Insurer’s Duty to Obtain Information under the IDD Directive – Threat or Opportunity?

Abstract

Enacting Directive 2016/97, on insurance distribution (the IDD), has, inter alia, extended the scope of application of regulation, increased the requirements for expertise of the personnel of insurers and insurance intermediaries, and particularised the content of the duty to give information. One of the novelties in the IDD, with regard to the insurer’s duty to provide information, is the duty of the insurer to obtain information from the customer for enabling fulfilment of its own duty to give information. Before the IDD, the balance between the insurer’s duty to give information and the customer’s duty to become acquainted with the information received was customarily understood in many legal systems such that the insurer is obligated to supply comprehensive information on its insurance products in an understandable form while the customer bears the risk of selecting correct and sufficient insurance in reliance on the information received. In other words, the insurer is liable in respect of the information as such, but the customers accept a risk of applying the information incorrectly in their specific circumstances. This background gives rise to the following questions, examined in the article: 1) What is the legislative background of the new duty to obtain information, and what are the objectives behind it? 2) What are the consequences of neglecting this duty? 3) What is the ‘upside risk’ of the reform? That is, in what kinds of cases could the new duty improve matters? 4) What is the ‘downside risk’? In other words, might the new duty cause any problems? The article provides analysis focused on the IDD itself rather than on any national jurisdiction in which the directive has been implemented.