The Polish Financial Supervision Authority (KNF) has adopted new recommendations on insurance distribution. The changes will be significant for insurance companies, agents, brokers and businesses that offer policies as an add-on to other services. The new rules are intended to limit the sale of products that do not match customers’ needs or provide them with little real value.
The most important change concerns the approach to the sales process itself. Insurers will no longer be able to treat distribution solely as a sales channel. They will be required to exercise more effective control over whether a product genuinely meets a customer’s needs, whether the customer has received complete information on the scope of cover, exclusions and costs, and whether intermediaries act in line with the insurer’s requirements.
Greater insurer responsibility for agents
The KNF points out that insurance companies often have insufficient insight into how agents actually sell their products. The new recommendations are intended to change this. Insurers will be required to monitor the quality of distribution more closely, assess agents’ conduct and respond to irregularities.
In practice, this means stronger oversight of sales networks. Where an agent offers products improperly, the insurer should take corrective action and, if such measures prove ineffective, impose sanctions.
An end to products that offer little value to customers
One of the key elements of the new recommendations is the requirement for insurance products to provide appropriate value to customers. The KNF notes that the market has included products that formally offered insurance protection but, in practice, delivered limited value to policyholders.
The new approach is designed to curb the sale of policies in which a substantial share of the premium is absorbed by costs, commissions or margins, while only a small part translates into actual insurance protection. For certain products, the KNF refers to a minimum loss ratio of 30%, meaning the relationship between benefits and claims paid out and the premium collected.
More thorough assessment of customer needs
The way insurers and intermediaries assess customers’ demands and needs is also set to change. Both insurers and distributors will have to place greater emphasis on whether the proposed policy genuinely fits the customer’s circumstances.
This is particularly important for products sold on a mass scale, online, by telephone or as an add-on to loans, leasing agreements, electronics purchases or other services. Customers should receive a product that meets their needs, rather than simply one that is easiest to sell.
More information about policy limitations
The KNF also highlights the problem of customers receiving incomplete information about risks, limitations and exclusions of liability. The new recommendations are intended to make the sales process more transparent.
For customers, this means that before buying insurance they should receive clearer information about when a policy will apply, when a benefit will not be paid and what the most important limitations of cover are.
Changes will also cover group insurance
The recommendations apply not only to individual insurance policies, but also to enrolment in group insurance schemes. This is particularly relevant to products offered to employees, bank customers, lessees and people using services provided by various intermediaries.
The new rules will apply to contracts concluded after the recommendations have been implemented, as well as to new enrolments in group insurance agreements.
When will the changes take effect?
Insurance companies have until 1 July 2027 to bring their operations into line with the new recommendations. One exception concerns a recommendation related to the savings component of a product, for which the implementation deadline has been extended to 1 July 2028.
Until then, the KNF’s existing 2014 guidelines will remain in force.
The Polish Financial Supervision Authority is the central public administration body responsible for supervising Poland’s financial market. The KNF oversees, among others, the banking, insurance, pension, capital market and payment institution sectors, with the aim of ensuring market stability, security and transparency.
Source: CEO.com.pl
