The European Insurance & Occupational Pensions Authority () has an online survey, seeking views about the scope of, and the nature of the products that should be covered in, its Guidelines “for the assessment of insurance based investment products (IBIPs) that incorporate a structure which makes it difficult for the customer to understand the risks involved“. If you want to participate in the survey, you’ll need to act fast – it closes at 23:00 (CET) on 25 September 2016.
From 23 February 2018, insurance distributors will be required, before they conclude an insurance contract, to (i) specify the demands and needs of their customer; and (ii) give him some objective and comprehensible information about the proposed policy, so that he can make an informed decision about whether to proceed. If advice is being provided, the insurance distributor will also be required to give its customer a personalized recommendation, which explains why the particular policy will best meet the customer’s demands and needs. (See article 20(1) of the IDD, which sets a higher standard than article 12 of the Insurance Mediation Directive.)
In addition, if the policy is an insurance-based investment product, the intermediary or insurer will be obliged (by articles 30(1) and (2) of the IDD) to obtain information about the customer’s relevant knowledge and experience, so that it can:
- (if advice is being given), recommend the products that are (i) “suitable” for that customer; and (ii) “in accordance with that person’s risk tolerance and ability to bear losses“;
- (if advice is not being given), “assess whether the service or product envisaged is appropriate for the customer“. If the product is not appropriate, the intermediary or insurer must give the customer a warning “to that effect“. If the customer won’t give the intermediary or insurer the information it needs to carry out the assessment, it must “warn them that it is not in a position to determine whether the product envisaged is appropriate for them“.
However, if advice is not being given, article 30(3) of the IDD will allow a European Member State to choose not to require the insurers and intermediaries carrying out insurance distribution activities in its territory, to obtain information, carry out appropriateness assessments, and give warnings in relevant cases, if their relevant activities refer to (i) “contracts which only provide investment exposure to financial instruments deemed non-complex under [MiFID II] and do not incorporate a structure which makes it difficult for the customer to understand the risks involved“; or (ii) “other non-complex insurance based investments for the purpose of this paragraph” (whatever that might mean) and, in either case, certain other tests are met.
Under article 30(7) of the IDD, EIOPA is required to “develop guidelines … for the assessment of insurance-based investment products that incorporate a structure that make it difficult for the customer to understand the risks involved“. EIOPA also has the power (but not a duty) to develop guidelines for the assessment of insurance-based investment products “for the purpose of this paragraph” (see above). At this stage, EIOPA is concerned only with the former; and it does not say whether and, if so, when it will begin to develop the latter.
EIOPA will use survey responses to help it develop a draft set of (article 30(7)) guidelines, for consultation in the usual way, in due course.