Following the adoption of the Insurance Distribution Directive (IDD) [1], which was meant to improve the ‘protection of consumers and retail investors buying insurance products or insurance-based investment product’ [2] by ‘increasing transparency of price and costs of insurance products’ [3], by disclosing information on inducements and streamlining investment-related advice, the European Commission (EC) adopted today two Directives that provide further detail on the: (i) requirements for product oversight and governance (POG) [4]; and (ii) information requirements and conducts of business rules [5].
In addition to the Implementing Regulation concerning insurance product information document (IPID) [6], the Commission’s new rules for businesses set out specific obligations that should amount to a high standard of consumer protection.
These new obligations include prioritisation of consumer interest ‘when designing, developing and distributing’ insurance products as of 2018, updated standards on accepting inducements and for preventing conflicts of interests.[7]
BETTER FINANCE already expressed its view on the draft Delegated Act (DA) with regard to:
- the minimum criteria for identifying conflicts of interest, laid down in Article 3(2) of the Directive, in the sense that the Commission’s decision to remove the criterion of monetary benefits (inducements) is not sufficiently justified; and
- the elements used ‘to assess the detrimental impact of inducements’, BETTER FINANCE highlighted that the wording used in Article 8(2) is too broad and ‘leaves more room for interpretation’.
In relation to the adopted version of the DAs, BETTER FINANCE welcomes the new rules adopted by the EC improving the protection of investors in insurance-based investment products (IBIPs).
However, it would have been better for consumers and investors, as well as simpler and more consistent, to align these conduct of business rules for IBIPs with the more protective ones applicable to other retail investment products such as funds, shares and bonds (MiFID II Directive). As such, investor protect rules remain inconsistent at the retail point of sale.
[1] Directive (EU) 2016/97 of the European Parliament and of the Council with regard to information requirements and conduct of business rules applicable to the distribution of insurance-based investment products, OJ L 26/19, entered into force 19 February 2016, applicable from 23 February 2018.
[2] Explanatory Memorandum pt. 1 para 3 Directive 2
[3] Insurance Distribution Directive: Bund der Versicherten and BETTER FINANCE denounce the erosion of consumer protection rules’, BETTER FINANCE website.
[4] Commission delegated regulation supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to product oversight and governance requirements for insurance undertakings and insurance distributors, C(2017) 6218 final.
[5] Commission delegated regulation supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to information requirements and conduct of business rules applicable to the distribution of insurance-based investment products, C(2017) 6229 final.
[6] Commission Implementing Regulation (EU) 2017/1469 of 11 August 2017 laying down a standardised presentation format for the insurance product information document, OJ L209/19.