On 23 March IVASS published some clarifications to frequently asked questions regarding its Regulation No. 45/2020 on insurance products oversight and governance requirements and Measure No. 97/2020 providing amendments to some of its regulations in force, including IVASS Regulation No. 40/2018 on insurance and reinsurance distribution; such regulations will come into force on 31 March 2021. Moreover, on 19 March IVASS published a press release informing the market that the first visits by mystery shoppers - specialised operators who work "incognito" to verify in person the modalities through which insurance intermediaries sell insurance products - began in March.

On 23 March, IVASS, in the run-up to the entry into force of its Regulation No. 45/2020 on insurance products oversight and governance requirements (“POG”) and Measure No. 97/2020 mainly providing amendments to the current provisions governing the distribution of insurance products, published some clarifications on the application of some of the main provisions thereof, which will apply as from 31 March 2021.

With respect to IVASS Regulation No. 45/2020 on POG, the Italian insurance Regulator clarified that:

1. In the case of horizontal collaboration, the assessments carried out by the insurance companies related to POG procedures are performed in relation to the intermediary issuing the product (i.e. the intermediary who is entrusted with the distribution by the issuing company or with whom it has business relations) and also concern compliance by the proposing intermediary (i.e. the intermediary who comes into contact with the contracting party) with the obligations regarding the distribution of insurance products to the identified target market.
2. If an insurance intermediary and an insurance company both manufacture insurance products, such entities shall sign a written agreement specifying their cooperation in complying with the requirements on POG set out under Art. 25 of the IDD, the procedures by which they agree on the identification of the target market and their respective roles in the product approval process as provided under Art. 3 of Regulation (EU) 2017/2358. In addition, with regard to manufacturers, IVASS Regulation No. 45/2020 contains further provisions on manufacturing intermediaries.

As regards IVASS Measure No. 97/2020, IVASS provided clarifications with respect to the following:

• Insurance advice and assistance: the advisory activity of the insurance distributor is characterised by the issue of a personal recommendation to a customer. On the other hand, the activity of assistance that accompanies the conclusion or the execution of an insurance or reinsurance contract, which has been removed from the definition of insurance distribution, does not envisage the issue of a personalised recommendation to the client. Therefore, intermediation activities include those consisting in "proposing insurance contracts or performing other preparatory acts related to their conclusion, concluding such contracts or collaborating, particularly in the event of claims, in their management and execution...". The advisory activity is optional (i.e. upon request or at the initiative of the insurance distributor), save for the cases of mandatory advice, and consists in providing personalised recommendations to a client in relation to one or more insurance contracts.
• Insurance advice and assessment of customers’ demands and needs: the assessment of consistency with the demands and needs of the contracting party applies to all types of insurance contracts and regardless of the distribution modality, either with or without advice. The distributor shall refrain from selling insurance products that do not correspond to the customer's demands and needs or if it is unable to ensure that the product corresponds to the customer's demands and needs due to the refusal by the contracting party to provide the information requested, also in the event where the customer falls within the target market identified for the relevant insurance product. The advisory activity is characterised by a personalised recommendation containing the reasons why the distributor believes that the specific contract recommended is suitable to meet the demands and needs of the contracting party.
• Insurance advice and pension products: insurance intermediaries and insurance companies that distribute individual pension plans (PIP) and open-ended pension funds are not obliged to provide the mandatory advice provided for complex insurance-based investment products (“IBIPs”), as PIP and open-ended pension funds do not fall within the category of IBIPs.
• Recording of distance communications: the recording of telephone conversations or electronic communications made by distributors who promote the conclusion of insurance contracts by means of distance communication techniques should make it possible to identify any potentially relevant conduct and also facilitate a more effective exercise of supervisory action and therefore the obligation to record must be fulfilled with regard to the telephone conversation in its entirety and not only with regard to a part of it, even if conclusive.
• Distance selling: the provisions regarding the promotion and placement of insurance contracts by means of distance communication techniques apply when such activities are carried out entirely through such techniques. It follows that the applicability of these provisions is excluded in cases where the intermediary makes use of distance communication techniques only for one or more segments of the distribution activity. For the qualification of the distribution model, the circumstances related to the occasional use of distance communication techniques or to the existence of an organized system dedicated to this activity are irrelevant. Therefore, the provisions on distance promotion and placement of insurance contracts apply in the sole cases in which all the stages of the process are carried out at a distance, irrespective of the circumstance that these activities are carried out by a special organized structure appointed for this purpose.
• Inducements: intermediaries are required to provide information on all inducements received, except for residual cases, including those activities that are strictly instrumental to distribution and that cannot generate any type of conflict of interest. If, prior to the distribution of an IBIP, the inducement is not determinable, the intermediary is in any case obliged to provide the contracting party with a brief note indicating the existence of the inducement and the related calculation method (e.g. objectives and parameters that give rise to the recognition of the inducement). Subsequently, when the inducement has actually been received, the distributor provides the contracting party, at the earliest opportunity, with information on the amount of the inducement. Where the inducement is not immediately attributable to a single policy, the intermediary may provide an amount determined on the basis of reasonable and objective criteria.
• Information of branches of intermediaries in the RUI: IVASS Measure No. 97/2020 has eliminated the indication in the Register of Insurance Intermediaries kept by IVASS (RUI) of the branch of intermediaries which, consequently, are no longer required to communicate the latter to IVASS at the time of application for registration and in the event of subsequent changes. The RUI will only indicate the registered office of intermediaries.
• Collaborators of insurance intermediaries operating in Italy under freedom to provide services: the registration in the RUI of the collaborators of insurance intermediaries operating in Italy under freedom to provide services is no longer provided by the regulations with effect from 31 March 2021, since an insurance intermediary operating in Italy under freedom to provide services cannot have a permanent establishment in the Italian territory (i.e. a network of collaborators), this being a characteristic element of the different regime of freedom of establishment. In light of the above, in the absence of initiatives and communications from the intermediaries concerned on how such collaborations will be managed in the future (including the possibility of initiating a procedure for the opening of a branch in Italy and appointing a related manager) IVASS will cancel from the RUI collaborators of intermediaries operating in Italy under freedom to provide services registered in Section E of the same.
• Communication to insurance companies of horizontal collaboration agreements: with respect to the introduction of the obligation for insurance intermediaries to notify the principal insurance companies about the horizontal collaboration agreement signed between two intermediaries, IVASS clarified that such obligation also applies to brokers in relation to any collaboration relationships established with insurance companies, in order to ensure the fulfilment of the information obligations related to the fees received by all the intermediaries involved in the distribution of insurance products and to allow manufacturers to carry out adequate assessments on the distributors' compliance with the obligations related to POG, including when the distribution activity is carried out by virtue of horizontal collaboration agreements between intermediaries.

Mystery Shopping project

In addition to the above, on 19 March IVASS also published a press release stating that the first visits by mystery shoppers began in March. These are specialised operators who work "incognito" to ascertain in person the concrete modalities of selling insurance policies by insurance intermediaries.

The "incognito" visits, which at the moment are experimental, will concern not only agencies, banks and post office counters but also online sales: mystery shoppers will navigate on digital distribution platforms and brokers.

The mystery shopping project, which is being developed with the support of a consultant and EIOPA (the European Insurance Supervisory Authority) and financed by the European Union's Structural Reform Support Programme, aims to provide the Italian insurance Regulator with new tools and methodologies for the exercise of supervisory activity on the market conduct that insurance intermediaries hold vis-à-vis policyholders.

The launch of this project was already announced by IVASS in its annual report on the supervisory activity carried out in 2019, where it was indicated that the final methodology would be integrated among IVASS’ supervisory procedures and within the European work on the harmonisation of market conduct supervision practices which European insurance supervisory Authorities were developing under the guidance of EIOPA.

Next steps

For the overall effectiveness of the mystery shopping project it will be essential that, once fully operational, the use of mystery shopping is framed within a primary regulatory framework that allows its safe use for consumer protection. In assigning support to the project, the European Commission emphasised the responsibility of the competent Italian legislative bodies to which IVASS immediately provided the necessary availability and technical support.