The proposed regulation relates to the distribution of insurance products (and financial planning products) without an intermediary, primarily through the Internet. The proposed framework is based on disclosure to clients, and requirements are proposed with respect to the platform and the training and supervision of distributors. Through the platforms, distributing firms must inquire into their clients’ needs and if applicable, ensure the products they are offering are suitable. The AMF is of the view that comparison shopping sites that direct clients to other websites to enroll in an insurance contract must also be registered and comply with the draft regulation if they receive payment for products sold. Certain prescribed information would have to be included on the platform, and clients would need to be provided with specified summary information about the applicable product.
Overview of the Council’s Comments:
We expressed support for the proposed Draft Regulation as it relates to the regulation of insurance products (and financial planning products) distributed without an intermediary, primarily through the Internet. We believe building a suitability requirement into the Draft Regulation should be an important component of the proposed framework. The council believes the burden of proof for demonstrating suitability analysis and conflict assessments should fall on the manufacturer or consolidator of the product being sold. In terms of disclosure requirements, we agreed that certain prescribed information should be included on each distribution platform. In particular, clients should be provided with specified summary information about the applicable product being sold. More importantly, the council expressed that the focus should be given to how the process of optimization nudges a client through various steps on a platform – such optimization may come at a cost of unsuitable recommendations. In particular, consumers may not know that they are being “guided” by algorithms as they input information into an on line application form. We recommend that the regulators take a cautious and forward-looking approach to the implementation and future enforcement of the Draft Regulation. It is important to first collect and examine data that can be used in informing regulatory positions. The surplus of data that is readily available to regulators should allow for a thoughtful study of the disintermediated market and client interactions with distributors.