Background
Since 2012, the Decree on Conduct of Business Supervision of Financial Undertakings under the Wft (Bgfo) has regulated that, upon request of the consumer, an intermediary or adviser in non-life insurance must inform the consumer about (the amount of) the acquisition commission or renewal commission it receives (see Article 86d Bgfo (old)). This is also referred to as passive commission transparency.
Based on the Financial Markets (Amendment) Decree 2023, as of 1 July 2024, intermediaries and advisers must actively inform consumers about the existence, nature and amount of commission they receive from an insurer (see amended Article 86d in combination with Article 86i Bgfo). The aim is to ensure consumers are better informed about the applicable commission agreements, so that they might inquire about the underlying services. According to the explanatory memorandum, practice has shown that a dialogue about the service provision is insufficiently initiated.
The Financial Markets Amendment Decree 2023 was adopted on 23 November 2023 (and can be accessed via this link). The Amendment Decree 2023 also introduces some other relevant changes for advisers and intermediaries, such as quality requirements for fully automated advice pursuant to (new) Article 32da of the Bgfo.
New legislation
Scope
Active commission transparency rules apply to non-life insurances other than payment protection insurances, individual disability insurances or life insurances. In addition, the requirements only apply to the private market. For the corporate market, passive commission transparency continues to apply, whereby clients can obtain information about the (amount of the) received commission (only) upon request. The obligation for action commission transparency also applies to foreign providers of non-life insurances operating in the Netherlands.
Requirements
From now on, intermediaries and advisers must disclose the commission amount in euros instead of percentages because percentages usually provide no or little insight. In addition, the information must be provided to consumers in a timely manner, by an adviser at the latest together with the advice, and by an intermediary prior to the conclusion of the contract. In practice, the exact amount of the commission to be received can usually be calculated after the (intermediary or advisory) services have been provided and all the details of the (non-life) insurance are known. The Dutch legislator has taken this into account by stipulating that, in such cases, an indication of the actual commission amount must be given. For this indication, the "fine-grained average" concept applies. The starting point is that the adviser or intermediary provides an indication of the commission amount with the consumer that is as accurate as possible.
Based on the Financial Markets (Amendment) Decree 2023, additional transparency requirements will also apply to non-life insurers (see in particular (new) Article 61 Bgfo). Non-life insurers must disclose which services they provide. If a client takes out a non-life insurance directly from an insurer (i.e., without the intervention of an intermediary or adviser), the client will usually not pay any commission. In that case, the non-life insurer must clarify that no additional services will be provided (either). In addition, non-life insurers must disclose the reimbursement they provide third parties, other than intermediaries or advisers, for bringing new clients, such as lead generators. This could include price comparison sites that are not also intermediaries or advisers, who receive a fee from an insurer for each client that is led to the insurer's website via the price comparison site and subsequently takes out an insurance.
Applicability of active commission transparency rules in practice
A relevant aspect is the practical implementation of the transparency duty for intermediaries who receive commission but are not involved in the conclusion of the insurance contract with the consumer. The insight into the commission must be provided to the customer at the latest prior to the conclusion of the contract.
Another relevant element is the following. Neither the explanatory memorandum nor other parliamentary documents specifically address whether and how active commission transparency applies to group insurances. It has been discussed in the literature that active commission transparency does not apply in all cases where a prospective policyholder takes out an insurance through an insurance intermediary. This is the case when there is a collectivity and the policyholder takes out insurances on behalf of certain third parties. The applicability of active commission transparency will depend on what has been agreed and whether, as a result of those agreements, consumers become policyholders, so that active commission transparency applies. In this regard, we refer to our previous news item on the interpretation of the Dutch Authority for the Financial Markets (AFM) under which circumstances licence requirements apply to the provision of intermediary services for group insurances.
Transition period and evaluation
It follows from the Financial Markets (Amendment) Decree 2023 that the active commission transparency obligation applies to (non-life) insurance contracts concluded on or after 1 July 2024. For existing contract, the passive transparency obligation as it stands on 30 June 2024 will continue to apply.
The active commission transparency requirement will be reviewed by the Dutch Minister of Finance within three years of this legislation coming into force.
Contact
Do you have questions about the active commission transparency rules or other financial regulatory topics? If so, please contact our Financial Regulatory Team.
