What could constitute a “significant adaptation of an existing product”?
The answer to this question is provided by the European Commission.
Article 25(1) of the Directive 2016/97/EU (Insurance Distribution Directive – IDD) provides that “insurance undertakings, as well as intermediaries which manufacture any insurance product for sale to customers” have to apply a process for “for the approval of each insurance product, or significant adaptations of an existing insurance product [...]”. This means that manufacturers have to comply with the product governance requirements not only when they launch a newly developed insurance product but also when they significantly adapt one of their existing insurance products (see also Article 4(1) of the Delegated Regulation (EU) 2017/2358). An adaptation of an existing insurance product may concern essential features of the product, such as the risk coverage, the price and costs of the insurance product, the risks resulting from the underlying investments of an insurance-based investment product, a change to the target market identified by the insurance manufacturer, and possible compensation and guarantee rights for the benefit of the customers. Whether the adaptation is “significant” has to be primarily assessed from the perspective of the average customer. An important criterion consists in the question whether the adaptation of the insurance product changes the compatibility of the product with regard to the target market and requires an adaptation of the target market. For example, the adaptation of the price and cost structure to inflation may be considered insignificant, whereas a price/cost increase which substantially impacts the return of an insurance-based investment product should be considered significant as this increase changes the return expectations of the insurance-based investment product.
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.