Distribution practices under fiduciary duties

Committee:
Insurance
status:
Some progress
Published:
We recognise that the FSA encourages insurers including brokers to conduct its fiduciary duties. Along with promoting fiduciary duties, the FSA has been discussing the product governance and the change of commission structure to be paid to distributors with both insurers and banks, especially for single premium foreign currency denominated products. The EBC, furthermore, appreciates the focus on the benefit of the customers, and also the possibility for industry, including European insurers, to leave comments. On the other hand, we believe that the current rule could be a barrier for new entrants and may not be beneficial to Japanese consumers, unbalancing with the potential risk of mis-selling. For example, insurance sales by an incorporated insurance agency to members of its parent and affiliated companies are restricted to so-called “third sector” products (“koseiin-kisei”)

Recommendations

  • When discussing the product governance, the FSA should take the product licence system in account. (i.g. The notification system instead of the product licence is applied in Europe.)
  • The FSA should carefully make certain that sales of innovative products are not hampered, for instance under a low-interest rate environment, while ensuring that fiduciary duties are fulfilled.
  • The FSA should consider relaxing the restriction of abovementioned “koseiin kisei”, beyond “third sector” products.
  • Taking into account emerging new technology and evolving insurance distribution, the FSA should review the related regulations, and present a roadmap for further deregulation for the benefit of Japanese consumers.
  • When looking into distribution practices, the FSA should put more emphasis on enabling the customer to choose from a wider product portfolio.