Poland’s insurance and banking industries issue credit protection insurance guidelines
In May 2024, the Polish Chamber of Insurance and the Polish Bank Association jointly issued Good Practice Guidelines on Credit Protection Insurance, with oversight of the financial regulator. The guidelines address a number of key issues, from creation of CPI products, to marketing, distribution, and monitoring of compliance.
The Good Practice Guidelines on Credit Protection Insurance (CPI) are primarily addressed to Polish insurance companies and banks offering CPI products. However, they could also be followed by other financial institutions offering similar products.
Implications of good practice guidelines
The Polish Chamber of Insurance (PIU) and the Polish Bank Association (ZBP) have set ambitious goals for themselves and their members. The main aim is to achieve high standards of protection for customers and for banks and insurers offering CPI products linked to banking products. The guidelines set specific goals: ensuring the value of products, transparency of operations, monitoring of product performance, implementation of corrective measures, effective cooperation, and high-quality customer service, especially in handling claims.
The Good Practice Guidelines place particular emphasis on cooperation between insurance companies and banks. Their roles should be clearly separated starting from the stage of CPI product development. The development process should be orderly and thoughtful. It is necessary to determine what benefits the product is supposed to bring to customers, and to identify the target group and their needs. It is also important to define the parameters that will be monitored while the CPI product functions on the market. Another level of cooperation between insurers and banks is product distribution. These entities jointly determine the methods of reaching customers, taking into account the characteristics of the product, the degree of complexity, and the target market. The insurance company and the bank are jointly responsible for the quality of distribution. In this regard, a lot of attention is drawn to sales contests for individual agents involved in distribution of CPI products. The bare minimum is for such incentives to be organised in compliance with the law, Polish Financial Supervision Authority (KNF) recommendations, and KNF indications to specific banks, taking into account the customers’ interests and needs. The guidance also stresses the need for the bank, as an insurance distributor, to meet its obligation to provide the relevant information to the customer.
The Good Practice Guidelines indicate that the insurance company exercises supervision over the bank as the distributor of the CPI product, to ensure the distribution activity is performed properly, detect any irregularities, and correct any irregularities found in the bank’s activities as an insurance distributor. The issue is not only to ensure legal compliance, but also to make sure that individual agents obtain the required professional training and maintain valid entries in KNF’s register of insurance agents.
Then the parameters set at the product development stage are monitored over the life of the product. In this regard, cooperation between the insurance company and the bank should include mutual communication of any complaints and how they are resolved. The processes of concluding insurance contracts should be reviewed periodically. On a regular basis, the bank should also keep the insurance company informed of new customer needs it has identified, so that it can assess the possibility of offering a different scope of protection.
Conclusion
The principles enshrined in the Good Practice Guidelines are a positive step. The Polish Chamber of Insurance and the Polish Bank Association have created a comprehensive set of rules useful when insuring repayment of mortgage credit and other loans.
Broad and deep cooperation, and smooth flow of information, between insurance companies and banks can greatly improve the standards for functioning of the bancassurance market, especially regarding creation and distribution of CPI products.
However, it should be remembered that these guidelines are not law, but an example of industry self-regulation. Therefore, they do not create exposure to sanctions under Poland’s Insurance and Reinsurance Act in the event of failure to follow best practice. Application of the guidelines in the document is voluntary, and each market player must take its own independent decision in this regard. Who implements the guidelines, and to what extent, remains to be seen in practice.
Mateusz Kosiorowski, adwokat, Klaudiusz Mikołajczyk, Insurance practice, Wardyński & Partners
