From dirittobancario.it
Contents: 1. Introduction: Instant insurance? Nihil sub sole novum. - 2. The (Insurance) Industry 4.0. - 3. Instant Insurance: what it is and how it works. - 4. Adequacy (consistency) assessment and pre-contractual information requirements. - 5. Conclusions.
“A brilliant idea.”
“For two coins, dear readers, purely and simply for two coins, for only ten cents, you can take advantage of this brilliant idea: two coins thrown into the slot of an automatic machine that, instead of showing you a view of a country you don't care about, or giving you a cheap chocolate, or a bad candy, will give you no less than an accident insurance policy. Inasmuch as this automatic machine is located in our railway station, inasmuch as every travelling man and woman who leaves, by putting two coins in the box, gets a ticket, a ticket that contains an accident insurance policy of Società Anonima Italiana di Assicurazione; inasmuch as said company is a branch of Società Assicurazioni Generali di Venezia, i.e. the most important and serious Italian insurance company.
Two coins: one small click: the ticket appears: you take it: it contains the policy that you must immediately sign, as this is your only duty: and you are insured for the journey that you are going to undertake, at that moment, with that train, until noon the following day. And the insurance varies from the smallest incident that can give you one Lira fifty a day, for forty days, rising to one hundred and fifty, three hundred, one thousand, one thousand five hundred, three thousand, yes three thousand Liras of insurance with only 10 cents. It's incredible. That's how it is. These are extremely practical, ingenious ideas: worthy of appreciation, in Naples as well as in all the other main stations in Italy, where these tickets are sold, automatically, by the thousands. And the ticket contains the entire practical explanation for the insurance. Nothing more than ten cents!”[1].
A hasty reading of the first lines of the story might leave one feeling puzzled.
In her account, the author does not mention filling in any questionnaire, or receiving any attachment 3 or 4, let alone any pre-contractual information document (DIP) or additional DIP. Instead, she talks about a certificate of insurance, which can be purchased as quickly and easily as a candy in a vending machine, with clear conditions and simple settlement.
Even so, a few lines down, the most attentive reader will be reassured by the mention of our beloved old currency, thus being able - not without some relief - to date the matter back to a period at least prior to 2002 (the year in which the Euro came into force), well before the implementation in our country of the so-called “IDD directive” (EU Directive No 97/2016 on insurance distribution), thereby removing the fear of infringement of insurance distribution regulations.
Yet, some concern remains due to the difficulty in establishing the exact time of the event.
Indeed, the use of a vending machine to place a travel insurance policy, for a minimal premium (“two coins”) and a simple gesture (“one small click”), brings us back to the present day, to distribution through new technologies, to the phenomenon by now known as instant insurance. A few mischievous people might even think that this article is the result of an intriguing advertising campaign, launched in view of the (hoped-for) forthcoming recovery of coastal trips.
Nothing of the sort.
In fact, it was 1899, and the author of this first-person account was none other than the well-known journalist and writer Matilde Serào[2].
The testimony conveyed by the story of the illustrious journalist, besides giving us an interesting historical glimpse of the development of the insurance industry in the period of great technical innovations that characterized the late nineteenth century and early twentieth century, is now more relevant than ever, given the growing interest of legal practitioners and major market players towards the so-called on-demand insurance and in particular instant insurance[3].
The latter recent distribution model is characterised by the offer to insureds, via apps or websites, at any place and at any time, of easy-to-understand micro-policies covering specific risks, limited in space and time, for small premiums. Recalling the author’s story, one cannot help but notice a certain similarity between the distribution of micro-policies through modern digital channels and the sale of a policy for a day trip through the aforementioned automatic machine located in the Neapolitan station (almost a sort of “analogue” instant insurance ahead of its time).
It is interesting to read about this - very old - initiative of the Generali group, which bears witness to the fact that even long ago, alongside the more ‘traditional’ insurance needs, there was a need for simple, informal, low-cost and quick coverages, both in terms of creation and termination; coverages which, precisely because of the greater simplicity and immediacy of their respective content, had to prefer instantaneous, automatic and deformalised forms of sale.
However, this comparison inevitably raises questions about whether the current sector regulations relating to the contract formation phase (and, in particular, to the assessment of adequacy and pre-contractual information) correspond to the peculiarities of said coverages and to the need for simplicity and immediacy that should characterise the respective placement phase. In particular, concerns arise in relation to the fact that the legislation and regulations in force impose on these micro-insurance policies the same obligations and controls provided for more traditional policies (which are normally characterised by a much more complex and articulated scope of coverage compared to the one that should characterise said micro-policies).
Indeed, the Italian legislation does not apply specific different rules to said simple forms of cover, which are subject to the ordinary provisions on distribution. This causes a considerable overload of procedures and formalities in the pre-contractual phase that appears to be in contrast not only with the commercial objectives of the operators in the sector, but also, and above all, with the needs of the insured persons interested in purchasing said products.
Therefore, it would be appropriate to reflect on the rationale of said rules and on the appropriateness of their general application, also in view of the specific characteristics and distribution methods of such new forms of instant insurance.
Technology and its continuous evolution are changing the way we live, communicate and, last but not least, work and do business. We have certainly heard a lot lately about digital transformation, Big Data, artificial intelligence and blockchain (to name but a few), in other words the so-called “fourth industrial revolution”[4]. Although these terms are sometimes overused, improperly mentioned or used in non-technical ways, the frequency with which they emerge in the discourses of market operators, and now even in national and international news, are clear indications of growing “media” attention and public interest in these issues, which seem increasingly topical and immanent. The great attention paid to the phenomenon is not surprising if one considers the magnitude and pervasiveness of the changes in the various business sectors and the rapidity with which the transformation is taking place, also due, most recently, to the Covid-19 pandemic[5]. The last few years have seen not only a decisive shift towards the digital transformation of companies and pre-existing business models in order to meet new customer needs, but also the development of new types of companies whose core business is specifically the provision of technological solutions for relevant sectors of industry; for example, Fintech, Medtech and Legaltech.
The insurance industry is no exception[6], as evidenced by the explosion in insurtech investment in recent years[7]. We are therefore witnessing the consolidation of major transformations in business practice and corporate functions at all stages of the value chain, from product design to the anti-fraud function, and the integration of traditional business systems with innovative product and distribution models aimed at meeting the new and different insurance needs of increasingly digital customers.
There are many different factors driving the transformation of the insurance industry. Some of the most important, in terms of market impact and future implications, are: the spread of telematics, the ever-increasing interconnectivity made possible also by the spread of smartphones and the Internet of Things (IoT, which generally refers to the extension of the Internet to the world of real-life objects and places), and the possibility of analysing ever larger masses of (structured and unstructured) aggregated data more and more rapidly, commonly known as “Big Data analysis”[8].
In this framework, the distribution of the so-called on-demand policies and of instant insurance (also known as push insurance) is of particular interest. The concept of instant insurance encapsulates a digital distribution and insurance model that allows companies to satisfy a specific insurance need of customers, with a “here and now” approach, at the time such a need arises. Insurance companies, operating according to the so-called subscription economy[9], meet the growing propensity of customers for instant products, which allow them to satisfy an immediate and short-term need (usually never exceeding one week)[10], leaving them free to choose whether to continue or terminate the relationship at any time, or in any case within a short period of time.
Concurrently, through the use of Big Data analysis, these products appear suitable to ensure a high degree of customisation of the offer and compliance with the needs and specific characteristics of the individual customer, establishing the most direct relationship possible between the actions of the insured and the insurance offer.
In other words, instant insurance enables the insured to select and purchase a specific cover for a specific feared risk, at a reduced price, limited to the time period in which one fears the risk might occur (by way of example only, one could insure a car solely for the period of one trip, taking into account the specific characteristics of the route, the vehicle and the driver, as well as crowd-sourced or official real-time traffic and weather information).
When approaching the insurance digital transformation phenomenon, it is also important to bear in mind that individual innovations do not operate independently of each other; on the contrary, new technologies and new business models must be seen as mutually interdependent.
This is particularly evident with regard to instant insurance, since these micro-policies, which are distributed through apps and other digital channels, can be combined with other new technologies, including smart contracts and blockchains[11]. Hence, this policy model can, for example, benefit from the transparency and security of blockchain and the automaticity of the “if ... then” mechanism offered by smart contracts, with further clear advantages in terms of speed and certainty. In particular, the use of smart contracts can make compensation payment procedures automatic and therefore extremely efficient if the insured event occurs, allowing instant insurance to be instantaneous also in the claim settlement phase, which is particularly important for the insured. It is also evident how the spread of the Internet of Things, as in the case of black boxes, can make it possible to obtain increasingly consistent products, through the constant and punctiform analysis of the behaviour, habits and consequently the needs of the insured, who obtains, in exchange, not only a policy tailored to one’s own contingent needs, but is also rewarded for his or her virtuous conduct through a reduction in premiums.
Using the example of instant insurance for road accidents, customers would not only be able to take out the policy at the beginning of the itinerary, but would also receive an offer tailored to their needs and characteristics and suitable for guaranteeing immediate settlement of the claim (for example, by sending photographs of the damage suffered via the same App)[12].
Usually, when we talk about instant insurance we refer to both the business model and the technology behind it, to the point that it is hard, in this context, to separate these two components. Indeed, these policies, which can be seen as a species of the broader genus of on-demand policies, are nowadays the result of the integration of Big Data analysis and of the increased possibilities for policyholders to take out and manage insurance contracts via the web or app.
As mentioned above, from a commercial point of view, these micro-policies are characterised by their simplicity, speed of take-up and termination, and by the fact that they are taken out remotely, in an automated way, through digital web channels/apps. They can be distributed as stand-alone policies, but very often they are ancillary to or bundled with other non-insurance products. Another key feature of these products is the frequent use of automatic claims settlement mechanisms, often characterised by the parametric nature[13] of the coverage offered[14].
In terms of the technologies involved, instant insurance generally implies the use of a data collection system and a data processing algorithm. With regard to the collection of the customer’s data, a key feature of this type of product is precisely the possibility for the digital distribution platform to be associated with technologies that allow the real-time collection of information on policyholders and their contingent insurance needs, such as, for example: geo-location, payment details, information on habits, etc., which can be combined with data collected by public agencies, such as, by way of example, road information, weather forecasts and updates on flight or train delays and cancellations, to name but a few. As regards the algorithm, it is an artificial intelligence capable of analysing the data collected and of proposing policyholders the most suitable solutions for their immediate and concrete insurance needs. So, the digital platform’s constant monitoring of the state of the insured and the context in which the same interacts, the associated risks and their processing by the algorithm, are translated into an insurance offer that is, to some extent, directly shaped by the customer’s choices, behaviour and habits (this is, of course, on the assumption that customers have consented to the collection and processing of their data for the purpose of the respective profiling).
Product placement can be carried out entirely through an app, whereby the customer receives specific offers from the insurer or insurance broker via a push system. It is interesting to note that said distribution mechanism does not usually leave customers free to take out any insurance solution possible, but only those offered by the app through the presentation of a “menu” of products designed for their current needs. From this point of view, instant insurance leaves very little room for product content customisation during the subscription phase, since the customisation of the offer, often at a very high level, takes place upstream, when the algorithm selects the products to be offered to the customer[15]. Indeed, the processing of Big Data, associated with technologies that allow the real-time collection of information on insureds and the context in which they move, makes it possible to offer customers products in an exact moment, and only in that moment, thus forming a ‘basket’ of ad hoc policies available to the insureds that are constantly being adjusted on the basis of the insureds’ needs and factual circumstances[16].
As is well known, Italian and EU legislation on insurance distribution establishes a series of safeguards to protect the customer, including, in particular, (i) the so-called assessment of consistency of the product with the customer’s needs and requirements (also more commonly referred to as adequacy assessment) and (ii) certain obligations regarding “pre-contractual information” aimed at enabling the customer to make an informed choice[17].
The consistency assessment of insurance products is, in particular, regulated by Article 58 of IVASS Regulation No. 40/18 (as amended by recent IVASS Resolution No. 97/2020).
In a nutshell, said article places the onus on distributors to offer customers contracts that are consistent with their demands and needs. To this end, distributors, before entering into the insurance contract, must obtain from policyholders the information necessary to assess their demands and needs (the so-called demands and needs test)[18], and then, on the basis of the information collected, “and taking into account the type of policyholder and the nature and complexity of the product offered”, provide customers, in a clear and comprehensible form, with objective information on the product, illustrating its characteristics, duration, costs, coverage limits and any other element useful to allow them to make an informed decision.
As regards pre-contractual information obligations, Article 56 of IVASS Regulation No. 40/18 (implementing the provisions of Article 120 of Legislative Decree No. 209 of 07/09/2005), provides that distributors are required, in particular, to deliver to customers (prior to the signing of each proposal or, if not required, prior to the conclusion of each insurance contract):
The purpose of the aforementioned provisions is, first of all, obviously, to protect the weaker party in the relationship (i.e. the customer), and, secondly, to increase public confidence in insurance operators and thus to foster the development of the relevant market. Therefore, if, on the one hand, pre-contractual information and the assessment of the consistency of products fulfil the need to protect insureds from the risk of purchasing products that are useless or in any case unsuited for providing them with adequate cover, at the same time, there is an attempt to protect the insurance sector, traditionally disliked by the public, from mistrust and reputational damage that could result from the distribution of products that are misaligned with the needs and expectations of customers, thereby fuelling dangerous stereotypes, "they don't pay anyway, when the time comes"[19], in a market like the Italian one, which is traditionally under-insured[20].
It should be specified that the legislation under examination, at least in terms of its founding principles, does not seem to provide a homogeneous and standardised application of the aforementioned obligations, disregarding the specificity of the type of products distributed and the respective risks insured. On the contrary, insurance distribution is rooted in the so-called “principle of proportionality”[21], which originates in EU legislation[22].
The principle of proportionality should assume primary value, imposing, on the one hand, the national legislator (as well as the regulator) to provide for rules commensurate with the complexity and relevance of the risks dealt with, and, on the other hand, the intermediary/distributor to adopt procedures and methods of placement suitable for the protection of customers’ interests, but in any case adequate and balanced in relation to the products offered.
Having said that, also in the light of such principle, the distributor of instant insurance should primarily be allowed to assess the consistency of the product offered on the basis, first of all, of the information collected in relation to the insured, through the above-mentioned technologies (geolocation, Big Data analysis, IoT, etc.). Moreover, given the nature and simplicity of the risks usually covered by micro-policies distributed through said remote techniques, the needs and expectations of customers should already be clear from the commercial name of the product, chosen by the customer from the basket of products offered by the distributor, a name that can/must already reflect the actual content of the contract, “so as not to give rise to expectations that do not correspond to the guarantee provided”[23].
To give an example, it is clear that if a consumer, geo-located in a ski resort, inside the ticket office of the ski area, who bought a pair of skis the day before, visits the website of a telematic distributor, and clicks, among the products offered by the platform, on a product named “Ski safe, a policy covering the skier’s medical expenses in case of accidents”, the adequacy assessment can be said to be practically fulfilled on the basis of the information available to the platform, in addition to the choice made by the customer (when clicking, among the products offered, on the box relating to the desired policy).
All the more so, when a policy is sold in concomitance with another non-insurance product, the very characteristics of that product (together with the information on the context in which it is purchased, the characteristics of the customer making the purchase, etc.), intrinsically contribute to clarifying the customer’s insurance needs (think of travel cancellation insurance policies combined with the purchase of air tickets).
So, the simplicity and immediacy of the policies placed (both in stand alone mode, and in combination with other products), and above all their intrinsic connection to a specific identified need (and basically to that need alone), implies, almost automatically (thanks to the modern technologies involved), the possibility of a direct and immediate association between need and offer.
As regards pre-contractual information requirements, insurance distribution regulations do not provide for the application of particular “discounts” for instant insurance, despite the peculiarities of the distribution channels used (apps and web) and the simplicity of the policies placed.
The only compromise is to be found in the aforementioned principle of proportionality, where paragraph 4 of Article 58 of IVASS Regulation 40/18 states that distributors, “taking into account the type of policyholder and the nature and complexity of the product offered, shall provide the policyholder with clear information on the product, illustrating its characteristics, duration, costs, limits of the cover and any other useful element to enable the policyholder to make an informed decision”.
For the rest, also distributors of micro-policies through apps/web platforms, before being allowed to place any insurance product, will be required to provide the customer with all the above-mentioned pre-contractual information provided for by the regulations in force (Annexes 3, 4 and 4 her, DIP and Additional DIP, besides the contractual terms and conditions).
In this regard, it is legitimate to wonder whether said regulatory provisions on pre-contractual information, transferred into the digital context of the distribution of instant insurance, can be said to be proportionate with respect to such methods of placement and to the type of products distributed, and therefore functional to the objectives that the legislator has set with such regulations, or whether, on the contrary, such requirements are to be considered over-regulation. In other words, given the scope of the cover and the commercial purpose of said micro-policies, is it consistent and rational to burden the distributors, and ultimately the customers, with all the formalities mentioned above?
At first glance, the insurance need underlying such micro policies is partly different from that of “traditional” policies. Indeed, the insured who takes out this type of cover needs first and foremost to easily and quickly take out a policy for a contingent insurance need. The policyholder who buys an instant insurance is most likely not sitting comfortably on the other side of the desk of a primary insurance broker, but on the street, busy with other matters, with the need to conclude the purchase of a simple and clear (micro) insurance policy, using his/her smartphone.
In this respect, raise your hand if you have ever purchased a product by surfing the Internet with your mobile phone after having read all the relevant contractual terms and conditions (we lawyers do not do this either; after all, as they say, “the shoemaker’s son always goes barefoot”).
As mentioned, the rationale underlying these provisions should be to ensure that the customer makes an informed choice, but it is equally clear that these provisions have been designed bearing in mind the traditional policy model (characterised by longer insurance relationships, involving a higher degree of complexity and certainly higher premiums), where it is considered necessary for the customer to calmly examine all the information and documentation provided by the distributor before taking out the policy.
On the other hand, in the case of instant insurance, it is quite clear that the customer’s interest in getting “good” insurance is accompanied by an equally important need to get “fast” insurance.
Excessive fervour in satisfying the first of these interests to the detriment of the second, through the necessary and compulsory submission to the customer of the entire set of pre-contractual information in a context in which the customer’s decision is also and above all based on the commercial name of the product and the summary of its main characteristics provided by the application (given the simplicity and short duration of the coverage offered) seems to clash with the commercial purpose underlying these products and the very interests of the customers. Moreover, this over-regulation seems to result in a mere burdening of the purchase process, without any real protection for the customers, who in fact merely scrolls (at best) through the documents submitted to them on their mobile screens, and then proceed (not without some discomfort) to click or tick the relevant box provided, to confirm that they have read and approved the relevant documentation. In the light of the above, the application of pre-contractual information requirements to the distribution of these micro-policies, on the one hand, risks undermining the interest in speed and, on the other hand, does not provide the customer with any additional awareness of the product placed.
Instead, for said types of contracts and distribution methods, effective customer protection should necessarily be pursued further upstream, i.e. in the product construction phase and in the control of the distribution phase.
In this regard, the recent legislation on product oversight and governance (“POG”) requirements, applicable to insurance companies and insurance intermediaries (see Delegated Regulation (EU)2017/2358 and IVASS Regulation No. 45/2020), should avert the risk that a commercial offer for a product with certain characteristics and aimed at a particular target market might result in the placement of a policy that is not in line with the customer’s expectations and needs.
Further safeguards for the protection of customers are set out in the specific provisions regulating the placement of products by means of distance communication techniques, such as, for example, the prohibition to place “unsolicited contracts” or to offer insurance cover in combination with other goods or services by means of opt-out mechanisms (see Article 70 of IVASS Regulation 40/18), or the intermediaries’ obligation to give prior notice to the principal companies of the application of distance selling techniques, indicating the methods and the object of such techniques, and to comply with the instructions given by the companies with reference to the professional use of websites, social network profiles and possible applications (see Article 74 of IVASS Regulation 40/18).
In light of the foregoing, the general application of the aforementioned provisions to instant insurance is therefore likely to burden the underwriting procedures in a context in which speed, simplicity and fluidity in the creation and termination of relationships are of the essence, paradoxically going so far as to produce effects opposite to those intended by the legislator and the regulator.
Therefore, based on the principle of proportionality and in the light of the specificities of these products, simplicity of content and need should reasonably go hand in hand with streamlining and simplicity of purchasing procedures, since the traditional procedures and formalities provided for by the current legislation are not adequately justified and rational in this context.
After all, what would Lady Matilde think, perhaps late for her connection, if, before she could insert her ten cents in the machine at Naples train station, the company had asked her to fill out a series of forms in order to ascertain her interest in insuring herself for a journey for which she had already purchased a ticket, as well as to declare that she had read Annexes 3, 4, 4-ter, the DIP, the Additional DIP and the contractual terms and conditions (perhaps contained in a 30-page booklet hanging on the back of the column)?
The content of this article is for information purposes only and is not, and cannot be intended as, professional advice on the matters dealt with. For further information please contact Michele Zucca, Antonia di Bella and Davide Luigi Totaro
[1] Cfr. article published in Il Mattino di Napoli No. 148 of 30 May 1899, which appeared in Assicurazioni Generali Venezia's monthly bulletin No. 76 of June 1899.
[2] Matilde Serào (born in Patras on 7 March 1856 - died in Naples on 25 July 1927) was a celebrated Italian writer and journalist. Besides being the author of numerous articles and books, she was the first Italian woman to have founded and edited the daily newspapers Il Corriere di Roma and Il Corriere di Napoli, an experience that she later repeated with Il Mattino and Il Giorno. During the 1920s, she was also nominated for the Nobel Prize for Literature six times, but never won it. See the entry Serào, Matilde, at Treccani.it - Enciclopedie on line, Istituto dell'Enciclopedia Italiana (accessed 16 June 2021), https://www.treccani.it/enciclopedia/matilde-serao.
[3] Although these products (on-demand policies and instant insurance) are still purchased by only 2.2% of the insurance target audience (to the point that they can hardly be defined as mainstream), a recent study by the Italian Insurtech Association (IIA) reported an increase of around 112% in market penetration in Italy compared to 2020. IIA, Survey on On Demand Policy Issue 2021 in Digital Customer, 2021 https://www.insurtechitaly.com/public/allegati/Ricerca_PolizzeOndemand_2021.pdf.
[4] The term was first coined by Klaus Schwab, at the World Economic Forum in 2015. The fourth industrial revolution is a way of describing the blurring of boundaries between the physical, digital and biological worlds and deals with a combination of innovations in the fields of artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing and other technologies. Klaus Schwab, The Fourth Industrial Revolution, 2017.
[5] Laura LaBerge, et al. “COVID-19 Digital Transformation & Technology | McKinsey.” McKinsey & Company, McKinsey & Company, 5 Oct. 2020, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever. Gerald Kane, et al. “Digital Transformation through the Lens of COVID-19 | Deloitte Insights.” Deloitte Insights, 6 Aug. 2020, https://www2.deloitte.com/us/en/insights/topics/digital-transformation/digital-transformation-COVID-19.html.
[6] The global insurance industry has been identified in a recent Accenture study as the fourth most disrupted industry to date and by far the most susceptible to future disruption. In particular, the same study found innovation to be one of the key drivers of industry disruption: Accenture, New research points to big changes in insurance industry disruption, 2020, https://insuranceblog.accenture.com/new-research-points-to-big-changes-in-insurance-industry-disruption.
[7] It should be noted that with the sole exception of 2015-2016 over the last 10 years, global investment in Insurtech has steadily increased from USD 348 million to almost USD 7.2 billion in 2020 (a growth of more than 10% compared to 2019). Willis Towers Watson, Quarterly InsurTech Briefing Q4 2020, 2020 — The most important year for InsurTech to date, 2021, https://www.willistowerswatson.com/en-US/Insights/2021/01/quarterly-insurtech-briefing-q4-2020.
[8] Eiopa, Discussion Paper on the (Re)Insurance Value Chain and New Business Models arising from Digitalisation, 14 aprile 2020, https://www.eiopa.europa.eu/sites/default/files/publications/consultations/discussion-paper-on-insurance-value-chain-and-new-business-models-arising-from-digitalisation.pdf. Si veda anche OECD, Technology and innovation in the insurance sector, 2017,https://www.oecd.org/pensions/Technology-and-innovation-in-the-insurance-sector.pdf
[9] The term subscription economy refers to a business model based on subscriptions, whereby goods and services are consumed continuously and periodically on a recurring basis.
[10] Eiopa, Discussion Paper on the (Re)Insurance Value Chain and New Business Models arising from Digitalisation, 21, cit.
[11] It is worth noting that blockchain and smart contracts have been “legitimized” in the Italian legal system by Decree Law No. 135 of 14 December 2018, converted into law by Law No. 12 of 11 February 2019, which in Article 8-ter not only provides a legal definition of the same but also recognizes that, under certain conditions, smart contracts can be regarded as written evidence. https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legge:2018-12-14;135!vig=.
[12] For a more in-depth analysis of the application of smart contract to insurance and future prospects, please see: Angelo Borselli, Smart Contracts in Insurance: A Law and Futurology Perspective. In: P. Marano, K. Noussia (eds) InsurTech: A Legal and Regulatory View. AIDA Europe Research Series on Insurance Law and Regulation, vol 1. Springer, Cham, 2020, https://doi.org/10.1007/978-3-030-27386-6_5.
[13] “Parametric insurance policies are insurance contracts in which the payment of compensation is correlated to the occurrence of a predetermined indicator (reference benchmark), whose performance is constantly recorded and monitored by ‘third parties’ with respect to the insurance company or the insured to ensure independence [...] While traditional insurance [...] is characterised by the fact that the indemnity is paid on the basis of the estimate of the loss suffered by the insured, with parametric solutions the loss is paid when a given indicator deviates from a predetermined indicator, thus eliminating the need for any a posteriori qualification of the loss actually suffered. As a result, parametric insurance differs from traditional non-life policies because claims are settled automatically, and therefore very quickly, once a pre-agreed threshold is reached, based on an independent parameter or set of parameters related to the customer's risks. Therefore, most of the steps typical of the traditional procedure for settling damages are eliminated, given that the payment of the indemnity is linked to reaching the level of the indicator taken as predetermined in advance, and when this occurs, the indemnity is triggered, regardless, therefore, of the customer's requests and subsequent checks and assessments of the damage actually suffered. In other words, parametric policies differ from traditional indemnity policies due to the fact that the right to compensation ‘is no longer related to the actual loss assessed on-site, but to a loss estimated on desk on the basis of specific parameters.” (IVASS, Annex to Statistical Bulletin Insurance business in property and general liability insurance (2013-2018) Year VII - No. 3, March 2020, https://www.ivass.it/pubblicazioni-e-statistiche/statistiche/bollettino-statistico/2020/n3/Allegato_D_GLOSSARIO.pdf).
[14] Eiopa, Discussion Paper on the (Re)Insurance Value Chain and New Business Models arising from Digitalisation, 21, cit.
[15] It is clear that the provision of a high degree of customisation within this type of products would be detrimental to the necessary simplicity of instant insurance and counterintuitive in view of their characteristics and the need for rapid and immediate take-up.
[16] Eiopa, Discussion Paper on the (Re)Insurance Value Chain and New Business Models arising from Digitalisation, 21, cit.
[17] Conduct in breach of pre-contractual information and adequacy assessment requirements laid down in the regulatory framework may lead to the imposition of sanctions by IVASS ranging from €3,000.00 to 10% of the undertaking's turnover (See Article 310 of Legislative Decree No. 209 of 7 September 2005).
[18] Article 58(2) of IVASS Regulation No. 40/18 provides in particular that “distributors shall request information on the personal characteristics and insurance or pension needs of the policyholder or the insured, including, where relevant, specific references to age, state of health, employment, household, financial and insurance situation and expectations in relation to the entering into of the contract, in terms of coverage and duration, also taking into account any insurance coverage already in place, the type of risk, characteristics and complexity of the contract offered”. IVASS has also clarified that said list is not comprehensive, stating that “The concept of ‘consistency’, deriving from the primary rule (Article 119-ter of the Code of Private Insurance) consists in the compliance of the product offered with the requests made by policyholders and therefore its suitability to meet their needs. Paragraph 2 of the article in question outlines, by way of example and without limitation, the information on which the distributor must base its assessment of the consistency of the contract offered with the needs of the policyholder. IVASS, within the scope of its supervisory powers, shall verify the proper application of the provision” (Cfr. IVASS, Consultation Document No. 5/2018, 276-291, https://www.ivass.it/normativa/nazionale/secondaria-ivass/esiti-pubb-cons/2018/reg40-epc/Esito_Pubblica_Consultazione_Regolamento_IVASS_40_2018.pdf).
[19] Alessandro Bugli, Coerenza dei prodotti assicurativi: meno burocrazia e più attenzione alle tutele, in Il Punto – Pensioni e Lavoro (visited on 4 May 2021): https://www.ilpuntopensionielavoro.it/site/home/assicurazioni/coerenza-dei-prodotti-assicurativi-meno-burocrazia-e-piu-attenzione-alle-tutele.html.
[20] On the underinsurance of the Italian market, see the speech of the President of IVASS Fabio Panetta of 20 September 2019: Panetta (Ivass), Italia sotto-assicurata cronica, in Assinews.it (visited on 15 June 2021): https://www.assinews.it/09/2019/panetta-ivass-italia-assicurata-cronica/660066866/?cli_action=1623853569.815.
[21] Said principle is expressed precisely with regard to pre-contractual information and assessment of consistency through the specific exclusion from the application of certain provisions for so-called “major risks” (See Article 56 paragraph 9, and 58 paragraph 9 of IVASS Regulation No. 40 of 2 August 2018), and through the more general albeit implicit reference to an application proportional to the complexity of the product in the same Article 58, paragraph 4 of Regulation No. 40/2018.
[22] “This Directive should not be too burdensome for small and medium-sized insurance and reinsurance distributors. One of the tools by which to achieve that objective is the proper application of the proportionality principle. That principle should apply both to the requirements imposed on the insurance and reinsurance distributors and to the exercise of supervisory powers” Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016, Recital No. (72), https://eur-lex.europa.eu/legal-content/IT/TXT/PDF/?uri=CELEX:32016L0097&from=it. It is worth noting that the aforesaid principle was already to some extent part of the legislation on insurance distribution in our system before the introduction of the IDD, as witnessed by the results of the public consultation of previous ISVAP Regulation No. 5/06, which, with regard to adequacy, clarified that “in the event of extreme simplicity of the cover and its compulsoriness by law, it is left to the assessment of the intermediary to choose not to acquire any information, deeming the contract in itself adequate”. ISVAP, Outcome of the public consultation Regulation No. 5 of 16 October 2006, 81, https://www.ivass.it/normativa/nazionale/secondaria-ivass/esiti-pubb-cons/2006/r05-epc/index.html.
[23] Cf. IVASS letter to the market, 14 March 2018, “Re: Simplification of insurance contracts - Guidelines of ANIA- CONSUMER ASSOCIATIONS- INTERMEDIARY ASSOCIATIONS Technical Table for simple and clear contracts”.
