These Guidelines are developed in line with Articles 30(7) and (8) of the Insurance Distribution Directive (IDD). The IDD requires that normally an assessment of the suitability or appropriateness of an IBIP for the customer should be carried out by the insurance intermediary or undertaking as part of the sales process. However, where various conditions are satisfied, including that the IBIP is not complex, the IBIP may be sold without a suitability or appropriateness test, i.e. on an execution-only basis.
The Guidelines cover the assessment of all types of IBIPs. They include criteria to identify product features, which may be difficult for the customer to understand. They address, for example, the nature of the charges paid by the customer and ability for the customer to surrender the product before maturity. IBIPs which include such features will be deemed complex and therefore not eligible for sale via execution-only.
EIOPA invites stakeholders and interested parties to provide their feedback on the Guidelines.
The consultation period will end on 28 April 2017. Important to note: Comments submitted after the deadline or not submitted via the provided template cannot be processed.
The consultation paper and the template for comments can be viewed here.
Background
Insurance-based investment products (IBIPs) are insurance products which offer a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations. As an example, the following products in the retail market will be IBIPs: unit-linked life insurance policies or life insurance policies with profit sharing or profit participation.
Execution-only sales of IBIPs: Article 30(3), IDD provides that such sales of IBIPs are only possible in Member States which decide to allow insurance intermediaries and undertakings to derogate from the obligation to assess the appropriateness or suitability of an IBIP for the customer. In such cases, it is still necessary to specify the demands and needs of the customer.
The Insurance Distribution Directive (IDD) entered into force on 23 February 2016 and has to be implemented by Member States by 23 February 2018. The IDD establishes new rules on distribution of insurance products and seeks to:
• Improve regulation in the retail insurance market and create more opportunities for cross-border business;
• Establish the conditions necessary for fair competition between distributors of insurance products, for example, through an extension of the Directive to direct sales by insurance companies;
• Strengthen consumer protection, in particular with regard to the sale of insurance-based investment products (IBIPs).
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