The level of granularity of the target market and the criteria used to define the target market and determine the appropriate distribution strategy should be relevant for the product and should make it possible to assess which customers fall within the target market in light of their needs, characteristics and objectives. 

Insurance products are quite heterogeneous and their complexity varies. Some insurance products are mandatory for consumers and product differentiation can be limited. This is, for example, the case with motor liability insurance products. Some insurance products are complex such as many insurance-based investment products (IBIPs). All products differ and, therefore, the granularity of the target markets can differ depending on the complexity and nature of the product and the risk of consumer detriment. 

There may be product limitations which are simple to understand, but would mean that the target market assessment would need to be more granular in detail. Even with compulsory motor liability insurance products, for example, not all customers would need ‘fully comprehensive’ coverage extension, meaning that a ‘fully comprehensive’ product extension may not be compatible for all customers. Therefore, specification of the target market should be more meaningful than simply describing it as ‘mass market’ suitable for any type of customer. 

Based on experience in some Member States EIOPA can provide the following guidance. N.B. This guidance is purely illustrative. Each insurance product and its identified target market should be assessed on its own. The description of the target market cannot correspond fully with the insurance coverage. The description of the target market could include the level of the target market’s knowledge and understanding of the complexity of the product and the objectives, demands and needs of the customers belonging to the target market. For example, the description of the target market for a travel insurance product which covers for personal injury should describe customers that do not have a supplementary healthcare insurance or other insurance with the same coverage. 

In particular for IBIPs, the description of the target market could include the age (category) of the customers belonging to target market, the personal household and dependents situation of the customers belonging to the target market, the occupational situation and the relevant occupational pension and insurance scheme of the customers belonging the target market, the level of risk tolerance of the customers belonging the target market, the financial situation of the customers belonging the target market, the financial and non-financial objectives and investment horizon of the customers belonging to the target market. Further criteria to define the target market may also include the payout characteristics of the IBIP (e.g. life long payments, lump sum or insurance coverage for surviving spouse in case of death), the tax deductability for premiums, the need for capital guarantees, natural premiums depending on age, and a possible cut-off coverage at a certain age.