What is the general principle of the DDA?

In order to strengthen consumer protection in their relationships with insurance companiesthe European Insurance Distribution Department requires a number of pre -contractual information rules, governance of insurance products or even management of interest conflicts.

What are the 5 pillars of the DDA?

The new DDA requirements are revolving around 5 major themes.

Professional capacity

Article 10 of the DDA emphasizes the honorability and competence of the management structure of the insurance company, but also employees who directly contribute to the distribution of products. Moreover, the latter must now follow 145 hours of compulsory training per year.

Finally, a professional capacity policy must be written, with the appointment of an internal manager.

The duty of advice

Detailed in articles 20 and 30, the duty of advice implies the obligation to collect the needs and requirements of each client, in order to provide them with a coherent solution. A second level of advice must also be created, called personalized recommendation service. It consists in comparing several products (or several options of the same product).

Information and transparency

Obligations related to information and transparency are abundantly described in articles 17, 18, 19, 20 and 29. They include:

  • The delivery of a standard information document to each customer for non-life products. For life insurance contracts, a specific document is also provided.
  • Customer information about the remuneration received by the insurance company for the distribution of the product.
  • The revelation of any conflict of interest situation to the customer.
  • The initial, then annual information, of the customer concerning the costs, costs and impact of the product on investment performance (only for savings products).

Remuneration and conflicts of interest

Articles 17 and 29 impose a Risk assessment linked to remuneration patterns. Indeed, the latter must not encourage to distribute specific products, nor degrade the quality of the service provided to the customer. A procedure for prevention, detection and management of interest conflicts must also be implemented for savings products.

Governance and surveillance of products

According to article 25, insurance distributors are obliged to write a product governance and product monitoring policy.

Thus, for each of them, the target market and the distribution strategy must be clearly defined. In addition, insurance products must be permanently monitored, with the aim of estimating whether they are always adapted to the needs of target customers and the market situation.

As for new products, they are now subject to a specific validation process. The same goes for changes in existing products, if they are significant.

What are the constraints of the DDA for the CIO?

With its new requirements, the European insurance distribution directive has multiple impacts on the life cycle of insurance products, but also on their distribution methods. As for computer tools and information systems, they are not spared either: the Dsi must therefore take into account the regulatory constraints imposed by the DDA.

The formalization of information documents

To strengthen the duty of information and advice, the information made available to customers must now adopt a standardized formatboth simple and understandable. Thus, insurance companies must be able to prove that they have correctly advised each client, by advocating the most suitable contract and by presenting them exhaustive information.

This measure concerns not only information documents on the insurance product (DIPA), but also pre -contractual/CRM/OAV documents and annual communications, which must be adapted accordingly. THE DSI tools are therefore directly impacted by these information and advice requirements.

Compulsory training

To guarantee a high level of competence and real professionalism, insurance distributors are now subject to 15 hours of compulsory training and professional development per year. But this obligation is accompanied by a duty of follow -up and reporting of these training systems, in which the Direction of Information Systems is necessarily involved.

Product monitoring and control

The CIO has a key role to play in the Implementation of the policy of monitoring and governance of insurance products imposed by the DDA. The latter aims to check the adequacy between products, the target market and customer needs, and this regularly.

Transparency of remuneration

The European Insurance Distribution Directive requires Review of compensation agreements and protocols, as well as the creation of a rising risk map linked to remuneration paid to insurance distributors. Here again, the information systems department is directly involved in the implementation of these new procedures.