The European Union (the ”EU”) packaged retail and insurance-based investment products (PRIIPs) Regulation (the ”PRIIPs Regulation”) is applicable throughout the EU from 1 January 2018.
The main requirement of the PRIIPs Regulation is the provision of a Key Information Document (the ”KID”) to EU retail investors investing in PRIIPs. The KID, which must be provided prior to the conclusion of the contract, must be in a prescribed format and include certain information, such as the name of the product, the identity of the producer, the types of investors for whom it is intended, the risk and reward profile of the product (which includes a summary risk indicator, the possible maximum loss of invested capital and appropriate performance scenarios of the product), the costs investors have to bear when investing in the product and information about how and to whom an investor can make a complaint in case there is a problem with the product or the person producing, advising on or selling the product.
In light of the above, all insurers selling PRIIPs (for example, unit-linked products) will have to comply with the obligation to draft and provide the KID from 1 January.
As regards non-life insurance products, the Insurance Distribution Directive (the ”IDD”) sets out the obligation for non-life insurance products distributors to provide potential policyholders with a simple, standardized insurance product information document (the ”IPID”) which aims to provide clearer information on the product so that the consumer can make a more informed decision.
On 20 December 2017, the European Commission proposed to push back the application date of the IDD by seven months to 1 October 2018 (although EU Member States are still required to transpose IDD into national law by the original date, 23 February 2018). In order to align the application dates, the Commission is also preparing to postpone the application of two Delegated Regulations adopted under the IDD.
In light of the above, the obligation to provide the IPID will only have to be complied with by non-life insurance companies once the IDD and its Delegated Regulations are applicable (1 October 2018).
Therefore, although we understand that the aim searched with the obligation to provide the KID and the IPID is the same (to increase the consumers’ protection by giving them more detailed information prior to the conclusion of the insurance contract so that they can make a more informed decision), the reality is that the obligation to provide the KID is already applicable and the obligation to provide the IPID is not. Thus, the consumers of PRIIPs are currently more protected than the consumers of non-life insurance contracts.
In any case, this possible lack of equilibrium between the consumers of these two types of products (which mainly obeys to the fact that the PRIIPs Regulation derives from MiFID II, which implementation has been faster than that of the IDD) will be corrected once the IDD is applicable.