Car dealers and travel agencies gain the right to sell insurance directly to customers

The Estonian Ministry of Finance is preparing a legislative amendment that would allow car dealers and travel agencies to offer insurance contracts directly to customers as representatives of insurance brokers. The Estonian Insurance Association opposes the change, warning that it will result in poorer advice and higher prices for consumers.

The Estonian Ministry of Finance is developing a bill to amend the Insurance Activities Act and the Law of Obligations, aimed at making insurance purchases more convenient and transparent in certain situations. One of the main innovations is the opportunity to conclude an insurance contract through intermediaries representing insurance brokers, meaning that car dealers and travel agencies would be able to offer insurance solutions directly to their customers.

What the amendment will bring

Currently, car dealers do have the ability to mediate insurance contracts concluded with insurance companies, but the planned legislative amendment would provide a clearer legal basis for this activity. According to Meelis Telliskivi, director of the Estonian Association of Motor Vehicle Dealers and Service Companies, it is primarily about implementing and clarifying a European directive.

"From the customer's perspective, it was previously already possible to buy both motor liability insurance and comprehensive insurance at a car dealership. Rather, this planned legislative amendment provides additional legal clarity to this transaction," explained Telliskivi. He added that the draft also includes a provision that gives the customer the right to know the amount of intermediation fees paid to the insurance broker, and clarified requirements that the car dealer must meet. Consumer protection has also been emphasized to ensure that the customer receives an insurance product that covers their actual needs.

Insurance association opposes

The Estonian Insurance Association opposes the amendment. According to the chairman of the association's board, Tuuli Pärnson, the system would gain an additional intermediary to whom a professional insurance broker could delegate their work, and this would unfortunately harm the customer.

"Currently, we have a professional intermediary who advises the customer and receives an average of 14% of the insurance premium for this advice. If this professional intermediary decides to delegate their work to someone else, two things happen: first, brokerage activities are quite complex, and if we delegate this to a third party as a side task, the customer will no longer receive the same quality advice," said Pärnson.

She warned that lower quality advice would lead to more disputes and confusion. Secondly, insurance becomes more expensive because the representative does not work for free.

Responsibility remains with the broker

Pärnson emphasized that legally, all responsibility for the representative's activities and any potential errors lies with the insurance broker. However, she noted that in practice, no insurance dispute to date has ended with the intermediary being held liable; disputes tend to be resolved at the expense of the insurance company.

She also explained the difference between broker and agent activities: an agent's work is simpler because an agent sells one specific product, while a broker must be familiar with all available options on the market to find the best solution for the customer.

If a car dealer acts as an agent representing insurance brokers, insurance companies themselves must verify that the dealer has the necessary competence and expertise for this, added Telliskivi.