EIOPA publishes third Report on the application of the Insurance Distribution Directive

The European Insurance and Occupational Pensions Authority (EIOPA) published today its Third Report on the application of the Insurance Distribution Directive (IDD). Amongst others, this report examines changes in insurance intermediaries' market structure, developments in cross-border activity, the quality of advice and selling methods, the impact of the IDD on insurance intermediaries that are small and medium-sized enterprises, and whether competent authorities are sufficiently empowered and have adequate resources to carry out their tasks.

EIOPA's latest findings on the structure of insurance distribution market confirm trends already highlighted in previous reports. The number of registered intermediaries has further decreased over the past two years due to consolidation, stricter professional requirements and the difficulty of attracting new talent to replace those reaching retirement age. At the same time, the number of intermediaries with an EU passport grew 12% between 2020 and 2024, indicating an increased interest in cross-border distribution.

The quality of advice and selling methods have improved in some markets, but persistent shortcomings remain in others, including post-sale (e.g. very long claims processing times). Reported weaknesses are consistent with EIOPA's recent mystery shopping exercise, which found limited correlation between the thoroughness of the sales process and the alignment of the offered products with the shoppers' profiles. The exercise had revealed that longer and more detailed sessions did not translate into better outcomes for shoppers, indicating a possible need to simplify the sales process.

Within digital distribution, Generative AI is increasingly being used through chatbots and sales tools - a development that may materially influence how some day-to-day activities are carried out. Given that the IDD does not comprehensively regulate digital channels or provide detailed guidance on AI-based advice models, there is scope for the regulatory treatment of these emerging technologies to be clarified.

Evidence from national competent authorities (NCAs) and the ESAs also shows that sustainability disclosures and preference assessments are often poorly understood by consumers and inconsistently applied. Gaps in distributors' knowledge of sustainable finance, along with misalignments between regulatory frameworks-in particular, differences between SFDR and IDD templates-may further complicate the sales process. While unsuitable products were offered only in a limited number of cases, the findings raise concerns about the proportionality and effectiveness of the current requirements in delivering better consumer outcomes.

On inducements, despite growing regulatory attention and supervisory action over the past years, misaligned incentives and insufficient transparency remain threats to consumer protection in some markets, particularly with regard to the distribution of life insurance or credit protection insurance. In response to a survey conducted by EIOPA for this report, some NCAs indicate that they are considering national-level measures to further restrict the payment/receipt of commissions, including by introducing a ban on commissions or implementing enhanced disclosure rules.

In conclusion, the IDD continues to provide minimum standards for fair and transparent insurance distribution across the EU. However, ongoing challenges, particularly in digitalisation, sales processes and the integration of sustainability preferences, require continued attention. EIOPA will build on these findings to promote supervisory convergence and support the implementation of the European Commission's Retail Investment Strategy and the eventual review of the IDD.

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Background

Article 41(4) of the IDD mandates EIOPA to prepare a report on the application of the Directive every two years. The IDD entered into application in most Member States on 1 October 2018. It sets minimum regulatory standards across the EU insurance market and aims to enhance consumer protection. EIOPA's first report on the application of the IDD was published in January 2022. The second report followed in January 2024.