Overview and Purpose of
Market Regulation ICPs
© 2014 National Association of Insurance Commissioners
OUTLINE
 Insurance Core Principles &
Consumer protection
 ICP 19
 Supervision of conduct of business
 ICP 9
 Work in progress:
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Supervisory approaches to conduct
of business
IAIS SAPR on conduct of business
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INSURANCE CORE PRINCIPLES
Preconditions to supervising fair treatment of
customers in several ICPs, including:
 ICP 7 Corporate Governance: “The supervisor
requires insurers to establish and implement a
corporate governance framework which provides
for sound and prudent management and
oversight of the insurer’s business and
adequately recognises and protects the interests
of policyholders.”
 Standard 7.9: “The Board shall ensure that
Senior Management…promotes a culture of
sound risk management, compliance and fair
treatment of customers.”
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ICP 19 CONDUCT OF BUSINESS
“The supervisor sets requirements for the
conduct of insurance to ensure that
customers are treated fairly, both before a
contract is entered into and through to the
point at which all obligations under a
contract have been satisfied.”
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ICP 19 CONDUCT OF BUSINESS
 Applies to insurers, and for the most part
also to intermediaries
 Requirements are outcome-focused
and includes:
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Fair treatment of customers
Pre-sale processes
Policy servicing
Claims handling
Complaints handling
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ICP 19 CONDUCT OF BUSINESS
Benefits of good conduct requirements:
 Trust and confidence in insurance sector
 Reduction in risk of insurers following business
models that pose a risk
 A level playing field regarding acceptable
business practices
Context - there are differences in:
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Traditions, culture, legal regime, development
of market
Customers and products
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FAIR TREATMENT OF CUSTOMERS
 19.1 Insurers and intermediaries should
act with due skill, care and diligence
 19.2 Insurers and intermediaries should
embed policies & procedures on fair
treatment in their business culture
 Fair treatment can be achieved through
a variety of approaches
 Fair treatment should be embedded in
the culture
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FAIR TREATMENT OF CUSTOMERS
Some factors to consider:
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Board and senior management responsibility
Strategy
Decision making
Internal controls (including reports and indicators
on fair treatment)
Performance management
Remuneration
Policies and procedures
Supervisory guidelines
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PRE-SALE PROCESSES
 19.3 Insurers should take into account the
interests of different types of customer in
developing and marketing products
 Product approval or principles-based approach?
 19.4 Insurers and intermediaries to promote
products/services in a manner that is clear,
fair and not misleading
 Information should be easily understood, not
hide important statements
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PRE-SALE PROCESSES
Disclosure:
 19.5 Supervisor sets requirements on timing,
delivery and content of information
 Customers need appropriate information before
and at point of sale
 Information should be easily understood – focus
on quality, not quantity
 Level of information required will vary, but should
include key product features
 Customers’ rights and obligations
 Policyholder protections schemes (if applicable)
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PRE-SALE PROCESSES
Advice:
 19.6 Where advice is given, this should be
appropriate taking into account the customer’s
disclosed circumstances

Need for advice may depend on type of product
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Basis of recommendations should be explained
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Insurers responsible for their agents
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Training programs will help staff maintain knowledge
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PRE-SALE PROCESSES
Conflicts:
 19.7 Where advice is given, any potential
conflicts of interest should be properly
managed
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Conflicts arise where competing personal &
professional interest exist
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Intermediaries more likely to encounter conflicts

Policies and procedures to manage
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Disclosure
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Decline to act if conflict cannot be managed
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POLICY SERVICING
 19.8 Insurers should
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Service policies until all obligations have
been satisfied
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Disclose to customer any contractual changes
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Disclose further relevant information, depending
on type of product
 Relevant information could relate to:
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The insurer
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Terms and conditions
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Ongoing information, where relevant (e.g. longterm, investment-related insurance)
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CLAIMS
 19.9 Insurers should have policies and
process to handle claims in a timely and
fair manner
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Policies and procedures
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Disclosure on how to claim, timeframes
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Information on claim status
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Claims disputes - staff should be appropriately
qualified, policies should promote independence
and objectivity
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COMPLAINTS
 19.10 Insurers and intermediaries should
have policies and processes in place to
handle complaints in a timely and fair manner
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Complaints a key indicator of conduct
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Policies and procedures
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Independent resolution mechanisms where
complaints are not resolved by the
insurer/intermediary
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PRIVACY PROTECTION
 19.11 Legislation identifies provisions under
which personal information is collected and
communicated to third parties
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Confidential information should be
legally protected
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Customers should be informed on what
information might be disclosed and to whom
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PRIVACY PROTECTION
 19.12 Insurers and intermediaries should have
policies and procedures for the protection of
private information
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Board and senior management ultimate
responsibility should be part of culture
and strategy
Policies and procedures
Training of employees
Appropriate IT & controls
Outsourcing risks
Assess risks of breaches
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DISCLOSURE BY SUPERVISOR
 19.13 The supervisor discloses information that
supports the fair treatment of customers
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Policyholder protection arrangements
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How local legislation applies to cross-border sales
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Warning notices
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Information that promotes consumers’
understanding of insurance contracts
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OUTLINE
 Insurance Core Principles &
Consumer protection
 ICP 19
 Supervision of conduct of business
 ICP 9
 Work in progress:


Supervisory approaches to conduct
of business
IAIS SAPR on conduct of business
19
ICP 9 SUPERVISORY REVIEW & REPORTING
“The supervisor takes a risk-based approach to
supervision that uses both off-site monitoring
and on-site inspections to examine the
business of each insurer, evaluate its condition,
risk profile and conduct, the quality and
effectiveness of its corporate governance and
its compliance with relevant legislation and
supervisory requirements. The supervisor
obtains the necessary information to conduct
effective supervision of insurers and evaluate
the insurance market.”
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ICP 9 SUPERVISORY REVIEW & REPORTING
 Results of previous conduct assessments
feed into the supervisory plan
 Off-site monitoring - conduct of business risks
one of the relevant risks to be analysed
 On-site inspection - full scale inspection
would include assessment of fair treatment,
including observance of COB requirements
and consumer regulation
 Where prudential and conduct supervision
carried out separately need cooperation both should have a full understanding of
the risks
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ICP 9 SUPERVISORY REVIEW & REPORTING
Guidance includes some examples of how of
fair treatment can be assessed in the
supervisory process:
 Assess the culture in relation to
customer treatment
 Check adequacy, appropriateness, timeliness of
information given to customers
 Review claims handling
 Review frequency/nature of complaints,
disputes, litigation
 Review any customer satisfaction measures
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SUPERVISORY APPROACHES TO
CONDUCT OF BUSINESS
Application Paper on approaches to supervision
of conduct of business
 Under development - due for adoption in
October 2014
 Currently out for consultation - comments due
8 August
The paper will:
 Look at approaches and tools that achieve
supervisory objectives that support
 ICP 19
 ICP 9 (regarding conduct supervision)
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IAIS SAPR ON CONDUCT OF BUSINESS
IAIS Self-Assessment and Peer Reviews
 Purpose - to contribute to enhanced observance of
IAIS Insurance Core Principles and Standards through:
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Developing assessment mechanisms and
questionnaires on a thematic basis
Reporting the outcome of the reviews - help
participating members identify potential areas of
improvement; and help improve standards or
identify gaps
 Questionnaire to launch during the summer of 2014
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QUESTIONS AND COMMENTS
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