Transparency in Insurance Regulation and Supervisory Law

Transparency plays an increasingly important role in insurance law. In the field of insurance intermediation transparency receives its importance due to the fact that “insurance” is a complex consultancy-intense product surrounded by a complicated legal framework. The fact that insurance intermediaries thereby always take a position between the insurance undertaking and the policyholder makes transparency even more important. Transparency in insurance supervision receives its importance from the need and the request of a stable but competitive single European market for insurance products. Therefore, the European as well as the Austrian legislator recently have taken a variety of measures to meet the need for transparency both in insurance intermediation and in insurance supervision. The contribution is intended to illuminate some aspects from an Austrian point of view.

This chapter deals with the transparency and supervision of the insurance intermediaries as well as insurance companies under Croatian law. First of all, the authors talk about the precontractual obligations of the insurance intermediary as well as the insurance agent to the policyholder. On the other hand, the policyholder’s duties of disclosure are also described. These obligations and duties are regulated by two acts: the Civil Obligations Act and the Insurance Act. Then are discussed the consequences of the infringement of these obligations and duties. Business operations of intermediaries and insurance companies are supervised by the Croatian Financial Services Supervisory Agency (HANFA). They provide regular reports and reports at the request of HANFA. Insurance companies publish annual reports on solvency and financial condition on their websites. HANFA performs on-site or off-site supervision of insurance companies and imposes supervisory measures in case of irregularities and illegalities in their business operations.

In Cyprus, the rules governing transparency in insurance regulation are mainly of EU origin. The basic legislative instruments are the Acts on Insurance and Reinsurance Business and Other Related Matters of 2016 to 2019, which also transpose the Solvency II Directive and the Insurance Distribution Directive. This chapter begins with an overview of the insurance supervision regime in Cyprus and continues with the transparency-related duties of insurance and reinsurance undertakings, followed by the respective duties of insurance distributors. It then presents the rules on transparency of administrative procedures, the provisions on alternative dispute resolution in the insurance sector and the transparency duties related to the prevention of abuse of the financial system for money laundering and terrorism purposes. The main country-specific issues that have arisen regard the supervision authority and enforcement procedures. As to the former, an imminent reform of the supervisory system will integrate insurance supervision with the supervision of pension funds under a single independent authority. Concerning enforcement procedures, doctrinal criticism focuses on the fact that administrative courts may not, in principle, control the merits of administrative decisions, which might violate the fundamental right to a fair trial. Moreover, sanctions for violations of the applicable rules can be both administrative and criminal, which raises double-jeopardy issues.

This chapter lays out the transparency regulations in insurance regulation in England. Transparency is vital not only in insurance contract but also in insurance regulation and is a requirement and guiding principle in insurance supervisory law where it helps the development of uniform and openly accessible convergent supervisory practices encompassing the need to apply not only the principle of good faith but also that of transparency. The chapter examines the move in England from the Financial Services Authority (FSA) to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) and its effect on the market and the operation of transparency in insurance supervision as the FCA bears the task to ensure that the relevant markets function well whilst promoting transparency.

Increasing transparency is a key element of the still relatively new EU supervisory system that has been implemented in Germany through a fundamental reform of the Insurance Supervision Act (VAG) and accompanying Acts. Several instruments of German insurance supervisory law additionally address the regulatory goal of increasing transparency in various facets. Not only the German supervisory authority BaFin (and indirectly also EIOPA) shall be fully informed but also the public by generally available information on the insurer(s) and the insurance industry. The underlying principle-based approach complicates efforts of insurance companies to comply, which is particularly problematic since companies are now confronted with existential sanctions such as the imposition of fines and so-called naming and shaming. The Insurance Distribution Directive also enhances transparency by increasing information for the policyholder on the intermediary, the distribution and the insurance product. In addition, the supervisory authority regains influence on the production process by product oversight and governance.

This chapter aims at illustrating the evolving meaning of the notion of transparency in Italian insurance regulation and supervisory law. Transparency becomes the standard for ascertaining whether the organisational and behavioural conduct of the supervised entities achieves the objective of protecting the insured. At the same time, transparency is required of the supervisory authority to ensure the proper performance of his duties towards the supervised entities and stakeholders in the insurance market. In this sense, transparency not only concerns supervision but also permeates the regulatory activity of the authority.

The objective of this chapter is to lay out the rules on transparency in insurance regulation in Malta. The study was designed around a literature review of documents provided by various legal firms, the Malta Financial Services Authority (MFSA), the Financial Intelligence Analysis Unit (FIAU), the Information and Data Protection Commissioner, the Office of the Arbitrator, company service providers, personnel working in compliance authorities and other personnel working in regulatory authorities.

There are various provisions taken to ensure transparency, among which are legislative requirements covering the overall framework of the working environment in the industry, the regulations that monitor and control the specific insurance operations and the contract provisions that regulate the dealing with the contracting parties.

The research presents the safeguards existing in the Maltese financial service industry with specific reference to the insurance sector. Primarily, it discusses the structural composition that seeks to preserve fairness and transparency. In the context of this research, this refers to the Malta Financial Services Authority and the Financial Intelligence Analysis Unit. Moreover, disputes to this effect fall under the auspices of the Officer of the Arbiter of Financial Service and the Financial Service Tribunals.

Furthermore, the research explores how organisations in the industry are supervised from prudential and conduct perspectives through an array of laws and regulations that have mostly been harmonised into the laws of Malta from the European Union.

In the aftermath of the financial crisis, transparency has become a priority for the regulators around the world. It is strongly believed that extensive disclosures, reporting and information duties help to restore confidence in markets and to ensure long-lasting financial stability. Therefore, in order to put beliefs into practice, a range of legislative initiatives have been undertaken by the national and European lawmakers. Over time, transparency has become a peculiar regulatory tool used in nearly every aspect of financial business activity, including insurance. This chapter reviews transparency measures applied within Polish insurance regulation and provides insight into the national approach to the issue of transparency in general.

The use of the term ‘transparency’ in the context of insurance regulatory law only truly made its way into Portuguese legislation in 2016. In this chapter, we set ourselves the tasks of finding out whether, when employed in this context, the term has taken on a different meaning or different implications than it assumes when used in the context of insurance contract law, and of pinpointing such differences. We have found that the notion of information appears to be at the centre of all such uses of the term. All references thereto are related to the creation of general or more specific information or disclosure duties. However, in insurance contract law, a common usage of the term is focused on the nurturing of data-sharing communication between the insurer on one side and the policyholders, the insured, the beneficiaries and injured third parties on the other side, thus demanding the creation of information duties in the Hohfeldian sense where they represent the jural correlatives of individual rights. There is also a relevant performative component to most such exchanges, given that contracting parties are doing more than provide information; they are giving rise to their contracts as they communicate with one another. In insurance regulatory law, the term appears to have taken on, if not a different meaning, at least some different implications. We have found no performative element in the prescribed conducts, and the creation of disclosure duties has not entailed the creation of correlating individual rights. And the addressees of transparency demands appear to be much more diverse than they are in the context of insurance contract law: the legal system, the market, the regulators and all those regulated must all be ‘transparent’. Despite its relative novelty, transparency appears to have become an EU catchword, transparency requirements being seemingly here to stay and on the rise, if we put together all the transparency references and requirements stemming from the European Insurance and Occupational Pensions Authority (EIOPA) Regulation, the Solvency II Directive and the Insurance Distribution Directive.

Information is the lifeblood of financial markets that allows decisions and timely choices to be made. That is why information must be adapted to situations that arise through the framework of appropriate regulations so that the insurance sector can act efficiently. And precisely information is considered as one of the most efficient instruments. In this context, there is also information transparency in relation to both insurance mediation and the management and supervision of insurance. On the other hand, the Spanish legal system, apart from recourse to the courts, offers the parties affected by an insurance relationship multiple options to resolve disputes that arise under the insurance contract: common arbitration, consumer arbitration, mediation, customer service, insurance ombudsman and the claims service of the General Directorate of Insurance.

Transparency is a cornerstone of the Solvency II Directive. This goal is primarily reached through the undertakings’ reporting requirements. The notion of transparency is not in the same way a cornerstone in the Insurance Distribution Directive. However, in practice, transparency of insurance distribution is a consumer protection problem. The Swedish Financial Supervisory Authority has for many years addressed several transparency-related problems in supervisory reports and through supervisory activities. This chapter aims at providing a comprehensive overview of the rules and regulations ensuring transparency in Swedish insurance law, as well as the supervisory authority’s approach towards transparency.

In this chapter, transparency in Dutch Insurance Regulation and Financial Supervision is discussed. The concept of transparency is a key principle in Dutch financial regulation and supervision, including insurance regulation and supervision. Transparency is a vast and multifaceted topic. The context of this chapter obviously only allows for a discussion of a selection of topics, relating to transparency. To place some of the topics in a proper context, the chapter starts with a short, high-level, overview of the cross-sectoral financial regulatory and supervisory environment. After the financial crisis, transparency was resorted to as one of the means to restore trust in the financial sector, both in formal regulation and in self-regulation, and a disciplinary framework, with independent scrutiny by the insurance industry itself. In this chapter, I also discuss some of the main areas in which transparency is relevant, such as prudential reporting and disclosure, including the reliability and audit(ability) of prudential information, transparency about the scope of supervision, transparency in market conduct and supervisory transparency. In addition, some general observations are made about the impact and added value of transparency.

Solvency II Directive and Insurance Distribution Directive have introduced harmonised rules across the European Union. This chapter compares the transparency as outlined in these Directives and the insurance regulation and supervisory laws in the EU Member States, which are included in the analysis made in this book. The different harmonisation pursued by the above Directives—maximum v. minimum—could result in differences in the transposition of the principle of transparency in these Member States.

This chapter explains how transparency is achieved in the Australian insurance industry through the regulation of insurers and intermediaries. Commencing with a high-level overview of Australia’s financial services regulatory framework, it then proceeds to examine the important roles played by the Australian Securities and Investments Commission and the Australian Prudential Regulation in ensuring compliance with these regulations. Through a discussion of recent case studies, the chapter shows how these regulators have been active in their efforts to promote transparency and fairness both in the selling of insurance and in the handling of insurance claims. The chapter also explains how the implementation of reforms arising from the 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will further ensure adherence to the principles of transparency and fairness in the years to come.

The chapter builds on existing theoretical literature to debate the regulatory transparency of the Brazilian Superintendence of Private Insurance (SUSEP). The discussion considers Lodge’s (2004) five dimensions of transparency, adapting each of them to the context of the Brazilian supervisory framework: (i) SUSEP’s transparency as the regulating actor; (ii) the transparency of SUSEP’s rules and guidelines; (iii) the transparency of SUSEP’s policy and decision-making processes; (iv) the transparency of insurance companies, insureds and intermediaries, as the regulated bodies; and (v) the transparency of the feedback processes. Evidence comes from a sample of three recent policy and supervisory decisions which provide a relevant opportunity for critical observation and analysis. Based on the literature review and the empirical analysis of the regulatory decisions from the sample, the chapter offers an inventory of institutional contingencies harming the betterment of SUSEP’s transparency. The study concludes that although SUSEP is successful in granting transparency to financial data of the supervised companies, as well as to supervision rules and guidelines, the same does not occur to SUSEP’s transparency, particularly on policy and decision-making.

This chapter aims to identify and analyze the principle of transparency that governs insurance intermediaries, on the one hand, and, on the other, how this principle influences the regulatory agency that supervises the activity of the different players participating in the Chilean insurance market. We would like to point out that the principle of transparency has been expressly included by the Chilean legislator in some cases, and in others it underlies the law.

To achieve the goal of transparency of an insurance contract to the insureds before concluding the contract, Chinese law adopts a number of approaches: first, insurers are required to explain the content of the contracts and to clearly explain the exclusion clauses to the insureds before the conclusion of a contract. Second, insurance contracts must be formulated transparently by the insurers and must meet the statutory requirements of the Insurance Law and regulatory requirements of the Insurance Supervision and Regulation Authority (ISRA). Third, the ISRA provides detailed regulatory rules to require insurers to disclose information of the products in a transparent manner. Fourth, the Insurance Law and the ISRA requires insurers and their salespersons to treat customers fairly and not to mislead them to purchase an unsuitable or inappropriate insurance product. In addition, as a general requirement of information transparency, the ISRA obliges insurers to disclose to the general public relevant and adequate information on a timely basis to give the potential insureds and market participants a clear view of the insurers’ business activities, performance and financial position. The purpose of this chapter is therefore to examine these approaches to see how transparency of insurance contracts can be achieved by insurance regulation in China.

Transparency in insurance law in New Zealand has developed from a combination of statutory regulation, common law principles and—increasingly—soft law in the form of self-regulation. Transparency requirements apply to both insurers and intermediaries. The law is presently under review, and major changes are anticipated for both the substantive rules applicable to insurance contracts and for the regulation of the financial services industry, although the vagaries of the electoral cycle and the impact of Covid-19 may well affect both the timetable and the outcome. This chapter takes in the introduction of a new Fair Insurance Code by the Insurance Industry as from April 2020.

The author makes a complete review of the various rules that an insurance company must comply with, regarding the information that must be included in the policies, their precontract obligations, the approval to which they must submit their policies and conditions, the way of doing advertising, contractual conditions, insurance applications, prohibition of clauses and abusive practices, even sanctions and rules for different types of insurance, in addition to the rights that the insured has and the services that the insurer must have to attend to it. He then exposes the transparency rules in insurance intermediation and loss adjustment to finish explaining the obligations in insurance supervision and its foundations.

This chapter lays out the transparency regulations in insurance laws in the Russian Federation. Transparency is becoming more and more essential as a supervisory requirement for insurance activities and as one of the guiding principles in insurance law. The chapter examines recent changes in the federal laws and the supervisory rules of the Central Bank implemented for insurance undertakings and intermediaries and their effect on the insurance market. As promoting transparency in insurance operations in a broad meaning remains a key task of the supervisory authority, further changes can be expected.

Transparency as a value is evident in a number of principles that apply to insurance intermediaries. These principles are found in common law rules and increasingly in statutory rules that regulate intermediaries and advisors. Consumers are protected by dedicated legislation that apply to insurance and to other intermediaries and advisors who sell financial products. This contribution evaluates all the rules pertaining to intermediaries and advisors and provides an overview of the structures that are in place to ensure that there is compliance with these rules. Overall, transparency as a value is evident from both statutory and common law rules, and increasingly, consumers of insurance products enjoy adequate protection as intermediaries and advisors are obliged to act in a way that is transparent.

This chapter will briefly introduce the framework of Taiwan’s insurance regulation, the debate between efficiency and transparency, and relevant critical issues. Taiwan is intended to increase the magnitude of regulation because of the many recent scandals and misbehavior concerning financial and insurance products. The authority may resort to more regulations or more comprehensive regulations to capture more misbehaviors. However, more regulations may decrease the competitiveness of markets. Similarly, vague and comprehensive insurance regulations may provide convenience to the authority to monitor financial institutes, but this causes difficulties for them to anticipate and follow these regulations.

We will start with the introduction of Taiwan’s insurance supervisory system and transparency issues. Then we will examine six major subtopics of insurance regulations in Taiwan and their transparency issues, including interested party transactions, investment in real estate, model clauses, internal controls, disciplinary action, and number of offense. These six subjects usually involve more controversies, and their transparency issues are also comparatively significant. In the end, the suggestions to improve the transparency of insurance regulations will be provided.

This chapter lays out the transparency regulations in insurance regulation in Turkey. In the first section, the supervision principles and basis that the insurance company and its intermediaries are subject to during their establishment and activities will be examined. This supervision is not for oversee the contract but to ensure that the insurer fulfills its obligations under the insurance contract. In the second section, the supervision principles for insurance mediators will be examined. The Code regulating the insurance mediators was drafted on the basis of European Union Directive No. 2002/92/EG. However, the Turkish lawmaker has preferred a narrow expression for the definition of “mediator.” This is the main issue where the Insurance Activities Code separates and deviates from European Union Directive No. 2002/92. People with a “consultant” title in insurance services are left outside the supervision system.

This chapter describes and examines transparency regulation in the law of insurance regulation in the United States. Transparency in the US legal tradition has its roots in democratic theory, but its greater relevance in insurance regulation is grounded in the use of the term to describe an essential characteristic of effectively functioning markets and the importance of consumer protection within those markets. The chapter overviews the US insurance regulatory framework and its goals, the role of the states as the primary regulatory authorities, the states’ principal regulatory tools, and how transparency relates to the structure, goals, and tools. The chapter describes and analyzes the regulations and rules that promote transparency in the US—both directly (for example, by disclosure requirements and mandates for clarity in insurance contracts) and indirectly (such as through consumer education). The chapter also describes current initiatives in the US intended to increase transparency in the insurance business. The chapter concludes with an assessment of the effectiveness of US transparency regulation.

This chapter compares the transparency regulations in insurance regulation and supervisory laws in the countries outside the EU and Europe, i.e. in the rest of the world. Transparency is a much-needed principle and prerequisite in insurance regulation and in insurance supervisory law, where it helps the homogeneity of practices pertaining to the abidance of good faith. The chapter examines transparency regulations in insurance regulation and supervisory laws in Australia, Brazil, Chile, China, New Zealand, Peru, Russia, South Africa, Taiwan, Turkey, and the USA and draws critical comparisons and conclusions.

The Insurance Core Principles (ICPs) developed by the International Association of Insurance Supervisors (IAIS) provide a globally accepted framework of principles, standards, and guidance for the regulation and supervision of the insurance sector. In setting the principles, the IAIS takes accounts on the concept of transparency and implements the relevant measures into the insurance environment. Given the fact that the ICPs inspire national regulations and constitute an important point of reference for national legislators, this chapter provides an overview of transparency measures presented in the ICPs.