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Polish FSA issues statement on improper practices in insurance distribution

12/10/2021

In response to irregularities in the application of the Polish Act on Insurance Distribution (implementing an EU Directive) uncovered during audits, the Polish Financial Supervision Authority (PFSA) issued a statement on 1 October 2021, which outlines recommendations in response to crucial distribution issues. The Statement is addressed to insurance undertakings and insurance intermediaries (i.e. insurance agents and brokers) and calls upon them to take adequate steps to eliminate the identified irregularities. Below, we present a summary of the PFSA’s recommendations in each category. Customer’s demands and needs test Proactivity and due diligence The PFSA highlighted that customer’s demands and needs test plays a vital role in consumer protection since it prevents the mis-selling of insurance products. Therefore, an insurance distributor must be proactive and obtain all necessary information from the customer. The test should not be limited solely to obtaining a confirmation that the customer wants to buy a certain type of insurance. While performing the test, the distributor should pay special attention to the types of risks that a customer wants to insure and verify them against exclusions and limitations of insurance cover in proposed insurance products. Documentation and archiving Even though, the form of the customer’s demands and needs test is up to distributors, the PFSA stated that the test must be properly documented (e.g. for the purpose of customer disputes, supervision or control). The documentation should cover questions asked of the customer, the customer’s answers to these questions, proof that the consumer’s demands and needs test was performed and proof that the customer ...

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