From passive to active commission transparency for insurance brokers in the Netherlands

From 1 July 2024 onwards, non-life insurance advisors and brokers in the Netherlands must actively inform consumers about the commission they receive from insurers, before the conclusion of a contract. The purpose of this "active transparency obligation" is to ensure that consumers are well informed and to encourage them to engage in conversation with their advisors or brokers on this topic. This active commission transparency obligation does not apply to the corporate market.

From passive to active transparency

Up until now, non-life insurance advisors and brokers are only obligated to provide consumers information on the acquisition commission or renewal commission they receive from insurers if consumers actively request such information. This is the so-called passive commission transparency obligation. In practice, however, consumers rarely ask their advisor or brokers how much commission they receive. At the same time, the Dutch Authority for the Financial Markets (AFM) found that consumers would like to know if (and how much) commission is paid.

For insurance contracts concluded on or after 1 July 2024, this passive transparency obligation changes to an active transparency obligation. This follows from the Financial Markets Amendment Decree 2023 (Wijzigingsbesluit financiële markten 2023). The Dutch legislator considers it important that consumers are well informed about the amount of commission they (indirectly) pay their advisor or brokers, because:

• well informed consumers are more capable of assessing how much they (indirectly) pay for the services received from their advisor or brokers. Consequently, they will be more likely to ask their advisors or brokers what the added value of the services are; and
• well informed consumers are better able to compare (the fees of) different advisors and brokers.

To ensure that consumers are well informed, the Financial Markets Amendment Decree 2023 obligates advisors and brokers to provide the consumer prior to the conclusion of an insurance contract information about the existence, nature, and amount of the commissions, free of charge and in an understandable manner. If the exact amount of the commission is not yet known, the most accurate indication possible of that amount must be provided.

AFM's interpretation

On 16 May 2024, the AFM published its interpretation of the upcoming active transparency obligation, in which it expresses its expectations.

The AFM's interpretation does not provide much clarity with respect to certain questions from the market. For example, it remains unclear how exactly the AFM expects the information to be provided to consumers.

The AFM states that its supervision will mainly focus on the legislators' aim underlying the active commission transparency obligation: through actively informing consumers on the amount of commission received, consumers are more likely to initiate a conversation regarding the service received. Once the new rules apply, we expect the AFM to assess to what extend non-life insurance brokers and advisors actively inform consumers about commissions.

Key points and considerations

• The active transparency obligation is form-free. This means that neither the legislator nor the AFM provides for any specific way in which the consumer must be informed. It remains unclear at which point the active commission transparency obligation is complied with (for example, is including the information in the end of a pre-contractual information document sufficient?).
• The active transparency obligation does not apply to non-life insurance intermediaries that are exempt from the licence obligation, such as merchants that provide intermediary services that are ancillary to the delivery of a good. This is not surprising, as these intermediaries are currently also not subject to the passive transparency obligation.
• The amount of commission must be stated in euros (and not, for example, in percentages).