Intermediaries and other salespersons will be given greater training to ensure they also understand the complex nature of the products they are selling.
Knowledge of insurance cover and the tendency to shop around is very limited in Spain, and a high number of homeowners do not have contents cover – some, if they live in flats, only hold the basic buildings policy offered by the freehold community, which covers communal areas and the outside of the home.
Those who have a mortgage will have been required to take out cover as part of the loan deal, but most erroneously believe they cannot choose a company of their own and are obliged to sign up for the lender’s own cover.
A high number of car-owners hold third party insurance cover only, potentially exposing themselves to massive costs if their vehicle is damaged in an accident or fire, or stolen.
The government’s new decree, currently at the draft stage, responds to a European Union directive which seeks to ensure customers are fully aware of the cover offered, and proposes stiffer penalties for middlemen who do not give full information – even, and especially, if this is because they themselves do not know the full workings of the policy.
Competition rules will be streamlined in a law that affects not only policyholders themselves but also the 3,200 brokers and 77,000 tied and non-tied agents who operate in the insurance industry.
The vast majority of tied agents are self-employed and work on a commission basis only, which can compromise accuracy and ethics in a largely unregulated market.
As well as personal insurances, customers must be fully informed of the risks relating to insurance- and assurance-related investments, and also different investment strategies.
Regular evaluations of the product and the customer’s attitude to risk will be required.
Where several policies are sold at once, the agent must advise the customer that he or she can choose which to buy and that they are separate contracts, and also break down the costs involved.
Underwriting, as well as selling, will be regulated, to ensure fairness and transparency across the board.