New draft KNF recommendations on insurance distribution: What will they mean for foreign insurers?
The Polish Financial Supervision Authority (KNF) has published its draft Recommendations for Insurance Undertakings on Insurance Distribution. The recommendations are to be issued under Art. 365(1)(2)(a)–(c) of the Insurance and Reinsurance Act of 11 September 2015 and are designed to ensure legal compliance by insurers, to combat infringement of the interests of policyholders, insureds and beneficiaries, and to mitigate risks in the insurers’ operations.
As KNF signals, the recommendations are intended to ensure consistent application of the regulations by insurance companies and to eliminate identified irregularities in the distribution of insurance by insurers operating directly or in conjunction with insurance brokers or agents. Another key goal of issuing the recommendations is to prevent the offering of insurance that does not align with customers’ needs or provides low value to customers.
The recommendations are to replace the Guidelines for Insurance Undertakings on Insurance Distribution of 24 June 2014. The new draft represents a complete overhaul of the existing supervisory standards in this area.
Recommendations 4–28 and foreign insurers—the principle of the general good
A key issue from the perspective of foreign insurers operating in Poland is what entities are covered by the proposal. According to the draft, “The Recommendations are directed to Polish insurance undertakings, the main branches of foreign insurance undertakings, and—with respect to recommendations 4 through 28, under the principle of the general good—foreign insurance undertakings with their registered office in member states of the European Free Trade Agreement which are parties to the Agreement on the European Economic Area, carrying out insurance activity in the territory of the Republic of Poland under the freedom of establishment (via a branch) or under the freedom to provide services.”
This means that foreign insurers operating transnationally on the Polish market (based on notification, without opening a branch) are also subject to a significant portion of the proposed new recommendations. The “principle of the general good” mentioned by KNF alludes to the “overriding public interest” clause. It should be explained that regardless of the form in which a foreign insurance company operates in Polish territory, it is obliged to comply with Polish legal regulations insofar as required for protection of the overriding public interest (Art. 205(1) of the Insurance and Reinsurance Act).
The concept of “overriding public interest” is defined in the Art. 3(3) of the Act on the Rules for Participation by Foreign Undertakings and Other Foreign Persons in Commerce in the Territory of the Republic of Poland of 6 March 2018 as “a value subject to protection, in particular public order, public safety, state security, public health, maintaining the financial stability of the social insurance system, protection of consumers, service recipients and employees, integrity in commercial transactions, combating abuses, protection of the natural and urban environment, animal health, intellectual property, the aims of social and cultural policy, and protection of the national historical and artistic heritage.”
It is clear from this definition that the Polish legal regulations extend to a surprisingly broad catalogue of issues which may be directly or indirectly connected with values protected by the overriding public interest clause. This, in turn, is defined by KNF as “the general good.”
An overview of recommendations 4–28
Below we present a brief overview of the recommendations that are covered by the principle of the general good, and are thus also directed to foreign insurance undertakings.
| Organisation of insurance distribution activities | |
| Recommendation 4 | The insurance undertaking shall ensure that its distribution activities are performed solely by distribution personnel meeting the conditions set forth in the Insurance Distribution Act. |
| Recommendation 5 | The insurance undertaking shall have internal policies and solutions in place for overseeing distribution personnel in their performance of distribution activities. |
| Recommendation 6 | The insurance undertaking shall ensure that the manner of compensating distribution personnel is consistent with the duty to act in the best interests of customers. |
| Construction of insurance products | |
| Recommendation 7 | The insurance undertaking shall ensure that it distributes products with appropriate value for the customer. This principle is not met, in particular, when the present value of the anticipated costs of compensation and benefits is less than 30% of the present value of the gross insurance premiums (or in the case of low premiums, less than 20%). |
| Insurers’ obligations to customers when conducting their own distribution | |
| Recommendation 8 | The insurance undertaking shall ensure the proper conduct, form, and documentation of the customer needs analysis. |
| Recommendation 9 | The insurance undertaking shall have solutions in place ensuring that the proposed insurance contracts meet the customer’s requirements and needs for insurance protection. |
| Recommendation 10 | In performing its informational obligations, the insurance undertaking shall enable customers to familiarise themselves with information and documents. |
| Insurers’ cooperation with agents | |
| Recommendation 11 | The insurance undertaking’s oversight of agents shall include effective verification that they meet the conditions for performing agency activity. |
| Recommendation 12 | The insurance undertaking shall have internal policies and solutions in place to ensure the accuracy of data entered at its request in the register of agents. |
| Recommendation 13 | The insurance undertaking shall provide support to agents in ensuring that the agency activities they perform comply with the legal regulations and the best interests of customers. |
| Recommendation 14 | The insurance undertaking shall oversee the quality of informational materials, including advertising and marketing materials, used by agents in connection with performance of their agency activities. |
| Recommendation 15 | The insurance undertaking shall ensure that the manner of compensating agents is consistent with the agents’ duty to act in the best interests of customers. |
| Recommendation 16 | The insurance undertaking shall support agents in meeting their training obligation, in the case of persons required to undergo training, and shall oversee implementation of this obligation. |
| Recommendation 17 | The insurance undertaking shall oversee compliance by cooperating agents with the obligation to hold civil liability insurance or an insurance guarantee, as required by the Insurance Distribution Act. |
| Recommendation 18 | If the insurance undertaking entrusts the distribution of insurance to a group of agents, including agents operating in a consortium, it shall take measures to ensure that their activities comply with legal regulations and the best interests of customers. |
| Recommendation 19 | If irregularities are found in the agent’s activities due to the agent’s lack of proper supervision of a natural person assisting the agent in performing its agency activities, the insurance undertaking shall take action. |
| Recommendation 20 | The insurance undertaking shall exercise effective oversight of agents. |
| Insurers’ cooperation with brokers | |
| Recommendation 21 | The insurance undertaking shall cooperate with brokers on the basis of clear rules. |
| Recommendation 22 | The rules for compensating brokers adopted by the insurance undertaking shall reflect the specific nature of brokerage activity. |
| Recommendation 23 | The insurance undertaking shall document its cooperation with brokers. |
| Insurers’ cooperation with undertakings referred to in Art. 2 of the Insurance Distribution Act (i.e. distributors of certain add-on coverage for products, lost baggage, trip cancellation etc – in particular related to embedded insurance) | |
| Recommendation 24 | In cooperating with undertakings referred to in Art. 2 of the Insurance Distribution Act, the insurance undertaking shall take steps to ensure that they properly perform their obligations to customers. |
| Recommendation 25 | The insurance undertaking shall ensure that in carrying out their informational obligations, the undertakings referred to in Art. 2 of the Insurance Distribution Act enable customers to familiarise themselves with information and documents. |
| Recommendation 26 | The insurance undertaking shall ensure that the manner of compensating undertakings referred to in Art. 2 of the Insurance Distribution Act is consistent with the duty to act in the best interests of customers. |
| Group insurance contracts | |
| Recommendation 27 | In the case of group insurance contracts, the insurance undertaking shall take steps to ensure that information is passed on concerning insurance coverage or denial of coverage, as well as the terms of the insurance. |
| Conflicts of interest | |
| Recommendation 28 | The insurance undertaking shall identify and manage conflicts of interest. The undertaking must have appropriate internal policies in place including inter alia specification of the units responsible for identifying conflicts of interest, procedures to be followed, and maintaining a log of identified conflicts of interest—identifying not only conflicts of interest which have materialised, but also potential conflicts of interest. |
Consultations continue through the end of March
Publication of the draft KNF Recommendations for Insurance Undertakings on Insurance Distribution is a key signal for the entire insurance market in Poland—both Polish and foreign entities.
Public consultations on the proposal are ongoing until 31 March 2026. Until then, any stakeholder, including foreign insurance companies, can submit comments to the Office of the Polish Financial Supervision Authority.
This is a important opportunity to actively contribute to the final wording of rules that could directly impact the model for insurance distribution on the Polish market.
Mateusz Kosiorowski, adwokat, Klaudiusz Mikołajczyk, Insurance practice, Wardyński & Partners
