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Next level of detail on the Insurance Distribution Directive (IDD)

Next level of detail on the IDD

On 4 July, EIOPA published its consultation paper on possible delegated acts in the areas outlined below. The consultation closes on 3 October, with EIOPA planning to submit its final advice to the Commission by 1 February 2018.


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The IDD entered into force on 23 February 2016, with transposition of its requirements by 23 February 2018. In common with other recent directives, there are a number of articles where further delegated acts are required to support some of the detail. The Commission requested EIOPA’s technical advice in these areas, which cover:

  • product oversight and governance
  • conflicts of interest
  • inducements
  • assessment of suitability and appropriateness and reporting.

In the interests of cross-sectoral consistency, EIOPA was asked to deliver consistency as far as possible with products falling under MiFID II, where there is no fundamental differences between the wording used in the two directives.

On 4 July, EIOPA published its consultation paper on possible delegated acts in the above areas. The consultation closes on 3 October, with EIOPA planning to submit its final advice to the Commission by 1 February 2018.

Product oversight and governance

The proposals build on the preparatory guidelines already published by EIOPA in relation to product oversight and governance in March, although these are expanded to cover the situation where intermediaries are actively involved in the design and development of insurance products, so should be viewed as acting as a manufacturer.

Conflicts of interest

EIOPA previously provided advice to the Commission in this area in January 2015 as part of the proposed amendments to the Insurance Mediation Directive that would have been necessary had MiFID II’s implementation not been deferred. This advice forms the basis of the current proposals, although some changes have been made to take account of amendments to the MiFID II level 2 requirements in which this advice was based. The focus remains on identification of conflicts of interest and maintaining a conflicts of interest policy.


The IDD does not define inducements and EIOPA has interpreted this as excluding internal payments. A high level principle seeks to establish when an inducement could have the potential to result in consumer detriment, but does not ban inducements. Inducement schemes would require senior management approval and must be documented.

Assessment of suitability and appropriateness

This relates only to the provision of personal recommendations regarding insurance-based investment products. Advice can be provided during the life of the customer relationship and not just at the point of sale. The EIOPA advice does not extend to an assessment of the ‘demands and needs’ test and restricts the suitability and appropriateness requirements to elements such as the customer’s investment objectives, risk tolerance, financial position and investment knowledge.


Reporting requirements relate to the assessment of suitability and appropriateness and must be in the format agreed with the customer. The suitability statement must cover both an outline of the advice given and why the recommendation is suitable for the customer. An annual statement of transactions must be provided to the customer unless this is made available online.

This consultation paper does not however provide any further detail on the pre-sales product information document (PID), which contrasts starkly with the voluminous requirements for the Key Information Document (KID).

Implications for firms

The proposals do not add a lot of colour to existing material that applies during the period to implementation of the IDD. As both IMD and IDD are a minimum harmonisation directives, it is no surprise that some member states already have requirements that align well with these proposals. However, where insurers and intermediaries have yet to comply with the preparatory guidelines they will need to consider what enhancements are needed to their current processes.

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