EIOPA - Proposal for a Report on Good Supervisory Practices regarding knowledge and ability requirements for distributors of insurance products

In 2013 EIOPA published - Proposal for a Report on Good Supervisory Practices regarding knowledge and ability requirements for distributors of insurance products

EIOPA vision of good supervisory practice for a competent authority is to provide that distributors of insurance products have appropriate knowledge and ability in what concerns the applicable legal aspects, in particular the insurance contract, relevant regulatory and supervisory standards, consumer protection requirements, underlying tax regime, conflicts of interests, mitigation rules and personal data protection regulation.

Distributors of insurance products have to demonstrate ethical and professional conduct at all times and communicate effectively to the customer: general and particular terms and conditions of the contract, complaints-handling procedures, risks and rewards of a strategy or product, by using clear and comprehensible language. They have to provide suitable and/or personalised recommendations, for example, concerning the beneficiary of the insurance contract, selection of appropriate insurance products depending on their main features and adapt the recommendation to the evolving situation and needs of the consumer.

EIOPA considers that an external body can be used to assess whether a distributor possesses knowledge and ability which fulfils relevant legal and regulatory requirements. Some supervisory authorities permit an insurance company or insurance intermediary which has full responsibility for a natural or legal person conducting insurance mediation, to conduct oversight of that person’s knowledge and ability.

EIOPA considers that supervision of a competent authority must provide performance by distributors of insurance product of a professional training that relates to professional and ethical skills. It is suggested that training should be conducted periodically (for example, at a period of 3 to 5 years). Each authority is to encourage CPD beyond minimum standards and expectations (minimum 30 hours of study within a period of 3 years or an equivalent on an annual basis).
The competent authority or professional body should review the certification of professional training, on a regular basis. Existing reporting mechanisms should be utilised to make the process more efficient and to prevent unnecessary burden for distributors and competent authorities.

In EIOPA’s vision appropriate supervision of the training activity must exist. An external body can be used to assess whether a distributor maintains its knowledge and skills through professional training fulfilling in the same time relevant regulatory and legal requirements. However, the use of appropriate tools, such as attendance records, could be implemented to help attesting appropriate training certification.

Competent authorities will apply sanctions, such as a fine or ultimately, removal from the register, if distributors of insurance products fail to comply with the requirement to possess and maintain appropriate knowledge and ability and will ensure that distributors are aware of the importance of keeping a high level of professional knowledge and of the necessity to update it. 

For more information visit: http://www.asfromania.ro/international/reglementari-europene/ghiduri-eiopa