Market structures and remuneration policies in Sweden

1. Market structures and remuneration policies in Sweden Meeting with members of the European Parlament 20 mars 2013 Christian Sandell Senior legal advisor at Insurance Sweden

2. Distribution channels life insurance premiums • Intermediaries 36% (Agents and Brokers) • Direct writing 17% • Collective agreement 23% (Intermediaries?) • Intermediaries 14% (Bancassurance) • Other 11%

3. Intermediaries in Sweden • Tied intermediary (banks etc) • Intermediary working exclusively for one insurance company (banks and franchise) • “Dependent” intermediaries (majority) • Independent intermediaries giving independent advice (few in Life, but more in the B2B Non-Life sector) • Others (administrators of collective agreement, administrators of group life insurance, etc)

4. Customer protection regulations in force • Consumer Investment Advice Act (consumers only but includes direct sale from insurance undertakings) • Insurance Intermediary Act (all IMD costumers) • The combined regulations goes further than IMD and are in many areas in line with IMD2 proposal ( no ban on independent advice, no disclosure of remuneration on personal level) • Both acts calls for ”god practice” and “advice against” transactions not suitable • Administrative rules and general guidance from the supervisor (Finansinspektionen)

5. Self regulations • Insurance Sweden's recommendation: • ban on commission regarding non-life insurance in april 2003 • product information including fact sheet • Insure Sec started in 2012 (intermediaries) • Registration • Licensing • Sanctions • (set good practice)

6. Compensation to intermediaries • The commission system is the dominant system to compensate intermediaries in Sweden • Intermediaries* get 88,5 % of the income in commission and 11,5% in fees. • 2/3 of commission on “stock” and the rest as up-front. • Fees are more common in Non-Life B2B but exists in Life B2B through large intermediaries. *Members of the Swedish Insurance Intermediaries' Society (SFM) They organise 3 out of 4 intermediaries.

7. Challenges on the Swedish market • Who is independent and who is giving independent advice? • Miss-selling, some cases (intermediaries) • How can you inform more clearly about costs • Low interest products (pension) and the “fact” that pensions are complicated • Large country and well spread population • Growing need for advice

8. Need for advice A growing part of the working population will need advise on their pension • More and more of the occupational pensions schemes are transferred from benefit contribution to defined contribution. The employee is responsible for the level of their future pension. • Part of 1st pillar pensions are placed individually in the premium pension system (funds) where each and everyone is responsible for the level of their future pension.

9. How does the system work in Sweden? • The use of intermediaries sets a benchmark to insurance undertakings direct sales distribution. • Intermediaries are important for insurance undertakings to reach customers that are hard to get at by direct sale • The commission-system makes it possible for insurance undertakings to grow on “new” markets without to much investment cost • The commission-system (paid trough the product) gives opportunity for all customers to get advice. • Insurance undertakings want to pay more stock commission