On 9 February 2021, Legislative Decree No. 187 of 30 December 2020 (the "Decree") entered into force. The Decree, adopted to integrate the provisions implementing Directive (EU) 2016/97 (the "IDD"), introduces a number of amendments to the Private Insurance Code (the "Code"), with specific regard to the distribution of insurance products.
1. New definition of (re)insurance distribution activities
Among the main changes introduced by the Decree there is, under Article 106 of the Code, a new definition of insurance and reinsurance distribution activities.
The new definition, compared to the previous version, expressly states that the advice activity, which falls within the group of activities constituting insurance distribution, concerns advice as defined in Article 1 paragraph 1, letter m-ter) of the Code, i.e., "the activity consisting in providing personalised recommendations to a customer, at the customer's request or at the distributor's initiative, in relation to one or more insurance contracts".
The new version of Article 6 also includes in paragraph 2 a specific definition of reinsurance distribution activities, as a distinct one from insurance distribution, which lacked in the original one.
2. Training duties of ancillary insurance intermediaries
Through the amendment of Article 109-bis, the revised Code provides for the extension to ancillary intermediaries of the professional training obligations (which will however be defined by a forthcoming IVASS decree).
The regime provided for in Article 119, paragraph 3 of the Code is also extended to ancillary intermediaries: they therefore become liable for the intermediation activity carried out by the subjects assigned to it, such as their employees, collaborators and other appointees engaged in insurance distribution and registered in section E of the Italian Register of Intermediaries.
3. Remunerations
The Decree also amends Article 119-bis, paragraph 1 of the Code. The previous language reads as follows "shall not receive remuneration and shall not offer remuneration to their employees and shall not evaluate their services in a manner contrary to their duty to act in the best interests of the contracting parties as provided for in paragraph 1". The new version, perhaps in order to avoid possible uncertainties, no longer includes the expression "and shall not value their services".
4. Good reputation requirements
The Decree also provides that the natural person responsible for insurance distribution for an intermediary registered under letter D of the Consolidated Register of Intermediaries "Registro Unico Intermediari" must meet the requirements of professionalism and honorableness identified by IVASS regulation.
5. Cross-selling
Furthermore, the new wording of the Code requires distributors engaged in the cross selling of insurance products to always provide an adequate description of the different components, regardless of whether the policyholder decides to purchase the components of the package offered separately.
This is in contrast with the previous version, which required a description of the characteristics of the various components only if the components of the package offered to the customer were purchased separately.
A further important novelty in the area of cross-selling is the possibility for IVASS to apply the cautionary and interdictory measures set out in Article 120-quinques paragraph 5 of the Code regardless of whether the ancillary element relates to insurance or to the service or product other than insurance. IVASS intervention is therefore permitted even where the main product is a non-insurance product (or service) (and the policy is ancillary to such product).
6. Advertising material and IVASS powers
Paragraph 3 of Article 182 of the Code, which provided for the possibility for IVASS to request, albeit not systematically, the transmission of advertising material used by undertakings and intermediaries, is then abrogated.
7. Obligations of companies during the execution of contracts
The new Article 183 of the Code (as amended by the Decree) provides that the obligations of conduct incumbent on companies (i.e., the duty to behave with diligence, fairness and transparency; the obligation to identify and avoid conflicts of interest; and to implement independent, sound and prudent financial management) also apply to the phase of offering contracts (in addition to the phase of executing them).
8. Alternative dispute resolution procedures
The Decree also introduces a link between the dispute resolution system provided for by the Code (the so-called insurance arbitrator) and the mediation and assisted negotiation procedures.
In particular, such so-called alternative dispute resolution systems will be considered as mutually alternative.
9. Sanctions
Lastly, several amendments are made to the provisions on administrative pecuniary sanctions. In particular, the sanctions set out in Articles 324 and 324-bis of the Code are extended to conduct relating to the stage of manufacturing of the insurance product.
By amending Article 324-quinquies, it is specified that there is a repetition of the breach when "within five years following the commission of an administrative breach, ascertained by an enforcement measure, the same person commits another breach of the same nature".
Finally, it is clarified, in Article 325-bis of the Code, that in the event that the turnover (on the basis of which the penalty is calculated) cannot be determined, the applicable penalty is between a minimum of € 5,000.00 and a maximum of € 5 million.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
