Information note on non-life insurance products: over-simplification?

Article published in Italian on Insurance Daily on July 12, 2016 N. 966

Insurance Update

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The consultation period on Document no. 10/2016 (the Document) ended on June 20. IVASS (the Italian Insurance Supervisory Authority) had opened a public consultation on the amendments to Regulation no. 35/2010 on the information and publicity obligations related to insurance products (the Regulation).

On the same lines as Regulation EU no. 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurance-based investment products (which shall enter into force by the end of this year), the Document aims at streamlining and reducing the number of key information pieces indicated in the information note of non-life insurance products, whose number of pages varies from three to five (as in the case, for example, of third-party liability car insurance containing optional coverages in addition to the mandatory ones).

The reduced number of pages in an information note testifies to a progressive process of equalization of pre-contractual information relative to non-life and life insurance products with financial content. In fact, pursuant to the aforementioned Regulation EU no. 1286/2014, the pre-contractual information note of life insurance products with a financial content shall be indicated in a document – so-called KID – of three pages at the most.

On the other hand, the Document introduces several important novelties, all of these aimed at reducing the number of documents given to the prospective contracting party in the pre-contractual phase and streamlining the information indicated therein.

First of all the information package shall contain only three documents: the information note, the insurance conditions (including the glossary) and the proposal form, if applicable.

However, if the contracting party is a legal person and the contract has been specifically negotiated (so-called tailor-made policy), or if the insurance policy covers major risks or in case of a collective policy covering agricultural risks (pursuant to Legislative Decree 102/2004), the pre-contractual documents to be given to the prospective contracting party shall consist only of the general insurance conditions, including the glossary and the proposal form, if any.

The undertakings may in any case prepare a personalized summary sheet for submission to the prospective contracting party before underwriting the contract, summing up the main conditions of the contract (Article 33 (5) of the Document).

It should also be noted that the Document also provides for utmost simplification of the information in the Information Notes.

The future Information Note shall contain several questions and answers, provided by the undertaking, on key contract information.

This includes a brief description of the insurance conditions of the policy, information on the undertaking and period of validity of the policy, including a description of the withdrawal and contract termination rights, a brief section dedicated to the premium payment and reimbursement methods, followed by information on the risks covered and not covered by the policy. The last three sections instead shall be dedicated to the possibility of activating policy options (as in the case of premium reductions and/or payment of additional premiums), and to the instructions to be followed in case of a claim and to submit a complaint.

Moreover, references to policy conditions or regulatory provisions shall not be allowed.

Certainly this is a significant step forward from a pre-contractual standpoint, if one considers that, pursuant to the Regulation, the summary sheet alone comprised five pages, and the information note contained six to seven pages. A few information notes available on the market reproduced almost entirely the content of the policy, thus producing an effect contrary to the intended one (i.e., easy identification of key contract information).

However, one may wonder if the simplification process briefly described above really achieves its purpose and if, through the Document, the occasion has been grasped to really equalize all the sector players.

On the first point, it seems fair to conclude that there has been a shift from a complex (and in many instances useless) stratification of information to a summary list that will certainly allow an easier and more effective comparison of homogeneous products.

In respect of non-homogeneous products, the conciseness of the information required may work to the disadvantage of the specificity of the insurance contract content (consider for example the tax regime applicable to the policy).

On the other hand, in this phase, evident differences remain between national and Community players.

Pursuant to Article 33 of the Document, the undertakings may submit the pre-contractual documents on paper and electronically (subject to the proponent’s consent). In this latter instance, documents may be submitted by email, indicating the exact location on the undertaking’s website where the documents can be found, with the obligation to keep these documents accessible on the website throughout the period of time in which the contracting party may reasonably need to consult them and, in any case, until expiry of the two-year period from occurrence of the event on which the right of the insured is based.

This certainly is quite a burdensome duty, which however supposedly does not apply to Community undertakings, keeping into account that present Article 3 (2) of the Regulation (which the Document does not change) provides for the Community undertakings not to be subject to the obligation to publish the documents on their websites.