The advice covers the identification, prevention, management and disclosure of conflicts of interest which may arise in the course of the distribution of insurance-based investment products.
Identification of conflicts of interest
EIOPA recommends requiring insurance intermediaries and insurers to assess all cases where they have an interest related to distribution which is distinct from the customer's interest and which has the potential to influence the outcome of the services to the detriment of the customer.
For certain cases such conflicts can be always taken to exist, for instance, where the distributor is likely to make a financial gain, or avoid a financial loss, at the expense of the customer, or where the distributor is involved in the management or development of insurance-based investment products.
Conflicts of interest policy
EIOPA also recommends requiring insurance intermediaries and insurers to establish and set out in writing an effective conflicts of interest policy. At the same time, EIOPA acknowledges the importance of proportionality, especially with regard to the impact new organisational requirements may have for small and midsize intermediaries. However, all insurance intermediaries and insurers are bound to adopt the appropriate procedures and measures necessary for ensuring that their distribution activities are carried out in the best interest of the customers and are not biased by conflicting interests.
Inducements and remuneration
EIOPA also notes that conflicts of interest may arise from third party payments (inducements) and from internal payments (remuneration). Therefore, EIOPA is convinced that this issue should be addressed as well. As inducements are discussed in the review of the Insurance Mediation Directive (IMD), EIOPA only presents general observations on this topic.
Gabriel Bernardino, EIOPA's Chair: "We have clear lessons to learn from mis-selling cases that caused consumer detriment and unidentified, unmanaged or unmitigated conflicts of interest were at the core of those cases. Consumers should always be confident that they will be offered a fair deal. We believe that it is essential to strengthen rules so that consumers' interests are not sacrificed in favour of those of insurers or intermediaries. Progress on this is vital for rebuilding trust, which will be good for insurers, insurance intermediaries and consumers alike."
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