Insurance Supervisory Law and Consumer Protection

Johannes Gutenberg University, Mainz, Germany



This chapter discusses the relationship between insurance supervisory law and consumer protection within the ambit of Solvency II and the EIOPA system. To this, the article focuses on existing laws, with particular regard given to European rules on insurance supervision. The Solvency II Directive takes as its exclusive objective the protection of insureds and insurance beneficiaries. Solvency II does not address consumer protection. Nevertheless, consumer protection is a significant by-product of the Solvency II rules, in the sense of collective consumer protection. The EIOPA Regulation provisions, too, address consumer protection solely in the realm of collective consumer protection. The applicable profile is that of the mature and discerning consumer. The consumer protection guidelines of EIOPA on handling of complaints have no legal basis in the EIOPA Regulation.

First published as “Versicherungsaufsichtsrecht und Verbraucherschutz im Solvency-II- und EIOPA-System” [in English: The Insurance Supervisory Regime and Consumer Protection in the Solvency II and EIOPA System], VersR (2013), 401 ff.

3.1 Introduction

The concept of consumer protection in insurance immediately brings to mind insurance contract law. But the subject matter of insurance contract law is not consumer protection but solely protection of the policy holder.1 At the same time, consumer protection constitutes one of the main subjects of legal policy and thus encompasses the insurance supervisory regime. In fact, under art. 1, para. 6, subpara. 1 sent. 2 f of the EIOPA Regulation,2 one of the objectives of EIOPA, the European insurance supervisory authority, is “enhancing customer protection.”

Against this background, the first issue to be addressed concerns what existing legal provisions on the subject consumer protection the EIOPA Regulation and the Solvency II Framework Directive contain,3 taking note of their equally ranked and successive regulatory levels. Attention must also be given to the provisions appearing in the government’s draft of the new VAG [German Insurance Supervision Act]4 (3.2, below). It is upon this basis then that the role of consumer protection in the supervision of insurance undertakings must be determined. Particular attention in the following remarks will then be directed to the supervision objective (3.3.1, below) and consequences relating to the insurance supervisory regime’s existing prohibition on optimization (, below), to the indirect consumer protection function of insurance supervisory regime (, below), to EIOPA activities in the set of consumer and policy holder protections in the form of guidelines on complaints-handling (, below), and to collecting consumer trends (, below). Above all and finally, some questions on the future relationship of consumer protection and the insurance supervisory regime will be addressed (, below).

3.2 Consumer Protection Provisions of the New Insurance Supervisory Regime

3.2.1 The EIOPA Regulation

The EIOPA Regulation forms the foundation of the relationship between the insurance supervisory regime and consumer protection. Under art. 1, para. 6, subpara. 1, sent. 2 f. of the EIOPA Regulation, “the Authority” expressly “contributes to enhancing customer protection.” This contribution, although the last-named of six areas of “contributing”, is incorporated into the objective of art. 1, para. 6, subpara. 1, sent. 1 of the EIOPA Regulation. Under this provision, “The objective of the Authority shall be to protect the public interest by contributing to the short, medium and long-term stability and effectiveness of the financial system, for the Union economy, its citizens and businesses.”5

The objective of “enhancing customer protection” will be achieved only if EIOPA in addition receives concrete tasks and powers. These are to be found in art. 8, para. 2 i and art. 9 of the EIOPA Regulation. First of all, in art. 8, para. 1 j, the EIOPA Regulation directs that the Authority shall “fulfil any other specific tasks set out in this Regulation… .” Thus, this mandate includes the “Tasks related to consumer protection and financial activities,” as set forth in the heading of art. 9. Paragraph 1 of Article 9 addresses consumer protection6 as does all of art. 9, contrary to its somewhat unclear heading. The introduction of Paragraph 1 states:

The Authority shall take a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market.

Four such tasks are then enumerated by way of example, viz.: collecting, analyzing, and reporting on consumer trends; mediating financial literacy and education initiatives7; developing training standards; and contributing to the development of the common disclosure rules. Thus, the transparency mentioned at the outset of the Article is of prime importance within these tasks. In view of the tasks and powers delegated to the EIOPA in the area of consumer protection, one may see at once that the issues concern only collective consumer protection and do not (also) touch individual consumer protection matters.

EIOPA powers arise both from special provisions and also generally from art. 8, para. 2 of the EIOPA Regulation. Article 8 states that “the Authority shall have the powers set out in this Regulation… .” Letter i of this paragraph names particularly the power to “develop common methodologies for assessing the effect of product characteristics and distribution processes on the financial position of institutions and on consumer protection… .” This power is fleshed out in art. 32, para. 2, sent. 2 c of the EIOPA Regulation. Under this provision,

the Authority shall develop for application by the competent authorities: “…(c) common methodologies for assessing the effect of particular products or distribution processes on an institution’s financial position and on policyholders, pension scheme members, beneficiaries, and customer information.”

Further, art. 9 of the EIOPA Regulation assigns the Authority special powers pertaining to consumer protection. Among these are the very far-reaching powers under para. 3 to issue “warnings in the event that a financial activity poses a serious threat to the objectives laid down… .” Moreover, under para. 5, the EIOPA can go so far as to “temporarily prohibit or restrict certain financial activities… .” Of course, narrow and specifically defined conditions must be met for the application of these powers.8

In addition, art. 37, para. 2, sent. 1 of the EIOPA Regulation addresses consumer organizations. The Insurance and Reinsurance Stakeholder Group is to include “consumers” “in balanced proportions” to the other groups included.9 And finally, consumer protection under the EIOPA Regulation is also significant in connection with a Member State’s recourse to the safeguard clause of art. 38 of the EIOPA Regulation to fend off a perceived interference in its fiscal responsibilities. Art. 38, para. 5 of the EIOPA Regulation bars Member States from “abuse” of the safeguard clause, “in particular in relation to a decision by the Authority which does not have a significant or material fiscal impact… .” Particulars substantiating this provision are set forth in Recital 50, sent. 4 of the EIOPA Regulation. As examples of such EIOPA decisions, the Recital adduces—in somewhat awkward language—such impacts “as a reduction of income linked to the temporary prohibition of specific activities or products for consumer protection purposes.” The EIOPA possesses the prohibitory power implicit in this provision under the already noted art. 9, para. 5 of the EIOPA Regulation pertaining to consumer protection.

Based on art. 9, para. 4 of the EIOPA Regulation, the EIOPA ultimately considers itself warranted in setting up a Committee on Consumer Protection and Financial Innovation (CCPFI). This Committee has the special characteristic that it also comprises national authorities that do not belong to the EIOPA as national insurance supervisory authorities but that do, however, fulfill certain functions in the area of supervising insurance mediation.10 This Committee is to contribute to the work of the EIOPA in the areas of consumer protection and financial innovation. A part of this contribution is to be the presentation of draft technical standards, policies, and advice. Despite the absence of pertinent legislation, the CCPFI members remarkably have awarded themselves extensive tasks and powers with the express objective “to complement the provisions in the EIOPA Regulation”.11

3.2.2 The Solvency II Directive

The Solvency II Directive contains the phrase “consumer protection” only in Recital 79, where it is stated: “In an internal market for insurance, consumers have a wider and more varied choice of contracts.” In order for consumers to benefit from that diversity and the results of competition,

consumers should be provided with whatever information is necessary before the conclusion of the contract and throughout the term of the contract to enable them to choose the contract best suited to their needs.

The Solvency II Directive, however, sets forth its fundamental objectives without any reference to consumer protection. Recital 16 and arts. 27 and 28 of the Solvency II Directive identify the protection of policy holders and beneficiaries of indemnity payments as the main objective. Of lesser importance are financial stability and fair and stable markets, which are of equal weight.12 As may be seen also in Recital 17, the Solvency II Directive rules on solvency are not directed so much toward consumers as toward policy holders.13 In those places where the Directive does distinguish among persons, the distinctions are nevertheless not oriented toward the concept of the consumer. For example, the duty to inform set forth in the non-life insurance provisions of art. 183, para. 2 of the Solvency II Directive applies only when the policy holder is a “natural person.” A further example is seen in art. 186, para. 2 b of the Solvency II Directive, which allows Member States to omit a cancellation provision,

where, because of the status of the policy holder or the circumstances in which the contract is concluded, the policy holder does not need special protection.

3.2.3 The Draft Regulation on Key Information Documents and the Draft Directive on Insurance Mediation

In like manner, the new plans under European law to introduce a regulation on “information documents for investment products” are divorced from any concept relating to consumers.14 Under art. 2 (a), the regulation shall apply also to the marketing of certain insurance products. The key information document, however, is not intended especially for consumers; rather, under art. 4 (c) of the proposed regulation, it targets “retail investors.” These are defined as “retail clients” within the meaning of the Markets in Financial Instruments Directive (MIFID, hereafter: MIFID Directive), i.e., as non-professional clients, and as “customers” within the meaning of the Directive on Insurance Mediation. The proposal for a new directive on insurance mediation is also tied in with the concept of the “customer.”15

3.2.4 The Second and Third Regulatory Levels of the Solvency II System

The draft of an implementing regulation [DVO]16 for the second regulatory level of the Solvency II Directive does not contain any provisions on consumer protection.

For Level 3, the CEIOPS Consultation Paper, Draft Proposal for Level 3 Guidelines on the System of Governance, of December 2010,17 mentions consumer protection law in refs. 3.46 and 3.48 in relation to the inquiry into repute and integrity within the meaning of art. 42, para. 1 b of the Solvency II Directive. This mention occurs in the explanations to Guideline 13. Under this authority, breaches of consumer protection law would be taken into consideration in the inquiry into repute and integrity.18

3.2.5 The VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act]

The VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act] addresses consumer protection only to note that earlier VAG [German Insurance Supervision Act] rules, such as secs. 10,10 a, 157, para. 1, sent. 2 of the superseded version, are now “obsolete” due to enhancements of insurance contract law, in particular with regard to consumer information.19 In addition, sec. 319, para 2, sent. 2 of the VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act] denotes representatives of consumer organizations as persons who should be a part of the Insurance Advisory Council to be assembled by the BaFin [Federal Financial Supervisory Authority]. Likewise, the primary provision on legislative intent, found in sec. 1, para. 1 of the VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act] relates not to consumers but generally to the “protection of insureds.”

At the same time, secs. 1 and 292 of the VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act] propose to continue the undefined general supervision according to the principles of abusiveness, a practice that contravenes European law and German constitutional law, this despite the fact that the Solvency II Directive expressly allows only supervision of legality.20 As pertaining to the present subject matter under investigation, this result follows from other rules, which have not been considered in relation to the only legal supervision that will be permissible in the future. Initially, this applies in the case of art. 181, para. 1, subpara. 2, sent. 1 of the Solvency II Directive to review by supervisory authorities of general policy conditions in the area of life insurance. Under this provision,

Member States may require non-systematic notification of those policy conditions and other documents only for the purpose of verifying compliance with national provisions concerning insurance contracts.

Further support for the proposition that only legal supervision is possible may be found in art. 182, para. 2, sent. 1 of the Solvency II Directive. That provision concerns life insurance and allows the Member State of origin to

require systematic communication of the technical bases used in particular for calculating scales of premiums technical provisions.

This passage provides, however, that this requirement may be imposed

for the sole purpose of verifying compliance with national provisions concerning actuarial principles.

Previously there has existed within the environment of supervision according to the principles of abusiveness a prohibition on limited coverage insurance,21 a prohibition that lacked a basis in law. This prohibition will not survive.

3.2.6 The BaFin [Federal Financial Supervisory Authority]

The consumer protection rules of the EIOPA Regulation also have an influence on the national insurance supervisory regime,22 although in fact consumer protection has not thus far been mentioned in the legal bases of BaFin [Federal Financial Supervisory Authority] activity. Nevertheless, according to the BaFin [Federal Financial Supervisory Authority], the general clause on supervision in the VAG [German Insurance Supervision Act] should encompass the objective of consumer protection.23 And in line with this view, the Gesetz zur Stärkung der deutschen Finanzaufsicht [Act to Strengthen German Financial Supervision] has created a new Consumer Advisory Council at BaFin [Federal Financial Supervisory Authority].24 In fact, the policy argument is being made that consumer protection should be fixed as a proprietary supervisory objective for the BaFin [Federal Financial Supervisory Authority].25 Apart from the development of legal bases, the national insurance supervisory authorities are also compelled to attend to consumer protection issues if the EIOPA produces applicable guidelines and advice.

3.3 The Role of Consumer Protection in the Supervision of Insurance Undertakings

3.3.1 The Objective of Supervision

As has been seen in the systematic collection of references concerning consumer protection law in the future European insurance supervisory regime,26 consumer protection has no role to play in supervision of insurance undertakings under the Solvency II Directive. A different situation obtains in reference to the EIOPA Regulation. Herein there appears to be a conflict between the European insurance supervision regime and European law as it relates to insurance supervisory authorities. In point of fact, however, this is not the case.

The determinative factors demonstrating the absence of a conflict are the objectives of the two legal acts and their rules on tasks and powers. It has been noted above that the main objective of the Solvency II Directive is the protection of insureds and of beneficiaries of indemnification payments, without regard to whether they are consumers. The subsidiary objectives of financial stability and of fair and stable markets do not touch upon consumer protection in any case. This is so because the concept of fairness, which also appears in the EIOPA Regulation, is not peculiarly the province of consumer issues.

These objectives of the Solvency II Directive do not alter any aspect of the EIOPA Regulation. To the contrary, art. 1, para. 6, subpara. 1, sent. 2 of the EIOPA Regulation denotes the prime objective of the Authority to be “contributing to the short, medium, and long-term stability and effectiveness of the financial system” in the “public interest.” This comports with the subsidiary objective of the Solvency II Directive. And the EIOPA’s “task” under art. 8, para. 1 h of the EIOPA Regulation to foster “the protection of policyholders, pension scheme members, and beneficiaries” corresponds precisely with the main objective of the Solvency II Directive.

Under art. 1, para. 6, subpara. 1, sent. 2 f of the EIOPA Regulation, the Authority shall contribute to “enhancing consumer protection.” To the extent the Authority does so, such action nevertheless does not affect the objectives of the Solvency II Directive and the role of the EIOPA in the application of this Directive. This conclusion follows i. a. directly from the fact that according to art. 1, para. 6, subpara. 1, sent. 2 of the EIOPA Regulation the Authority shall ensure the purposes within the meaning of art. 1, para. 6, subpara. 1, sent. 2 a through f of the EIOPA Regulation, by way of “efficient and effective application of the acts referred to in paragraph 2.” There are 19 legal acts in the paragraph referred to here. Along with the Solvency II Directive itself, these include not only the 13 acts repealed since 1 Nov. 2012 by art. 310 of the Solvency II Directive, but also, e.g., the Directive on Insurance Mediation, 2002/92/EC. According to Recital 8 of this Directive “the coordination of national provisions on professional requirements” for insurance brokers is meant to contribute “both to the completion of the single market for financial services and to the enhancement of customer protection in this field.” In line with this objective, the consumer frequently appears as the addressee of regulations in this Directive.27 Against this background, it becomes clear that the consumer protection functions of the EIOPA under art. 1, para. 6, subpara. 1, sent. 2 f. art. 8, para. 2 i, and art. 9 of the EIOPA Regulation do not pertain to the responsibility of the EIOPA in connection with applying the Solvency II Directive. Rather, these functions relate solely to legal acts directed toward consumer protection.

This result is seen also when the adoption of the EIOPA Regulation on the one hand and the Solvency II Directive on the other are examined with a view to areas of responsibility. The legal basis of Solvency II Directive is the regulation of the free movement of services, formerly art. 47, paras. 2 and 55 of the EGV [Treaty on the European Community]. By contrast, the EIOPA Regulation is based on art. 114 of the Treaty on the Functioning of the European Union (TFEU), the rule governing competence for provisions “which have as their object the establishment and functioning of the internal market.” Consumer protection is not addressed in this rule, but in art 169, para. 1 of the TFEU. The relevant means are mentioned in art. 169, para. 2 of the TFEU, including measures adopted pursuant to art. 114 of the TFEU. Thus, the EIOPA Regulation comes full circle. To the extent the Regulation pursues consumer protection concerns, measures pursuant to art. 169, para. 2 a of the TFEU are involved. In contrast, the Solvency II Directive does not serve the purposes of consumer protection, but rather the implementation of basic freedoms for the purpose realizing the internal market for insurance.28

In the final analysis, this assignment and determination of competence is congruent with the substantive regulatory content of the EIOPA Regulation. This is so because the consumer protection tasks and powers set forth in art 8, para. 2 i and art. 9 of the EIOPA Regulation are essentially independent of supervision over the licensing and activities of insurance undertakings and others to whom the rule is directed, as subject matter of the Solvency II Directive. In substance, the EIOPA Regulation is concerned with developments and trends, assessments, and transparency with regard to consumer protection.

3.3.2 Further Implications The Prohibition on Optimization in the Supervisory Review Process Under Solvency II and the European Law “High Level of Protection” in Consumer Protection

As shown by Recital 16, the Solvency II Directive as a whole pursues “adequate protection of policy holders and beneficiaries” as the “main objective of insurance and reinsurance regulation and supervision.”29 This objective is also served by the supervisory review process (SRP) under art. 36 of the Solvency II Directive. This process is designed to “ensure that the supervisory authorities review and evaluate the strategies, processes, and reporting procedures which are established by the insurance and reinsurance undertakings to comply with the laws, regulations, and administrative provisions adopted pursuant to this Directive.”30 Art. 36, para. 2 of the Solvency II Directive identifies the subject matter of this process, the core of which comprises the governance, capital, and risk-related requirements of the Solvency II Directive. Consumer protection is not a part of this core group, nor is it part of the objective of the process under art. 36, para. 1 of the Solvency II Directive. Further, consumer protection is not a concern in the rules on supervisory authority powers in this process.

Pursuant to the Solvency II Directive’s wording and scheme, a prohibition on optimization applies to the SRP.31 This is so because the Directive’s requirements for insurance undertakings and the provisions on licensing and activities establish only the required supervisory level, i. e., the minimum level. With regard to insurance undertakings, which are the ones toward whom the insurance supervisory regime is directed, supervisory authorities can therefore enforce compliance only with what is legally required. And thus the future legal situation under art. 36 of the Solvency II Directive and sec. 289 of the VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act] corresponds to the legal situation under the hitherto existing VAG [German Insurance Supervision Act].32

While thus a prohibition on optimization applies to insurance company supervision under the Solvency II Directive, the TFEU, which is the legal basis of the EIOPA Regulation, in art. 114, para. 3 requires a “high level of protection” in the field of consumer protection.33 This wording does not mean, however, that the Authority may seek the “highest” or “highest possible” level of protection in the field of consumer protection. According to a widespread view, even the so-called safeguard clause and extended safeguard clause for Member States in art 114, paras. 4 through 6, 9, and 10 and art. 169, para. 4 of the TFEU clarify that the phrase “high level of protection” signifies simply a minimum harmonization.34

The phrase “high level of protection,” however, is also found in the EIOPA Regulation itself. Under art. 8, para. 1 i of the EIOPA Regulation, the Authority shall “contribute”

to the consistent and coherent functioning of colleges of supervisors, the monitoring, assessment and measurement of systemic risk, the development and coordination of recovery and resolution plans, providing a high level of protection to policy holders, to beneficiaries and throughout the Union, in accordance with Articles 21 through 26.

In this passage, then, the criterion of a “high level of protection” does not relate to the consumer protection activities of the EIOPA, but rather to protection of policy holders and beneficiaries, as targeted by the Solvency II Directive.

Nevertheless, no conflict arises with the prohibition on optimization that applies to the SRP according to the Solvency II Directive. On the one hand, in the place at issue, art. 8, para. 1 i of the EIOPA Regulation, by pointing to arts. 21 through 26 of the Regulation, restricts its application to risk-oriented supervision by colleges of supervisors within the meaning of art. 212, para. 1 e and art. 248 para. 2 of the Solvency II Directive in cases of groups active across borders and in consideration of possible systemic risks and of development of a network of national guarantee schemes. Thus, the rule on the level of protection does not constitute for the SRP a standard in the nature of a general clause. Rather, they provide that the EIOPA, in consideration of the risk-oriented rules of the Solvency II Directive, also shall “contribute” to the protection of policy holders and beneficiaries. This objective is enunciated and pursued in numerous corresponding rules of the Solvency II Directive. In other words, the issue in this respect is solely the realization of the Solvency II Directive’s goals through insurance supervision. The issue is not establishment of additional supervisory standards. Additional support for this point is seen in the wording of the level of protection for group supervision in Recital 98 of the Solvency II Directive, where the objective is stated as an adequate level of protection for policy holders and a level playing field between groups.

On the other hand, it is no contradiction to the foregoing that Recital 141 of the Solvency II Directive in reference to group supervision denotes the criterion of a “high level of policy holder (and beneficiary) protection” for the advice that CEIOPS may render for insurance and occupational pension matters. This is so because the Solvency II Directive defines the intended level of protection through the respective substantive content of the individual provision or set of provisions. Since the Directive’s nature leans toward full harmonization, except in the places where wording such as “at least” appears or in the areas where Member States have a right of election,35 EIOPA, too, is tied into achieving the regulatory content—and only this content—of the given standard as to the level of protection intended by the exhaustive provisions of the Directive. Thus, for insurance undertakings as the addressees of this regulation, this constitutes the level required by supervisory law in the sense of a minimum level, a level which the undertakings may voluntarily exceed; and it leads to the prohibition on optimization by the supervisory authorities. Ultimately then, the level of protection provided by the Directive flows from the Directive provisions themselves and not from the Solvency II Recitals. Recitals 16 and 98, noted above, merely characterize the established level of protection as “adequate,” while Recital 141, also noted above, employs the word “high” to describe the level of protection in the regulatory area at issue there. The Indirect Consumer Protection Function of the Insurance Supervisory Regime

Even though the Solvency II Directive neither is a consumer protection directive nor even has consumer protection as an objective, consumer protection effects indirectly arise from its individual rules. These effects are indirect, inasmuch as the rules do not especially apply to consumer protection—by whatever definition, a topic not addressed here,36—but apply only generally to policy holders and beneficiaries under insurance contracts.37

Perhaps the most important area where the insurance supervisory regime indirectly effects consumer protection is the realm of solvency supervision.38 Even if the objective of solvency supervision39 does not focus on the consumer, but, as expressed in Recital 17, on “better protection for policy holders” as a whole, protection of solvency through insurance supervision results in the best consumer protection.40

Also important in connection with this objective is the regulation on the Solvency and Financial Condition Report (SCFR), a completely new regulation in the area of the insurance supervisory regime following Solvency II. The SFCR is provided for in art. 51 of the Solvency II Directive and in sec. 50 of the VAG-RegE [Government’s Draft of a Tenth Act Amending the German Insurance Supervision Act]41 The objective of the SFCR is to increase transparency in the insurance market42 and remove informational imbalances. There remains, however, the insoluble contradiction that the legal and economic requirements of solvency for policy holders and insureds, in particular for the consumers among them, are on the whole intransparent43 by reason of their complexity, and perhaps even incomprehensible.

Insureds and beneficiaries are the true intended addressees of the public report,44 since protection of these parties accords with the main objective of the Solvency II Directive.45 Many policy holders and beneficiaries are also consumers, however that term may be defined. With respect to the contractual information under the Solvency II scheme, the SFCR can function as an additional source of information and thereby as an indirect and factual tool for consumer protection. On the issue of who is the primary addressee of the SFCR it has been argued46 that the capital market fulfills this role. According to this view, the creation of market discipline constitutes the focus of the duty to inform with respect to the public. In other words, disclosure would occur with the objective of allowing market participants to make assessments. The result of these assessments would be, in some circumstances, corrective action by the market with regard to insurance undertakings.47 This view contradicts not only the tiered objectives of the Solvency II Directive, but also the existence of additional very extensive duties to disclose imposed upon insurance undertakings by virtue of capital market and commercial law.48 Further and not least significantly, the special pre-contractual duty to inform imposed upon insurance undertakings toward policy holders under art. 185, para. 2 d of the Solvency II Directive shows who the European legislator intended the main addressees of the report to be. That provision requires a concrete reference to the report on the solvency and financial condition…, allowing the policy holder easy access to this information. EIOPA in Between Consumer Protection and Insured Protection: The EIOPA Guidelines on Complaints-Handling as an Example

On 27 June 2012, EIOPA presented guidelines on complaints-handling by insurance undertakings.49 The Guidelines are based on art. 16 of the EIOPA Regulation. A Best Practices Report and an Impact Assessment were issued along with the Guidelines.50 The EIOPA Guidelines are aimed at the national supervisory authorities51 and require these authorities to carry out the tasks listed below with regard to the undertakings they supervise, with appropriate subsidiary standards in individual cases:

  • to put in place, publish, and implement a written complaints management policy, for which the undertaking’s senior management is responsible,

  • to create a complaints management function in the insurance undertakings,

  • to ensure that insurance undertakings register complaints internally,

  • to issue regular reports on complaints to the competent national authorities or ombudsman,

  • to ensure that undertakings conduct internal analysis of complaints-handling and

  • to put in place internal procedural rules for complaints-handling with regard to complainants, including the obligation to adhere to specific response and follow-up time lines.

Detailed further requirements are found in the introduction and in the epilogue to the EIOPA Guidelines. In this respect, the Guidelines direct attention to the Best Practices Report.

The issuance of the EIOPA Guidelines initially raises the basic issue of whether EIOPA has the requisite competence. On this point, it is indeed debatable whether a consumer protection measure or an insurance supervisory measure unrelated to consumer protection is at issue. The Impact Assessment52 justifies the issuance of the EIOPA Guidelines as follows:

In order to steer a harmonized approach to consumer outcomes and to mitigate regulatory discrepancies due to varying national provisions, EIOPA suggests the introduction of the guidelines.

In this context, the Impact Assessment explains that the process of creating the Guidelines included discussion of whether the Guidelines should cover only consumers’ complaints or complaints from all customers. The EIOPA Report on Best Practices by Insurance Undertakings in handling complaints states the purpose as follows:

Their purpose is to contribute to “enhancing customer protection” as described in the underlying statutory objectives of EIOPA.

This language cites (inaccurately) for authority “art. 1, para. 6 f. EIOPA Regulation”, the regulation on consumer protection. The voice of BaFin [Federal Financial Supervisory Authority] was heard thus: “In consideration for the great importance of consumer protection, Germany has agreed to the Guidelines in the Board of Supervisors.”53 Both the Impact Assessment and the Best Practices Report expressly invoke consumer protection to justify issuance of the EIOPA Guidelines. And consumer protection was telling for the decision in the EIOPA Board of Supervisors. Yet consumer protection is not mentioned in the EIOPA Guidelines themselves. To the contrary, the Guidelines do not expressly refer to the proffered legal bases,54 but to art. 16 of the EIOPA Regulation “taking into account Recital 16 and arts. 41, 46, 183, and 185” of the Solvency II Directive and the “adequate protection of policy holders and beneficiaries” of Recital 16.55

Under art. 16, para. 1 of the EIOPA Regulation, however, issuance of guidelines by the Authority shall be restricted to ensuring the “common, uniform, and consistent application of Union law… .” But there is no such Union law for the field of complaints-handling. With regard to the Guidelines, EIOPA itself explained in a 27 June 2012 press release:

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