On Jul. 5, 2024, LTH CB published the finalized guidelines for the distribution of investment life insurance products, following consultation beginning in February 2023.
The guidelines aim to improve protection of consumer interests and unify the practice of distributing such products, as well as providing more clarity to insurance firms.
Highlight examples of best practice and cases of inappropriate activity where there is the greatest risk that consumer may be sold a product that does not meet their needs.
Prior to concluding an insurance contract, distributor must accurately determine needs of the user, provide objective information about product in an understandable form.
The guidelines are intended to address issues in the market and aid consumers.
LTH CB will keep the guidelines under review, and update and supplement their content when issues require attention, or when there is change in law or practice.
To allow firms to make changes, guidelines come in force one year after publication.
Document dated Jul. 5, 2024, received from LTH CB Jul. 9, summarized on Jul. 10.
In Aug. 2024, LTH CB analyzed whether advertising misleads customers, see #224604.
Consultation launched after mystery shopper survey found products often offered to consumers without considering their needs, with limited information sought/offered.
Seeks public views on proposals to reduce inappropriate sales, improve distribution, methods, ensure pre-contractual information disclosure, protect consumer rights.
Proposes to amend Insurance Law, so that insurers cannot pay commission for the distribution of IGD contracts, in line with principles in force in 10 other EU countries.
Aims to make product suitability assessment mandatory when selling life insurance.
LTH CB will also develop product sales guidelines to help market participants identify consumer needs, product suitability, making pre-sale information disclosures.
Survey Findings
Found significant shortcomings in distribution of investment life insurance products.
70% of sales are by insurance agents driven by commission fees/main income source.
Can create conflict of interest, with 40% of mystery shoppers offered products that did not meet their needs, and customer assessment information not always requested.
Effectiveness
Responses are invited until Mar. 27, 2023.
Oct. 2023 Regulatory Proposals
On Oct. 2, 2023, LTH CB said, following consultation, proposals submitted to prevent improper sales of unit-linked life insurance and protect consumers from being misled.
Proposed amendments to insurance law aimed at ensuring that residents, who choose investment life insurance, purchase an investment product that meets their needs.
Amendments relate to the remuneration of the distributor, payment, IGD contracts.
Stricter requirements for qualification of distributors of IGD products and, in order to provide participants with more clarity on how to properly comply with requirements of legislation, intends to develop guidelines on distribution of IGD products.
They will cover the assessment of consumer needs, the assessment of the suitability and acceptability of the product and the disclosure of pre-contractual information.
Jul. 2024 Finalized Guidance Issued
On Jul. 5, 2024, LTH CB published the finalized guidelines for the distribution of investment life insurance products, following consultation beginning in February 2023.
The guidelines aim to improve protection of consumer interests and unify the practice of distributing such products, as well as providing more clarity to insurance firms.
Highlight examples of best practice and cases of inappropriate activity where there is the greatest risk that consumer may be sold a product that does not meet their needs.
Prior to concluding an insurance contract, distributor must accurately determine needs of the user, provide objective information about product in an understandable form.
The guidelines are intended to address issues in the market and aid consumers.
LTH CB will keep the guidelines under review, and update and supplement their content when issues require attention, or when there is change in law or practice.
To allow firms to make changes, guidelines come in force one year after publication.
Document dated Jul. 5, 2024, received from LTH CB Jul. 9, summarized on Jul. 10.
In Aug. 2024, LTH CB analyzed whether advertising misleads customers, see #224604.
