Since its publication on 24 May 2023, the draft Retail investment strategy has been the subject of much discussion and reaction, notably by France Assureur on 5 June. Stéphanie Yon-Courtina, Member of the European Parliament, also published a report on the subject on 5 October. The main objective, which everyone involved considers commendable, is to encourage European savers (individuals and small businesses) to invest in the European economy, particularly in sectors favored by public policy. The European Commission is taking the opportunity to put its foot down and wants to reform the remuneration of intermediaries to make it more favorable for savers (and we can imagine, for policyholders in general, in the future), from its point of view. The Commission is particularly concerned about commissions, which it believes can distort the advice given by intermediaries, particularly brokers. Several countries have already banned such commissions outright. In addition to savings products, the industry has expressed concern about this issue, and intermediaries fear that their remuneration methods will be changed in the future, disrupting their business models. So let’s take a look at what these changes could mean for non-savings insurance. Firstly, a policyholder may agree to pay an administration or entry fee, but in his or her mind this is payment for administrative set-up costs, whereas the advice has generally cost much more. What’s more, the advice is given over time. These products need to be adapted on a regular basis as the policyholder’s situation changes, and the intermediary needs to remain in contact with the policyholder or, at the very least, available and familiar with the policy throughout the life of the insurance contract. This requires recurring remuneration to be deducted from the customer’s payment. Today, this payment often covers a premium that includes everything (the technical premium, loadings, additional cover such as assistance, etc.). In the future, this payment will have to distinguish more clearly what each party is responsible for. The key will be for one of the players (the insurer, a delegate, the intermediary itself) to be able to deduct the premium in one go and then distribute the shares to the others. The key to any future regulation is to know to what extent it will authorize insurers to deduct the fees of external intermediaries (agents and brokers), even if it means that contractual transparency is perfect. If this is not the case, it will make direct distribution by insurers in brokerage difficult, and they will then be led to delegate the management of this activity to managers, wholesalers, who will be the integrators of the offer so as not to have to deduct the fees of the contributors. The second point is the difficulty of financing the sales act. Customers expect to pay a relatively constant fee, and rather less than what they had previously, which is precisely the point of competition. On the other hand, the initial commercial act costs more than the monitoring consultancy.
Brokerage firms therefore have a much greater need for working capital than other traders. In some sectors, the famous ‘précompte escompté’ (discounted advance payment) made it possible to cover this need relatively easily by having it financed by insurers. This method of remuneration has always been in the eye of the beholder, and one day or other it may disappear. It may even disappear naturally as a result of other regulatory changes for which it was not intended (intra-annual termination, for example). However, there are other ways of financing working capital requirements, and the disappearance of this method of remuneration would in no way be the end of the world for this type of short distribution. Finally, there is a tax issue associated with these regulatory changes. Until now, since intermediaries were mainly paid on a commission basis, they were considered to be an integral part of the insurer’s function, and these commissions were subject to insurance tax. If, in the future, intermediaries were no longer to be paid out of insurers’ premiums but through fees, they would be subject to VAT instead. As a result, they would be able to reclaim the VAT and would no longer be subject to the corresponding special payroll tax. This would bring brokers into line with the administrative norms of other traders, which would simplify matters.
