Please clarify how the insurance undertakings shall apply in practice the provisions under CHAPTER II of the Commission Delegated Regulation (EU) 2017/2358 and in particular Articles 4, 5, 6 and 7 when dealing with tailor-made insurance policies.
Background of the questionCHAPTER II of the Commission Delegated Regulation (EU) 2017/2358 and in particular Articles 4, 5, 6 and 7.
From a customer perspective, it does not make any difference whether the insurance product is sold to one customer or a group of customers. In contrast hereto, it could be argued that the POG arrangements are disproportionate if applied for tailor made products, in particular with regard to the identification of the target market and the product testing, taking into account that the insurance product is designed for the specific demands and needs of an individual customer.
When manufacturing tailor made insurance products, manufacturers shall apply the POG requirements set out in Chapter II of the Commission Delegated Regulation (EU) 2017/2358 in cases they decide to distribute or manufacture such products for customers (i.e. more than one customer). In fact, Article 3 of the Commission Delegated Regulation (EU) 2017/2358 provides that personalisation of and adaptation of existing insurance products in the context of insurance distribution activities for individual customers, as well as the design of tailor-made contracts at the request of a single customer, shall not be considered as manufacturing and therefore, in such cases, there would be no requirement for the manufacturer to apply the provisions of Chapter II of the Delegated Regulation.
On the other hand, personalisation of and adaptation of existing insurance products for more than one customer or design of a new tailor-made product for more than one customer cannot be exempt from the scope of product oversight and governance rules.
As explained in recital 49 of the IDD in case of group insurance, ‘customer’ should mean the representative of a group of members who concludes an insurance contract on behalf of the group of members where the individual member cannot take an individual decision to join, such as a mandatory occupational pension arrangement. The representative of the group should, promptly after enrolment of the member in the group insurance, provide, where relevant, the insurance product information document and the distributor’s conduct of business information.