The comprehensive modification of the Hungarian Insurance Supervisory Act was published

The comprehensive amendment of the Hungarian Insurance Supervisory Act („Amendment”) was published recently. The primary objective of the Amendment is to comply with the Directive (EU) 2016/97 on insurance distribution (IDD). The Amendment shall enter into force on 23 February 2018.

Introducing a uniform regulation for the insurance distributors regardless of the channel through which customers buy the insurance product (directly from an insurer or an intermediary), is one of the major changes of the Amendment. This shall bring two main consequences to the present regulation.  On the one hand, the employees of the insurers (reinsurers) who are involved in activities preparatory to, during and after the sales of insurance and reinsurance policies shall be of good repute and comply with continuing professional training and development requirements. On the other hand, a new category of distributor, the ‘ancillary insurance intermediary’ shall be introduced, to whom more permissible regulation shall apply than to insurance intermediaries.

Any insurance product proposed to the customer should always be consistent with the customer’s demands and needs. The Amendment introduces the requirement for standardized insurance product information document to be provided in case of non-life insurance products.

The Amendment shall distinguish the advised and non-advised distribution. The advice provided on the basis of a fair and personal analysis shall form a special type of the advisory service.

Due to the fact, that the insurance-based investment products are often offered as a possible alternative to investment products for customers, the Amendment shall set out, similarly to the MiFID II regulation, additional requirements for the distribution of insurance-based investment products. In case of the breach of these additional requirements high administrative pecuniary sanctions may be imposed.

It shall be noted, that the Amendment shall bring significant changes not only in the field of insurance distribution, but also in a few other areas besides. The Amendment for example creates the statutory framework for the portfolio transfer of brokers.

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