Product oversight and governance

Directive (EU) 2016/97 on insurance distribution, Article 25, and Delegated Regulation (EU) 2017/2358: the duty to advise deals with the moment of sale; product oversight and governance moves upstream to design. Its premise is that a badly designed product cannot be rescued by good advice, because no advice makes suitable a contract that suits nobody. The regime therefore imposes four obligations on the manufacturer. Define a sufficiently granular target market and, symmetrically, a negative target market, that is the customers the product does not suit. Put the product through an internal approval process before launch, including adverse scenario testing. Choose distribution channels consistent with that target market and give distributors the information they need. And review the product regularly, notably in light of complaints and of the ratio between claims paid and premiums collected. That last indicator has become, in European supervisory practice, the trigger for interventions on add-on covers whose loss ratio revealed they almost never paid out.