Telephone recording where distribution is partially conducted via distance communication means
Retention requirements for telephone calls in case insurance contract is not completed
Control of professional and honourability requirements of brokers
Report on control over distribution networks
Delivery of pre-contractual documents
POG
Freedom of establishment, provision of services and POG
Actual target market and actual negative target market
Notification to IVASS relating to shareholdings and close links


Following meetings held between the Institute for the Supervision of Insurance (IVASS) and the market between July 2021 and November 2021, a set of clarifications insurance distribution rules was published by the IVASS on 23 December 2021. These clarifications are pending a broader review of insurance distribution regulation (including IVASS Regulation No 40/2018). This article looks at each of the nine clarifications.

Telephone recording where distribution is partially conducted via distance communication means

According to article 83 of Regulation 40/2018, distributors are obliged to record telephone conversations only when distribution is carried out entirely by means of distance communication, and not in cases where stages of the promotion and placement process normally take place in person.

However, the clarifications confirm that recording is required for the distribution of insurance-based investment products (IBIPs) in respect of potential customers.

Retention requirements for telephone calls in case insurance contract is not completed

According to article 83(2)(a) and article 67 of Regulation 40/2018 bis, telephone records must be retained by distributors for the entire duration of the relationship or for the longer period which is set out by other applicable laws and in all events for a five-year term after the termination of the relationship. The IVASS clarified that where an insurance contract has not been concluded, the starting date of the retention period coincides with the date of the last electronic recording or communication.

Control of professional and honourability requirements of brokers

Article 46(1)(a) of Regulation 40/2018 requires insurance companies to set up internal policies aimed at ensuring compliance with the professional and organisational requirements of entities that carry out distribution activities directly and through distribution networks, including those of good repute. With particular reference to brokers, the monitoring actions carried out by insurance companies, according to article 46(4) of Regulation 40/2018, must take into account that brokers act on behalf of the client and with no authority to bind insurers. Therefore, article 46(1) and article 46(4) do not entitle undertakings to introduce pervasive procedures (eg, inspections) that are inconsistent with the independence and autonomy of brokers. The control of the professionalism and honourableness requirements of brokers can therefore be based on self-declarations in line with Presidential Decree 445 of 2000 and standards of best practice in the market.

Report on control over distribution networks

The clarifications confirm that the report on the control of the distribution networks for the 2021 financial year shall be prepared by the undertakings' compliance office and Measure 2743 of 27 October 2009 shall continue to apply. Therefore, the report shall be submitted to the IVASS within 60 days from the end of the calendar year.

Delivery of pre-contractual documents

The pre-contractual documentation envisaged by Regulation 41/2018 can be delivered to policyholders digitally, in compliance with the provisions of article 4 of the same regulation, which, in accordance with article 56 of Regulation 40/2018, prescribes that the obligations of delivery of the pre-contractual documentation shall be fulfilled in the manner set out in article 120 quater of the Law of Private Insurance (ie, on paper or, upon the policyholder's consent, on another durable medium). The policyholder may also choose a method of communication with respect to any subsequent contracts concluded with the same undertaking, without prejudice to the possibility of changing the choice of method at any time.(1) The distributor keeps track of the choice that is made by the policyholder and shall inform them of the possibility of modifying it at any time.

POG

In accordance with article 9(3)(f) of Regulation 45/2020, which covers product oversight and governance (POG), the undertaking is entitled to terminate the relationship of a distributor if, in addition to the monitoring activities, cases of "greater seriousness" emerge. The IVASS has clarified that "cases of greater seriousness" include repeated breaches of Regulation 45/2020, namely:

  • article 11(4) of Regulation 45/2020 – selling products to customers that fall within the negative target market;
  • article 11(5) – failing to supply information to the undertaking relating to sales outside the target market; and
  • more generally, conduct obligations that the regulation imposes on intermediaries.

Freedom of establishment, provision of services and POG

Article 11(6) of Regulation 45/2020 stipulates that freedom of establishment and provision of services distributors shall comply with European and Italian regulations with regard to POG, including those requiring that insurance products meet the needs, characteristics and objectives of the actual target market identified.

The IVASS clarified that:

  • the "Italian rules" that are referred to in article 11(6) of Regulation 45/2020 are those that apply to foreign undertakings under the list of general good provisions published by the IVASS; and
  • the prohibition of distribution to customers who fall within the negative target market, according to article 11 of IVASS Regulation 45/2020, is applicable if the manufacturer that is authorised to operate in Italy has identified groups of customers whose needs, characteristics and objectives are not consistent with the identified insurance product.

Actual target market and actual negative target market

Intermediaries are not required to notify the undertaking of the actual target market or the actual negative target market for each product if, based on the relevant client base, it appears that these markets coincide with those identified by the insurance company. In any case, the intermediary shall promptly inform the undertaking if the actual target market and the negative target market are no longer the same.

Notification to IVASS relating to shareholdings and close links

The IVASS clarified that the duty of notification of shareholdings and close links is provided by article 109 (4 sexies) of the Insurance Code and it applies even if such shareholdings and close links do not prevent the exercise of the supervisory authority of the insurance undertaking.

For further information on this topic please contact David Maria Marino at DLA Piper Studio Legale Tributario by telephone (+39 02 80 61 81) or email ([email protected]). The DLA Piper Studio Legale Tributario website can be accessed at www.dlapiper.com.

Endnotes

(1) See article 4 of Regulation 41/2018 and Article 61 of Regulation 40/2018.