorporate the regulations of the Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on Insurance Distribution into domestic law and these must be incorporated into the domestic regime of the Member States before 23 February 2018. This has also been identified as an opportunity to update certain elements of the existing Insurance Intermediaries Act which have become outdated.
Although it is just a first draft, it gives a general overview of the key elements which will be regulated, in particular, in respect of insurance or reinsurance distribution services to consumers through any kind of distribution channel.
Essentially, the main novelties of the draft can be summarised as follows:
- The DSIDA will apply to those whose activity consists in providing insurance or reinsurance distribution services to third parties. This would include insurance companies that sell insurance services directly and that are not subject to provisions of the existing Act.
- A new package of consumers’ rights will be incorporated into the new Act. Consumers will benefit from the same level of protection despite the differences between the various distribution channels. The draft enhances consumer rights by obliging the insurance distributors to adopt customer protection measures and rules of conduct which are similar to the ones implemented in the banking and finance sector.
- The applicable sanctions are considerably higher in comparison with the current fines, which are limited to a maximum of EUR 30,000. In respect of companies, the DSIDA establishes fines up to EUR 5,000,000 or up to 5 % of the total annual turnover according to the last available accounts approved by the management body, whichever is the higher. In respect of individuals, the fines can reach EUR 700,000.
- Both insurance intermediaries and agents who are involved in the design of insurance products for their sale will have to submit an application for the approval of the products by the General Directorate of the Insurance before commercialising them and, additionally, will have to undergo regular inspections and reviews of those insurance products.
Although it is still a draft, the DSIDA has introduced some new issues for consideration by the insurance market. In particular, the inclusion of insurance coverholders as insurance distributors, the amount of the fines set out and the sale of insurance through websites will, no doubt, form part of the debate in the forthcoming months.