The IDD directive: better protection for consumer interests Focus on insurance products
The FSMA This brochure is published by the Financial Services and Markets Authority (FSMA). The FSMA is an autonomous public institution that carries out the tasks in the general interest entrusted to it by the Belgian legislature. The FSMA strives to ensure that the financial system is at the service of society, inspires confidence and places the consumer at the centre of its concerns. It does so in such a way that consumers may be able to count on receiving proper financial services and on transparent and open markets, and that they may be able to purchase products that fit their wishes and needs.
Table of contents What is the IDD directive?
2
Before concluding an insurance contract
6
Are you a retail or a professional customer? What are your demands and needs? What information should you receive in advance?
7 7 9
Ongoing obligations for distributors
16
Preventing conflicts of interest Following the rules governing remuneration Handling complaints and claims
17 18 19
Three overarching principles to remember
1
20
What is the IDD directive?
The IDD is the abbreviation for the European Insurance Distribution Directive. The IDD regulates the distribution services for insurance products. One of its main objectives is to provide a set of rules aimed at strengthening consumer protection. The IDD contains information obligations and rules of conduct that apply to all distributors of insurance products. This brochure summarizes the main information obligations and conduct of business rules that apply to the distribution, in Belgium, of insurance products by an insurance company or an insurance intermediary. This brochure is relevant only to insurance products other than insurance-based investment products 1 .
1
A separate brochure sets out the rules that apply to the distribution of insurance-based investment products.
3
The insurance products covered by this brochure This brochure is relevant only to insurance products other than insurance-based investment products. These include hospitalisation insurance, fire insurance, civil liability insurance for motor vehicles, etc. These products are referred to as “insurance products” in this brochure.
Three overarching principles The IDD directive requires distributors to abide by three over arching principles when distributing insurance products: • act honestly, fairly and professionally in a way that best serves your interests; • provide you with information that is accurate, clear and not misleading. This information is meant to enable you to take informed decisions; • take account of your individual situation, and in particular of your demands and needs.
4
Before concluding an insurance contract (p.6)
3
2
1 The distributor must put you in a category of customers:
Retail customer
Professional customer
The distributor must ask you for certain types of information in order to determine your demands and needs. If the distributor also provides you with advice, it must offer a personalised recommendation that explains why one particular product may better fit your demands and needs.
The distributor must supply you with certain items of information. Examples: • information about the distributor • information about insurance products • information about the costs and charges • ...
4
Ongoing obligations for distributors (p. 16)
• Preventing conflicts of interest • Following the rules governing remuneration • Handling complaints and claims
5
Before concluding an insurance contract
1
Are you a retail or a professional customer? Before any distribution of an insurance product, the distributor must categorize you as a retail customer or as a professional customer. In practice, most individual customers will be placed in the category of retail customers. This brochure thus sets out the rules governing the distribution of insurance products to just that one category of customers.
2
What are your demands and needs? Before concluding an insurance contract, the distributor must ask you questions in order to determine your demands and needs. To do so, it takes into account the complexity of the product and the type of customer you are. It must ensure that the insurance contract it is offering you is consistent with your requirements and needs. Moreover, if the distributor offers you advice, that is to say, a personalised recommendation, regarding an insurance contract, it must be sure to explain to you why the product it recommends would best meet your demands and needs. A recommendation is personalized if it is presented as tailored to you personally or if it is based on an examination of your own situation in relation to the insurance product. This is not the case, for example, if the recommendation made is intended for the public. Exception: the distributor is not required to comply with the information obligations that apply to your demands and needs if you are looking for insurance coverage of one or more large risks 2 .
2
Risks that fall within certain classes of insurance that are encountered chiefly by legal persons or individuals in the course of an industrial, commercial or liberal profession. The concept of “major risks” is defined in Article 5, 39°, of the Law of 4 April 2014 on insurance.
7
You are using the services of a distributor to conclude an insurance contract WHAT IS THE DISTRIBUTOR REQUIRED TO DO?
Demands-and-needs test The distributor must ask you about your demands and needs and must ensure that the insurance contract proposed is consistent with them.
Without advice
With advice
If the distributor offers you advice, it will have to provide a personalized recommendation that explains why a particular product would best meet your demands and needs.
8
3
What information should you receive in advance? All information you receive from the distributor must be accurate, clear and not misleading. This principle applies both to the content and to the presentation of the information. Moreover, where a distributor provides you with advertisements or advertising materials, these must be identifiable as such. The distributor must provide you with the necessary information sufficiently far in advance of the conclusion of the contract, so that you can make an informed decision. It is possible, however, that some information is provided to you afterwards, where the insurance product concerned is being sold to you via a remote mode of communication, such as by telephone. In that case, certain conditions must be met. You must, in particular, receive the following information 3: Information about your categorization The distributor must inform you whether it has categorized you as a retail customer or as a professional customer. It must inform you of your right to request a change of category, where applicable, and tell you the limitations in terms of protection that may result from such a change. Information on the type of advice provided The insurance intermediary must explain to you the nature and scope of the advice it provides, specifying for example if its advice is based on an impartial analysis. In that case, the advice must be based on the analysis of a sufficient number of insurance products available on the market so as to be able to make a personalised recommendation of the insurance contract that would be best suited to your needs.
3
Except for large risks.
9
Information about the distributor of insurance products The distributor must provide information about itself, specifying whether or not it offers advice 4 and providing you with the necessary information about the procedures for claims, complaints and redress. Information about any conflicts of interest and on transparency Where the distributor is an insurance intermediary or an ancillary insurance intermediary, it must provide you with general information regarding conflicts of interest. The intermediary must also provide you with information about any shares it may hold in companies or about any shares or voting rights that certain companies may hold in its capital. Moreover, it must inform you: (i) (ii)
(iii)
if it bases its advice on an impartial and personalized analysis, if it is subject to a contractual obligation to work exclusively with certain insurance companies, in which case it must give you the names of those companies, or the name and address of the insurance companies with which it can work and works if it is not in any of the situations set out in (i) and (ii).
Information on remuneration Your insurance intermediary must inform you of the type of remuneration it receives under the terms of the insurance contract. If the distributor is an insurance company, the information should indicate the remuneration received by its staff under the terms of the insurance contract. Where the distributor is an insurance intermediary or an ancillary insurance intermediary, it must also specify whether it works on the basis of: (i) (ii) (iii) (iv)
4
a fee paid by you directly; a commission of any kind included in the insurance premium; any other type of remuneration; or a combination of two or more of the above-mentioned types of remuneration.
If the distributor is an insurance intermediary or an insurance company.
10
Information about the costs and charges The FSMA has set out the detailed contents of this information in a regulation. The information must be provided to you before the conclusion of an insurance contract, as well as at each renewal date of your insurance contract. The exact information that the distributor must provide to you differs depending on whether the contract you wish to conclude is for the compulsory civil liability insurance for motor vehicles or another type of insurance. The amounts that must be conveyed to you may be estimates. Therefore this information does not necessarily indicate the actual costs and charges you will have to pay under the terms of the insurance contract in question. The estimates as regards the costs and charges are intended to enable you to gain a better overview of the proportion of the premium that serves to cover the risk insured by the insurance contract. Please note: when you compare several insurance contracts, you should not stop at comparing the estimate of the costs and charges for each contract. You are advised to take other elements into account as well, such as the amount of cover provided, the amount of any excess and any exclusion clauses. Information about insurance products The distributor is required to provide you with relevant information about the insurance product, in a comprehensible form, in order to enable you to take an informed decision. The information to be provided will vary depending on the complexity of the product and the type of customer.
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If the insurance product in question is a non-life insurance product, the information will be provided to you in the form of an insurance product information document, the content, form and format of which are regulated.
The format of the information document is laid down by a European Regulation and is presented as follows (see next page). It is in your interest to keep all the documents you receive from the distributor.
Insurance product information document This document must contain the following information: • information about the type of insurance; • a summary of what is insured, including the main risks insured, the maximum cover and, where applicable, the geographical scope and a summary of the excluded risks; • the means and duration of payment of premiums; • the main exclusions, as a result of which no claim may be made; • obligations at the start of the contract; • obligations during the lifetime of the contract; • obligations in the event that a claim is made; • the term of the contract, including the start and end dates of the contract; • the means of terminating the contract. The law also specifies the form of this document as well as the language in which it must be drafted.
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Xxxxx lnsurance
lnsurance Product Information Document Company: (Name insurance company)
Product: (Name policy)
(Statement that complete pre-contractual and contractual information on the product is provided in other documents)
What is this type of insurance? (Description of lnsurance)
What is insured?
What is not insured?
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx xxx
Are there any restrictions on cover?
xxx xxx
! xxx ! xxx ! xxx
xxx xxx
Where am I covered? xxx
What are my obligations? — xxx — xxx — xxx
When and how do I pay? xxx
When does the cover start and end? xxx
How do I cancel the contract? xxx
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Before investing, please ensure you are familiar with the procedures for lodging claims, complaints and redress against the distributor of insurance products. The distributor is required to provide you with this information.
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15
Ongoing obligations for distributors
4 The IDD lays down a number of obligations that the distributors must respect at all times.
Preventing conflicts of interest Distributors must act in such a way as to serve your best interests. To this end, they take measures that are effective in detecting and preventing potential conflicts of interest that may adversely affect your interests when distributing insurance products. Distributors must make sure they do not indirectly serve their own interests or those of other customers instead of yours. For example, there is a conflict of interest where the distributor of insurance products is likely to achieve a financial gain or avoid a loss at your expense. The same is true where the distributor has an incentive – financial or other – to put the interests of another customer or group of customers ahead of yours. Where the measures taken by the distributor to prevent or manage conflicts of interest are not sufficient to prevent the risk of damage to your interests, it must inform you of this. In that case, it must provide you with the following information before the insurance contract is concluded: • • •
a precise description of the conflict of interest in question; an explanation of the general nature and source of the conflict of interest; and an explanation of the risks that the conflict presents for you and the measures taken to attenuate these risks.
17
Following the rules governing remuneration In the course of distributing insurance products, the distributor may receive third-party benefits. These benefits may lead the distributor to favour other interests over yours. Different rules govern these situations with a view to your protection. On the one hand, the distributor cannot be remunerated, nor can it remunerate or evaluate the performance of its staff in a way that is counter to its obligation to act in your best interests. Furthermore, organizations that represent the insurance sector have drawn up a code of conduct that governs the payment and receipt of certain inducements. The code sets out: (i) (ii)
(iii)
fundamental principles regarding conflicts of interest and regarding the proportionality of the remuneration to the service provided; specific rules regarding certain non-monetary types of remuneration. These include rules on the training offered to insurance intermediaries, a limit on the length of events organized for intermediaries, as well as the geographical zone in which they are held; and a list of incentives or practices that are prohibited because they are considered to have a detrimental impact on the quality of the service provided to you. For example, trips offered to insurance intermediaries or incentives connected to the sale of certain products where certain conditions are met.
18
Handling complaints and claims Distributors are required to ensure that any claims you file with them about an insurance contract or an insurance distribution service you have received are examined in an expert and honest way and that you receive a reply in all circumstances.
Procedure to follow if you wish to file a claim or a complaint If you wish to file a claim about an insurance distribution service or an insurance product, you can first approach the complaint-handling service of your distributor. Under certain circumstances, you can also contact the Insurance Ombudsman, who will play the role of an impartial mediator between your distributor and yourself. Moreover, it is also possible to initiate legal proceedings, notably if any of the aforementioned claim procedures do not result in a solution to your problem. You can also address questions to the FSMA, bearing in mind that the FSMA is not authorized to intervene in any disputes between you and your distributor.
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Three overarching principles to remember The aim of this brochure is to inform retail customers about the various rules of conduct to be followed when distributing insurance products, in application of the IDD. These rules are intended to guarantee suitable customer protection. Remember the three fundamental principles that distributors must follow when they provide you with insurance distribution services: 1. 2. 3.
act honestly, fairly and professionally, in a way that best serves your interests; provide you with information that is accurate, clear and not misleading; provide you with services that take account of your individual situation, and in particular of your demands and needs.
This brochure aims to help customers to gain a better understanding of their rights and the conduct of business rules that distributors must comply with when they provide insurance distribution services in respect of insurance products other than insurance-based investment products. It presents a concise and general summary of the main obligations of such distributors toward retail customers, pursuant to the Belgian legislation transposing the IDD directive. It is not a comprehensive presentation of the applicable legal framework. This brochure may under no circumstances whatsoever be regarded as a legal interpretation on the part of the FSMA. The FSMA does not provide any advice as regards subscribing to fi nancial products or using specific financial services. The FSMA cannot be held responsible for any deleterious consequences that may result from the purchase of products or the use of fi nancial services that are inappropriate. The FSMA seeks to ensure the quality of the information contained in this brochure but cannot guarantee that it is absolutely precise and up to date at all times. The FSMA is not responsible for any inconsistencies that may arise, notably, due to changes to legislation.
Legal responsibility for this publication J.-P. Servais, rue du Congrès/Congresstraat 12-14, 1000 Brussels
FSMA Financial Services and Markets Authority Rue du Congrès/Congresstraat 12-14 1000 Brussels Tel. +32 (0)2 220 52 11 www.fsma.be www.wikifi n.be
