Czech Republic: Insurance update
On 1 December 2018, the new Insurance Distribution Act became effective in the Czech Republic. It replaces the Act No. 38/2004 Coll., on Insurance Intermediaries and Loss Adjusters, and implements “EU Directive 2016/97 on insurance distribution.”
Key Changes to Intermediary Categories
A significant modification involves reducing the number of authorized intermediary categories. “Insurance agents and brokers fall into one category of individual insurance intermediaries.” The new framework introduces tied representatives and supplementary insurance intermediaries as limited categories, while eliminating previous designations like subordinated or exclusive insurance agents.
Implementation Timeline
Existing insurance agents and brokers automatically transition to the new system on 1 February 2019, unless they notified the Czech National Bank by year-end 2018 of their unwillingness to operate as independent intermediaries. Other intermediaries must obtain authorization or register by the end of March 2019.
Authorization Validity
The Act introduces time-limited intermediary authorizations. “Authorisation to act as an intermediary now lasts up to two years” and can be extended by submitting an application and paying administrative fees: approximately CZK 5,000 (EUR 200) for individual agents or brokers, and CZK 1,000 (approximately EUR 40) for tied representatives.
Consumer Protection Measures
Enhanced protections include stricter remuneration regulations. The legislation prohibits compensation structures resembling “pyramid schemes” or payments conditioned on entry fees, while maintaining existing life insurance remuneration distribution rules.
The Act also modifies accredited testing procedures for intermediaries and group insurance distribution protocols.