With two measures introduced in August 2020, IVASS (the Italian insurance regulator) has approved changes and certain rules – effective as of 31 March 2021 – to various IVASS regulations concerning distribution and product oversight and governance (POG) for insurers and distributors. This article highlights the main changes.

Insurance Distribution Directive

Through Measure 97 of 4 August 2020, IVASS approved changes – effective as of 31 March 2021 – to:

  • IVASS Regulation 23 of 9 May 2008 on the transparency of premiums and conditions of compulsory insurance for motor vehicles and watercraft;
  • IVASS Regulation 24 of 18 May 2008 on complaint handling by insurers and intermediaries;
  • IVASS Regulation 38 of 3 July 2018 on corporate governance of domestic insurers;
  • IVASS Regulation 40 of 2 August 2018 on insurance and reinsurance distribution; and
  • IVASS Regulation 41 of 2 August 2018 on transparency, advertising and pre-contract information duties.

Compulsory motor insurance

Insurers that have their registered office in another EEA member state and pursue business in Italy under the freedom of establishment or freedom to provide services regime must:

  • indicate in the quote given to consumers whether they are a member of the direct compensation system (the so-called 'CARD system'); and
  • clarify that in the event that they are not a member of the system, the insured will be unable to seek indemnification from its insurer but will have to seek indemnification from the injured party's insurer.

Complaints

The obligation (which, at present, applies only to domestic and third-country insurers) to publish on their website a report on complaint-handling activities has been extended to EU undertakings that pursue business in Italy under the freedom of establishment or freedom to provide services regime. The obligation applies if the number of complaints exceeds 20 per year.

In addition, intermediaries registered under Section D of the Register of Insurance Intermediaries (RUI) (ie, banks) must notify the complaints received to the insurers for which they work in order to allow a more accurate and effective monitoring of such distribution channel.

Governance

Domestic insurers' compliance divisions have been entrusted with the specific role of checking compliance with the rules in the matter of POG (ie, POG of insurance products).

Distribution

The changes that have been introduced with regard to distribution aim to:

  • rationalise and simplify market players' obligations;
  • strengthen consumer protection; and
  • set out new rules of conduct for the distribution of insurance-based investment products (IBIPs).

Horizontal partnerships

Collaboration contracts between intermediaries registered in Sections A, B, D of the RUI must be properly drafted (reviewed) in order to ensure that:

  • adequate information is provided to insureds regarding costs and charges relating to the distribution activity; and
  • POG rules are duly complied with.

In the latter respect, intermediaries must notify the insurers for which they work regarding collaboration agreements with other intermediaries.

Pre-contractual information

Taking into account the need for simplification and rationalisation expressed by the market, as well as the approach to pre-contractual information adopted by bank distribution – where most of the pre-contractual information is provided at the beginning of the relationship when signing the framework consulting contract – Article 56 of IVASS Regulation 40/2018 has been amended to distinguish between:

  • information of a 'static' nature, which does not change due to the conclusion of several insurance contracts with the same policyholder; and
  • information of a 'dynamic' nature, which varies for each individual contract.

As a result of this, the amount of information to be rendered for each contract has been significantly reduced. With regard to disclosure regarding remuneration, in the case of horizontal collaborations or with intermediaries registered in Section E of the RUI, the information is on the whole relative to the compensation received by the intermediaries involved in the distribution of the insurance product.

Assessment of policyholders' requests and needs

In order to strengthen client protection, an appropriate statement must be delivered to the insured in which the distributor certifies that the insurance product meets the insured's insurance needs.

Combined sales

Article 59-bis has been inserted, which identifies the additional information that must be provided in the sale of insurance products combined with an ancillary product or service other than insurance. The information concerns the appropriate description of the different components of the agreement or of the package and separate evidence of the costs and charges of each component, as well as how its composition changes risks or insurance cover.

Document storage

Distributors must keep documents relating to their distribution activity for the entire duration of the insurance relationship or until the longer term provided for by law and, in all events, for at least five years after the cessation of the relationship. Distributors must also keep documents relating to the product and the product approval process received by insurers and manufacturers de facto.

Training and professional updating

The reform of training and professional provisions aims to:

  • encourage a rise in the professional standards of insurance intermediaries; and
  • promote the harmonisation of the regulation of professional requirements in the insurance and financial sectors, while at the same time initiating a process of rationalisation and simplification of the training costs.

Telephone recordings (Article 83)

In case of distance selling, distributors must provide information in relation to the recording of conversations or telephone communications leading to the conclusion of insurance contracts. In the case of IBIPs, communications are also recorded which do not give rise to conclusion of the contract in accordance with CONSOB (the Italian Companies and Exchange Commission) regulations.

Rules of conduct for distribution of insurance investment products

New provisions regarding pre-contractual information, incentives and assessment of adequacy and appropriateness have been introduced.

Transparency and information duties

The provisions regarding annual statements of accounts, which apply at present to unit-linked contracts, have been extended to all IBIPs. Specific information regarding the cumulative effect of costs on the profitability of the product will be included.

Product oversight and governance

Through IVASS Measure 45 of 4 August 2020, IVASS approved certain rules – effective as of 31 March 2021 – aimed at completing the regulatory framework on POG for insurers and distributors. In line with the primary legal framework, IVASS's new measure:

  • regulates the approval process of insurance products, identifying precise obligations on the producers which will identify with a sufficient degree of detail the target market of an insurance product and the categories of subjects to which the product may not be distributed, taking appropriate measures to ensure that the product is distributed to the identified reference market; and
  • provides for specific provisions regarding the approval and distribution processes of the product concerning insurance investment products.

The measure will apply (at least in part) to foreign insurers and distributors.

In the particular, the measure:

  • identifies the roles and responsibilities of the corporate bodies involved in the approval and distribution process of insurance products;
  • identifies the rules and elements to be taken into account regarding the identification of the target market and the negative target market;
  • defines the information flows between insurers and distributors;
  • regulates the distribution mechanisms of insurance products; and
  • prescribes specific control obligations on the part of the unit or structure responsible for insurance distribution for distributors of insurance products registered in Sections A, B and F of the RUI and regulates free collaboration relations between intermediaries involved in the distribution of insurance products in order to ensure full compliance with the obligations set out by the measure.