In a letter published on 17 December 2013, IVASS draws to the attention of insurers and intermediaries active in the payment protection insurance (PPI) market the obligation to assess the suitability of insurance products.
According to EIOPA - the European Insurance and Occupational Pensions Authority - a PPI is an insurance product designed to provide coverage for the consumer of a financial obligation (generally mortgage or consumer loan repayment) in case they are unable to fulfil a payment. The risks covered by PPI generally include accident, sickness and unemployment, and for certain products often life; however, it is worth noting that mortgages are sometimes sold together with insurance covering damage to the property as well.
IVASS recently carried out inspections at banks and financial intermediaries and found that, when selling a PPI product in connection with mortgages and personal loans, often suitability assessments were not conducted against borrowers and consumers.
In light of this, IVASS has clarified that the suitability assessment should be carried out even when the PPI product is structured as a group policy taken out by banks and financial intermediaries, as lenders, on behalf of their borrowers. This is in line with the advice Norton Rose Fulbright has consistently given in this regard.
IVASS requested that insurers remind firms in their distribution network of the requirement to conduct a suitability assessment and monitor compliance.
This follows an opinion issued by EIOPA to national competent authorities on 28 June 2013 which recommended an exploration of national markets for PPI.
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