EIOPA recently held a conference on the subject of the application of the Insurance Distribution Directive (IDD) over the last 5 years, in anticipation of EIOPA preparing a report on the application of the IDD in early 2024.
The event allowed various stakeholders to share their experience about the application of the IDD, from consumer associations, trade associations, insurance undertakings, insurance intermediaries, universities and national regulators, amongst others.
The event covered four different sessions, and the main takeaways from each are set out below:
- Trends in digitalization and new distribution models - emphasis was placed on the opportunities digitalisation could bring e.g. to drastically reduce the time needed for consumers to buy an insurance product where coverage is required in short order. However, this new trend also carries risks and does not diminish the responsibilities of distributors under the IDD. The IDD is technology neutral and the same level of consumer protection should apply irrespective of the distribution channel. Some insurance products are routinely purchased through purely digital channels, such as private car insurance. However, consumers' desire to speak or interact with another person for non-routine insurance products (in particular, life insurance) is unlikely to diminish, at least in the short term.
- Sustainable insurance products and integration of sustainability factors, risks and preferences into the IDD - participants found that the most challenging issue relating to the implementation of sustainability rules is the complexity of the EU regulatory framework on sustainability. A related issue is the limited offering of products that can match the sustainability preferences of customers to date. At this point in the evolution of sustainable finance, customers struggle to express their sustainability preferences to distributors, so financial education programmes or training courses on sustainable finance would help to raise consumers' awareness on sustainable investment and assist intermediaries with providing better advice in this regard.
- Practical application of the IDD - the recent ECJ judgment on group insurance in the TC Medical case (click here to read our briefing on this judgment) was a focus of the discussion. The impact of this judgment and potential consequences are still being assessed. The judgment emphasised the broad scope of the IDD and highlighted that other activities, such as after-sales conduct of insurers as well as some "new" insurance distribution activities, which might appear to be outside of the definition of "insurance distribution" in the IDD, may still fall within its ambit. Such activities could include cold calling or other forms of unexpected solicitation using new digital tools (e.g. lead generation tools).
- Quality of advice and selling methods - this session emphasised the on-going regulatory focus onpre-contractual information on coverage and exclusion clauses. Questions also arose on whether the demands and needs test is being adequately performed through the use of standardised questionnaires (e.g. a medical questionnaire for health insurance). Following the introduction of the IPID as a consumer disclosure tool, work is still necessary to protect customer's interests in light of new and evolving distribution channels.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.