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On October 9, 2019, the European Insurance and Occupational Pensions Authority (EIOPA) issued a warning to all European Union (EU) insurers and insurance intermediaries regarding problematic consumer protection issues in the travel insurance market. A review of these entities identified several issues, such as the taking of disproportionately high commissions and low claims ratios. Additionally, EIOPA reminded the industry that while travel insurance may be sold in the EU by unregistered ancillary insurance intermediaries such as travel agencies, tour operators, and platform operators, the insurers are still responsible for ensuring compliance with regulatory requirements and that these entities are acting in the best interest of the consumers. EIOPA indicated that these business models are not consistent with the fundamental principles set out in the Directive 2016/97 of the European Parliament.

Based upon this review, EIOPA has signaled that it will intensify its supervision of insurers and insurance intermediaries. This scrutiny will focus on the following business requirements:

  • The duty to act in the best interest of customers and to not pay or receive remuneration that conflicts with this duty;
  • The requirement to not enter into arrangements by way of remuneration, sales targets or otherwise that could provide incentives for the recommendation of a particular insurance product to a customer; and
  • The obligation to maintain, operate and review an approval process for each insurance product, specifying an identified target market and assessing all relevant risks to that target market.

This warning should be a reminder to all insurers and insurance intermediaries to periodically review their products for compliance.