The European Commission has published the draft of a Delegated Regulation under the Insurance Distribution Directive (EU) 2016/97 (IDD). The European Commission is granted the power to introduce delegated acts under Article 25 of the IDD in relation to product oversight and governance.
The Delegated Regulation sets out provisions for the oversight and governance of insurance products. It specifies that an intermediary shall be considered to be a manufacturer where they have a decision-making role in designing and developing an insurance product for the market. Decision-making can be assumed where an intermediary autonomously determines the essential features of the product (including coverage, price, costs, risk, target market, compensation and guarantee rights). Where responsibility for manufacturing is shared, both the intermediary and the insurance undertaking must enter into a written agreement stating that they will both comply with obligations under the IDD.
The Delegated Regulation specifies that target markets must be identified with sufficient granularity, although the principle of proportionality requires more detailed identification of target markets for more complex products. Products should be tested to ensure that they can meet the needs of a target market over the lifetime of the product.
Distribution channels should be carefully selected by the manufacturer, taking into account the specific characteristics of the product. The manufacturer should provide the distributor with sufficient information about the product and should monitor that the distributor is selling to the target market.
Distributors should ensure that they obtain all the information necessary to fully comprehend the products they distribute. Arrangements in relation to distribution should be set out in a written document which covers conflicts of interest, ensuring customer needs are taken into account and measures to ensure that products are sold to target markets. Distributors will be expected to report emerging concerns about products to the manufacturer.
Comments can be made on the draft Delegated Regulation until 17 August 2017.