The framework and the scope of the Regulation
The Regulation, which will come into force on 1 October 2018, is part of the previously started rationalization undertaken at European level with the Directive (EU) no. 2016/97 – Insurance Distribution Directive ("IDD"), introducing new provisions regarding insurance and reinsurance distribution and already transposed into Italian legal system by the Legislative Decree no. 68/2018, which updated the Italian Private Insurance Code.
Stimulated by the urgent demands of modernization determined, among the others, by the massive use of new communication technologies, the Regulation has acknowledged such needs (obviously taking into account the potential risks deriving from these new means of communication) by providing a coherent and unitary text, which can be summarized into a four-part division of macro-areas:
- access to intermediation and distribution activities;
- rules of conducts and pre-contractual information;
- promotion and placement of insurance contracts with distance marketing;
- professional training and updating.
The Regulation preliminary provides a list of definitions (Article 2) not appearing in the Italian Code (which must therefore be considered unless otherwise specified) and functional to the discipline contained in the Regulation itself. Among the most important ones: the "intermediario" definition (the intermediary) embraces insurance intermediaries, including ancillary insurance, and reinsurance intermediaries; the new definition of "aderente" (the contractor), represented by any person who decides to take advantage of the coverage of a joint insurance contract, expressing such will and bearing all or part, directly or indirectly, of the premium.
As specified in the accompanying Report to the Regulation, the scope of the application of the new regulatory framework, placing itself as a rational continuum with the Italian Code and with the clear intent to guarantee a uniform level of consumer protection regardless of the distribution channel, is no longer limited to intermediation activities in the strict sense, but has been extended to the broader concept of distribution activities. In this way, a wider control is provided with reference to the activities carried out by insurance and reinsurance companies and by their employees, by other market operators carrying out distribution activities on an ancillary basis with respect to the main activity, also on the direct assignment of one or more insurance companies, as well as by subjects who, through websites or other means, provide comparison services through which the customer is allowed to conclude, directly or indirectly, an insurance contract.
Access to intermediation and distribution activities
This is probably the macro-area, together with the one relating to the rules of conduct and pre-contractual information obligations, which has been most involved by Regulation and the one with the most relevant practical implications.
The main changes concerning the Italian Public Insurance Registry concern:
- the creation of a new section F (Article 4), established for intermediaries who, on behalf of one or more companies, distribute insurance products that are complementary to the product or service offered in the context of another main professional activity;
- the limitation of the obligation to register, among the operatives of the intermediaries registered in section E, exclusively to those who carry out distribution activities outside the premises of the latter (Article 4);
- the compulsory indication of the responsible for the insurance distribution activity of the intermediary;
- the report of any possible operations in other Member States (Articles 5-6);
- the obligation to provide a certified e-mail address for Italian companies and intermediaries to be enrolled in sections A, B, D and F, as well as to obtain a certified digital signature kit to be used in case of submission of official communications to the Italian Regulatory Authority (Articles 8-9).
Pertaining to the registration of individuals in sections A and B (Articles 10-12), a specific provision has been provided aimed at not hindering the regulator functions of the Authority: the individual should not have close links with natural or legal entities that may prevent the Regulatory Authority from exercising its supervisory powers. This provision was also included for legal entities/companies (Articles 13-16), which cannot even maintain holdings exceeding 10% of their capital if, also in this case, this corporate structure could hinder the control by the Authority.
Regarding section D (Articles 19-21), the credit institutions within the special list of the Italian Banking Code have been included as potential subjects to be registered. It is in any case required to:
- designate one or more managers of the distribution activity (chosen among individuals possessing requisites of honourability, proven competence and expertise in insurance, banking and financial matters), consistent with the size and complexity of the activity carried out;
- provide information of any "close link" and holdings of more than 10%.
As anticipated, a new section F (Articles 26-28) was set up for intermediaries who, on behalf of one or more companies, distribute insurance products that are complementary to the product or service offered in the context of another main professional activity. This section has similar aspects to the other ones, especially with reference to the requirements for registration (e.g., the honourability and expertise asked for members in sections C and E and the obligation to stipulate a professional liability insurance contract of sections A and B).
Subject to specific provisions are the annual requirements for intermediaries (Article 44) and the periodic checks by the Authority on the subjects who exercise the distribution activity (Article 45) and on the company's internal policies for the management and control of distribution (Article 46). A separate mention must be made for the reporting obligations of companies and intermediaries (article 43), according to which within 30 days (previously, the deadline was 20 days) such transmission must be sent concerning all communications regarding to:
- any change of the information provided during the registration step;
- appointments and terminations relating to the positions of responsible of the distribution activity, as well as, for the companies registered in section B, of legal representatives, chief executive officers and general managers;
- the interruption of the relationship maintained by the companies and intermediaries, respectively, with intermediaries registered in sections C or E.
Rules of conducts and of promotion and placement of insurance contracts with distance marketing
The other area most affected by the Regulation concerns the new discipline relating to "netiquette" in the exercise of distribution, which will be dealt with in this chapter – due to its close connection – together with the rules of promotion and placement of products with distance marketing.
The incompatibility regimes with other corporate officers (Article 53) and, in general, the rules of conduct (Article 54) and the enhanced criteria aimed at avoiding conflicts of interest to the detriment of contractors (Article 55) have fully implemented the canons of fairness, transparency and expertise, especially with reference to information and non-deceptive advertising obligations towards contractors, as well as the possibility for the latter to be able to use electronic means of payment of insurance premiums (including online payments) without any additional burden.
As for to the pre-contractual information, the obligation (limited to intermediaries only) has been maintained for the delivery of the "Disclosure Report on the obligations of conduct to which intermediaries are obliged towards the contractors" as per the new Annex 3 (which can now be available to the public on the premises of the intermediary also through technological equipment), of the "Information to be returned to the contractor before signing the proposal of the contract or before signing the contract itself, if no proposal is preventively submitted" as per the new Annex 4, now extended to all distributors, as well as for any the pre-contractual and contractual information documentation.
With particular reference to new Annex 4, the pre-contractual information indicated therein (integrated with the specific information on civil liability arising from the circulation of motor vehicles and vessels insurances and Payment Protection Insurance) must also include the compensation received in relation to the contract distributed, as well as – in case of collaborations with other intermediaries referred to in Section E – specify the remuneration received by both the proposer and the one with whom the member in Section E collaborates with (Article 57). By virtue of the "best interest" principle of contractors and policyholders, the consultancy phase of the distributor has been enhanced (the distributor is in any case free to provide it or not), that now consists in a personalized analysis of the contractor, with which the latter will be made aware of the reasons why the offered product is considered the one that best fits the needs of the contractor himself (this personalized recommendation, if offered, must be signed by the customer).
Specific obligations for the separation of assets have also been made explicit: intermediaries must pay the premiums collected on an account held by the company or by the intermediary as such (Article 63) or sign an appropriate bank guarantee (art. 64).
Lastly, after provisions relating to the methods of transmission of the documentation (Article 75), to the indication of the characteristics and requirements of the call-center used for the promotion and placement of products (Article 76) and of the websites and social networks, with the specification that the distributors who carry out their activity through the web must also be the owners of the related internet domain (Articles 77-79), the Regulation has strengthened the requirements for unsolicited commercial communications, monitoring the methods of prior consent acquisition and the cases in which the distributor can send such communications even without the consent itself (Articles 82-83).
The Regulation will have a significant impact on the industry companies, which are supposed to adapt their distribution models in due time to respect compliance with the new rules, within October 1 2018.