Article 15 of the Delegated Regulation (EU) 2017/2359 requires that the customer’s knowledge and experience of a product must be assessed before a distributor can provide a product in accordance with Article 30(2) IDD. How is it expected that their knowledge and experience is assessed? Furthermore, how should be understood the phrase “experience in the investment field relevant to the specific type of product or service” of Article 30(1) IDD?
The answer to this question is provided by the European Commission.
Article 30(2) of the Directive 2016/97/EU (Insurance Distribution Directive - IDD) deals with assessment of appropriateness which has to be applied in cases where the customer has, in accordance with the applicable national law, waived the right to obtain full advice. In such cases, an insurance intermediary or insurance undertaking asks the customer or potential customer to provide information regarding his or her knowledge and experience in the investment field relevant to the specific type of product or service offered or demanded to enable the insurance intermediary or the insurance undertaking to assess whether the insurance service or product envisaged is appropriate for the customer. Article 15 of the Delegated Regulation (EU) 2017/2359 (DA 2017/2359) requires that “insurance intermediaries or insurance undertakings shall determine whether the customer has the necessary knowledge and experience in order to understand the risks involved in relation to the service or product proposed or demanded“.
Article 17 DA 2017/2359 provides a list of the information to be obtained by insurance intermediaries and insurance undertakings in order to be able to assess the customer's or potential customer's knowledge and experience in the relevant investment field following the requirement of Article 15 DA 2017/2359 and Article 30(1) and (2) IDD.
(a) the types of service, transaction, insurance-based investment product or financial instrument with which the customer or potential customer is familiar; (b) the nature, number, value and frequency of the customer's or potential customer's transactions in insurance-based investment products or financial instruments and the period over which they have been carried out;
(c) the level of education, and profession or relevant former profession of the customer or potential customer. The IDD or DA 2017/2359 does not contain comprehensive rules on how this information has to be collected or assessed. It is left to insurance intermediaries and insurance undertakings to organise the process of assessment in a way that allows it to determine with reasonable certainty that the product envisaged is appropriate for the customer.
The phrase “experience in the investment field relevant to the specific type of product or service” in Article 30(1) and (2) IDD should be understood as first person effects or influence gained through involvement in or exposure to the investment field relevant to the specific type of product or service. It follows that the relevant experience does not necessarily have to be acquired in transactions with the specific type of product or service, as long as the customer has knowledge and experience with the broader “investment field” to which the product belongs.
The disclaimer provided by the European Commission:
The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.