The European Insurance and Occupational Pensions Authority (EIOPA) has published a report on the application of the Insurance Distribution Directive ((EU) 2016/97) throughout the European market. The executive summary of the report notes that there has been insufficient time to assess the effectiveness of the Insurance Distribution Directive (IDD) as a combination of late implementation of the IDD by some Member States, digitisation in the market and COVID-19 has resulted in it being impossible to assess what factors have affected the market since the IDD came into effect on 1 October 2018. As a result, another impact assessment will need to be undertaken at a later date. Nevertheless, the report now produced by EIOPA presents a preliminary picture of how the IDD is working in the European market.
The report notes that there are currently problems in relation to the sale of unit-linked life insurance products and mortgage and consumer credit protection policies. Furthermore, some Member States have expressed concerns that the IDD demands-and-needs test is sometimes too formalistic or even non-existent and that customers are being pushed towards tick-boxes confirming that products meet their demands and needs, rather than any assessment being undertaken. There remain concerns about a lack of professionalism in the market, especially in respect of sales of insurance-based investment products (IBIPS). Also identified in the report is the fact that the IDD does not fully anticipate the digitised insurance market and defaults to paper based information disclosures. With greater digitisation comes the need to clarify who should be doing what in a digitised market. A further concern identified is that the current information requirements of the IDD provide customers with too much overlapping information which can lead to an information overload. Bundling and cross-selling practices remain a concern.
The report makes for interesting reading and should help firms identify the areas where further regulatory work will be undertaken in respect of the distribution of insurance products.