In early October, the EIOPA highlighted problematic consumer protection issues in the travel insurance market, which included the taking of disproportionately high commissions, as well as low claims ratios. As such, the EIOPA felt it necessary to remind the travel insurance industry that while travel insurance may be sold in the EU by unregistered ancillary insurance intermediaries (travel agencies, tour operators and platform operators), it is nevertheless still the duty of insurers to ensure that these policies being sold are in compliance with regulatory requirements, and that all entities are acting in the best interests of consumers.
The EIOPA found that business models were often not consistent with the fundamental principles laid down in the Directive 2016/97 of the European Parliament and found that there were issues with travel insurance products offering health coverage but excluding pre-existing conditions – for instance, where these are sold without performing any medical pre-screening, including self-assessment.
In response, the EIOPA has avowed to intensify its supervision of insurance and insurance intermediaries and in doing so will reinforce the following business requirements:
- The duty to act in the best interest of customers and to not pay or receive remuneration that conflicts with this duty.
- The requirement to not enter into arrangements by way of remuneration, sales targets or otherwise that could provide incentives for the recommendation of a particular insurance product to a customer.
- The obligation to maintain, operate and review an approval process for each insurance product, specifying an identified target market and assessing all relevant risks to that target market.
“Insurance undertakings and insurance intermediaries should assess their distribution agreements to ensure that they are able to act always honestly, fairly and professionally in accordance with the best interests of their customers,” wrote the EIOPA.
The EIOPA’s warning notes that where risks are identified and other supervisory measures are not successful, NCAs will exercise their powers to impose administrative sanctions and other measures, which include requiring the insurance distributor to cease and desist repetition of the conduct, or as a last resort, have the insurance or ancillary insurance intermediary withdrawn from the national register.
Read the EIOPA’s warning in full here.