The European Insurance and Occupational Pensions Authority published a Consultation Paper on its draft technical advice to the European Commission on possible delegated acts concerning the Insurance Distribution Directive.
EIOPA's draft technical advice pursues three high-level objectives:
First, to ensure that, throughout the product lifecycle, insurance products meet the needs of consumers and, thus, prevent or mitigate mis-selling.
Second, to ensure that different third party payments such as commissions, do not have a detrimental impact on the quality of services to the customer.
Third, to ensure that insurers and intermediaries sell to individual customers, products that are suitable (for advised sales) or appropriate (for non-advised sales).
Gabriel Bernardino, Chairman of EIOPA, said: "The Insurance Distribution Directive (IDD) is a significant milestone to strengthen consumer protection in Europe. This work goes hand in hand with the fact that EIOPA places consumer protection at the very centre of its strategic objectives. It is now important to specify the new requirements underlying the IDD, to ensure a consistent application across Member States and, as a result, achieve a common level of consumer protection across the European Union. EIOPA actively seeks a discussion with all market participants on how these goals can best be accomplished."
In the consultation paper, EIOPA invites all interested parties to provide their feedback on the policy proposals with regard to the following areas:
Product oversight and governance arrangements requiring manufacturers of all insurance products to establish processes for company-internal approval of each insurance product before it is distributed to customers. This work is based on EIOPA's Preparatory Guidelines on Product Oversight & Governance.
Organisational arrangements to prevent and manage conflicts of interests which may arise between distributors and their customers (e.g. inappropriate sales incentives) in the course of distribution of insurance-based investment products (IBIPs).
Specification of the circumstances under which, inducements, namely, third party payments such as commissions paid by manufacturers to distributors in connection with the distribution of IBIPs, have a detrimental impact on the quality of service provided to the customer. For example, EIOPA has proposed a list of inducements which are considered to have a high risk of leading to a detrimental impact on the quality of the service to the customer.
Specification of the information which distributors should obtain from their customers to be in a position to assess the suitability or appropriateness of IBIPs for the customer and reporting on the service provided to the customer.
EIOPA intends to submit its technical advice to the European Commission in February 2017. The consultation period will end on 3 October 2016.
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