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The 2018 European policy on insurance companies and product (IDD)

In 2018, the Insurance Distribution Directive (IDD) will be gradually implemented throughout the European Union. At stake is the conduct of business of all types of insurance providers, from the multinational insurance corporation to the car-rental employee. The goal: strengthen consumers’ protection by focusing on the training of insurance providers and information transparency.

Who is targeted?

Every type of insurance provider, from the multinational insurance company to the car-rental employee. The measure affects both the businesses and their employees, and the types of investment products that are on the market.

What are the major measures?

  1. Implement and order all types of insurance sellers to complete yearly mandatory training
  2. Forbid all types of compensation based on the product sold – all sales must be made closest to the customers’ needs and bonuses and compensations based on the type or number of product sold, or any kind of financial leading to a conflict of interest is forbidden.
  3. Increase transparency by making available to the customer all information needed for his/her choice
  4. Command better knowledge of the customer in order to serve him/her better

What impact on pre-sale customer profiling?

The insurance processes must clearly study products according to their market (to their customers), particularly risk-profiling of the market:

  • Type of client
    • Experience and knowledge
    • Financial situation and ability to bear losses
    • Risk tolerance and compatibility of the risk/reward profile of the product with the customer profile
    • Client objectives
    • Client needs

Additional requirements are demanded for insurance-based investment products, related to conflict of interests and transparency regarding remuneration and information: the insurance provider must be able to explain clearly and per customer profile the details of the contract, and must thus know its customer-profile.

BIBLIOGRAPHY

http://eur-lex.europa.eu/legal-content/FR/TXT/?uri=uriserv%3AOJ.L_.2016.026.01.0019.01.FRA

http://ec.europa.eu/finance/insurance/consumer/mediation/index_fr.htm

Impact in the UK: https://united-kingdom.taylorwessing.com/en/insurance-distribution-directive-key-themes

http://www.cms-lawnow.com/regzone/articles/2015/december/insurance-distribution-directive-adopted

https://www2.deloitte.com/content/dam/Deloitte/cz/Documents/finance/Regulatory-agenda-2016-2017.pdf

http://vff.no/assets/Presentasjoner/2016/MiFID-II_VFF_24.11.2016.pdf

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