Product governance and surveillance policy: a risk-based approach to insurance distribution
With the entry into force of the Insurance Distribution Directive (DDA), the obligation arose to put in place a written policy on governance and product oversight. This implementation gives rise to certain questions.
The Insurance Distribution Directive (DDA) entered into force in October 2018. One of the structuring obligations is to put in place a written policy relating to product governance and oversight. This issue is part of a trend towards the institutionalization of risk management systems, in line with European directives based on self-monitoring such as Solvency 2. The purpose of this article is to present certain key questions associated with variation of such a policy.
1. Regulatory context: towards the institutionalization of distribution risk management
Directive (EU) 2016/97 (DDA) dated November 24, 2015 is transposed into French law by decree n ° 2018-421 of June 1, 2018 and ordinance n ° 2018-361 of May 16, 2018. It is reflected in the obligation to put in place a governance and product monitoring policy provided for in the provisions of Article L. 516-1 and L. 516-2 of the Insurance Code and of Article L.116-6 of the Mutuality code.
The governance and product surveillance policy is defined as a means available to governance in order to define all the guiding principles concerning the control of the distribution of insurance products. The objective of such a written policy is to encourage insurers, mutual societies, provident institutions and bank-insurers to structure the design, distribution and management of their insurance products, in a context of diversification of distribution methods. insurance in Europe. This directive is part of a major trend in Europe consisting on the one hand in regulating the insurance activity and on the other hand in integrating a vision of compliance in insurance based on a risk-based approach, like other recent regulations (anti-money laundering directive, solvency directive, law on the prevention of corruption). This directive is also part of the normative trend formalizing compliance orders expected from insurers, risk carriers, in terms of customer protection. Insurers are therefore expected to be able to demonstrate the establishment of an arbitration system (prioritization) and concrete implementation of the various obligations of the directive (Cappelletti, Dufour, 2017) on their distribution risks as well as '' more formalization in terms of strategic and operational decisions on the marketing of ranges and guarantees in insurance as well as on the chosen distribution method.
We also note the stake of this policy of governance and monitoring of products (POG) through an ability that the insurer must demonstrate to set risk limits and to monitor compliance with said limits via various risk indicators and controls, steering and monitoring tables, dedicated committees. The product governance and surveillance policy is in a way a risk management policy (Dufour, 2016).
The implementation of such a policy implies considering various organizational issues and capitalizing on what exists within insurance organizations: what comitology should be put in place? What interactions between this new policy and the existing written policies (such as the underwriting policy, the risk management policy, the internal control policy, etc.).
2. The product governance and oversight policy: role and usefulness
The product governance and surveillance policy must lead the insurer to take better account of the risks that it may pose to its policyholders in the event of poor product design (risk of opportunity: an insurance product never meets its target market [1] and either does not sell to the right target or simply does not sell). Another example, in the context of poorly managed or poorly monitored marketing of a new offer, different types of risks may be encountered: error in pricing, parameterization of guarantees, under-pricing of an offer, inadequate reinsurance, insufficiently clear contractual information, moral hazard in the revision of an offer that does not make it possible to curb a drift in claims, incentive mechanism in the commercial remuneration on a product inducing a possible conflict of interest between the sale of insurance product and the interest of the insured, deterioration of technical margins
إرسال تعليق