Recommendation 2013-R-01 of January 8, 2013 on the collection of information regarding client knowledge for the exercise of the duty of advice and the provision of personalized recommendation services in life insurance, modified on February 21, 2020

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Online publication on the ACPR website on March 12, 2020 Recommendation 2013-R-01 of January 8, 2013 on the collection of information regarding client knowledge for the exercise of the duty of advice and the provision of personalized recommendation services in life insurance, modified on February 21 2020

1. Context
   For the marketing of a life insurance contract, the insurance company, in the absence of intermediation, or the insurance intermediary must inquire about the subscriber's requirements and needs, their financial situation, their subscription objectives, as well as their knowledge and experience in financial matters. The collection of this information is a prerequisite for the exercise of the duty of advice in life insurance, which requires the professional to propose a contract appropriate and consistent with their requirements and needs. Introduced into law by Ordinance No. 2009-106 of January 30, 2009, these obligations were confirmed by Ordinance No. 2018-361 of May 16, 2018, which transposed Directive (EU) 2016/97 on the distribution of insurance (DDA). This transposition also introduced into law the possibility for intermediaries or insurance companies to provide their client with a personalized recommendation service also based on information collection from clients.

In practice, professionals often use questionnaires through which they collect the information necessary for the exercise of their duty of advice1.
The analysis of documents and practices observed on the market as well as the information and complaints received regarding the collection of information led the ACPR and the AMF to clarify their expectations regarding the collection of information related to client knowledge. These were translated in 2013 by an ACPR recommendation intended for insurance companies and insurance intermediaries, and by an AMF position intended for investment service providers and financial investment advisors.

1 To be distinguished from the anti-money laundering and counter-terrorist financing framework that the entities referred to in Article L. 561-2 of the Monetary and Financial Code must put in place.

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The various European legislative developments and their entry into force in national law since the establishment of this recommendation in its version of January 8, 2013 have been implemented by the two authorities as follows:

• Following the entry into application of Directive 2014/65/EU concerning financial markets in instruments (MiFID II), the AMF position is under revision and now recommends the application of Delegated Regulation (EU) 2017/565 and ESMA guidelines concerning certain aspects related to the suitability requirements of the MiFID II Directive;
• Following the entry into application of the DDA and Delegated Regulation EU 2017/2359, the ACPR wished to bring developments to the recommendation in its version of January 8, 2013.
  The National Commission on Informatics and Liberty (CNIL) was consulted to ensure compliance with regulations regarding the protection of personal data, in particular Regulation EU No. 2016-679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (GDPR) and Law No. 78-17 on informatics, files and freedoms.

2. Reminder of the legal and regulatory framework
   2.1. On the different levels of advice in life insurance and the application of Delegated Regulation (EU) 2017/2359
   Article L. 522-5 of the Insurance Code provides for two levels of advice in life insurance.
   Paragraph I of Article L. 522-5 of the Insurance Code2 states that "the intermediary or the insurance or capitalization company specifies in writing the requirements and needs expressed by the potential subscriber or the potential member, as well as the reasons justifying the appropriateness of the proposed contract. [...] To this end, this intermediary or this company inquires with the subscriber or the member about their financial situation and their investment objectives, as well as their knowledge and experience in financial matters." These provisions describe the obligations incumbent on all intermediaries, insurance companies, and capitalization companies for the exercise of their duty of advice and the assessment of the appropriateness of life insurance and capitalization contracts.

Without prejudice to the aforementioned provisions, Paragraph II of Article L. 522-5 states that "when a personalized recommendation service is provided by the intermediary or the insurance or capitalization company to the potential subscriber or the potential member, this service consists of explaining to them in what way, among different contracts or different investment options within a contract, one or more contracts or options are more adequate to their requirements and needs and in particular more adapted to their risk tolerance and their capacity to suffer losses." These provisions introduce the option for an intermediary, an insurance company, or a capitalization company to provide, in continuation of their obligation of advice and information, a personalized recommendation service. This service is based on a comparative analysis of different insurance solutions in order to recommend to the client those that will best meet their requirements and needs. The provision of this service entails an assessment of the suitability of the recommended contract(s).

Intermediaries, insurance companies, or capitalization companies that provide a personalized recommendation service within the meaning of Article L. 522-5 of the Insurance Code are subject to the provisions of Sections 1 and 3 of Chapter III of Delegated Regulation (EU) 2017/2359. For the application of the provisions of Section 1 of Chapter III of said regulation, the term "personalized recommendation service" should be understood where the term "advice" is mentioned in the regulation3.

Intermediaries, insurance companies, or capitalization companies that do not provide a personalized recommendation service within the meaning of Article L. 522-5 of the Insurance Code are subject to the provisions of Sections 2 and 3 of Chapter III of Delegated Regulation (EU) 2017/2359.

Furthermore, the second paragraph of Article L. 522-6 of the Insurance Code places on the intermediary, the insurance company, or the capitalization company a duty of warning, prior to the conclusion of the contract, if the subscriber or the member does not provide the information mentioned above.

2.2. On the obligations regarding the nature of information to be collected provided by Delegated Regulation (EU) 2017/2359
Regarding the nature of information to be collected concerning the client's knowledge and experience, Article 17-1 of the regulation4 states that this information "includes, where appropriate, the following elements, to the extent appropriate to the type of client and the nature and type of product or service offered or requested, including its complexity and the associated risks:
a) the types of services, transactions, investment products based on insurance or financial instruments that are familiar to the client or potential client; b) the nature, number, value, and frequency of the client's or potential client's transactions on investment products based on insurance or financial instruments, and the period during which these transactions were carried out; c) the level of education and the profession or, if relevant, the former profession of the client or potential client."

Regarding information related to the client's financial situation, Article 9-35 of the regulation states that this information "includes, where appropriate, information on the source and importance of their regular income, their assets, including liquid assets, their investments as well as their real estate and their regular financial commitments."

Regarding information related to the client's investment objectives, Article 9-46 of the regulation states that this information "includes, where appropriate, information on the duration for which the client or potential client wishes to retain the investment, their risk-taking preferences, their risk profile, as well as the purpose of the investment."

Regarding the two preceding paragraphs, the regulation states that "the level of information collected is adapted to the specific type of product or service considered."

2.3. On the obligations regarding the nature of information to be collected as defined in Article L. 224-29 of the Monetary and Financial Code during the marketing of an individual retirement savings plan
Ordinance No. 2019-766 of July 24, 2019, carrying out the reform of retirement savings taken in application of the PACTE law, provided specific provisions for the exercise of advice during the marketing of individual retirement savings plans (PERI). These specific provisions apply without prejudice to other information and advice obligations applicable. In particular, for PERIs involving membership in a group insurance contract, they do not replace the provisions of Article L. 522-5 of the Insurance Code, which remain fully applicable.

Thus, Article L. 224-29 of the Monetary and Financial Code states that "the manager of the retirement savings plan or the authorized provider for the distribution of the retirement savings plan, based on the situation of the potential holder, their knowledge and experience in financial matters, their long-term investment horizon, their expected return, and their needs for retirement preparation, proposes an appropriate plan and informs them of the characteristics of this plan, particularly the financial management methods, the conditions for the availability of savings, as well as the applicable tax and social regime, in order to allow them to make an informed decision."

2.4. On the obligations regarding the reliability of collected information provided by Delegated Regulation (EU) 2017/2359
Article 107 of the regulation states that "insurance intermediaries and insurance companies take all reasonable measures to ensure that the information collected concerning their clients and potential clients for the purpose of assessing suitability is reliable. These measures include, without limitation, the following elements:
a) ensure that clients are informed of the importance of providing accurate and up-to-date information; b) ensure that all tools used for suitability assessment, for example those used to establish risk profiles or to assess client knowledge and experience, are adapted to the intended purposes and properly designed to be used with their clients, with any limitations identified and resolutely mitigated during the suitability assessment process; c) ensure that the questions asked within the framework of the process are understandable by clients and allow to accurately reflect their objectives and needs and to collect the necessary information to perform the suitability assessment; d) take appropriate measures to guarantee the consistency of client information, for example by examining whether the information they have communicated contains obvious inaccuracies."

Finally, Article 17-48 of the regulation provides that "the insurance intermediary or the insurance company is entitled to rely on the information provided by their clients or potential clients, unless they know, or should know, that the information is obviously outdated, erroneous, or incomplete."

2.5. On the obligations regarding the retention of information provided by Delegated Regulation (EU) 2017/2359
Article 19-19 of the regulation provides that "without prejudice to the application of [GDPR], insurance intermediaries and insurance companies keep a record of the suitability or appropriateness assessments carried out under Article 30, paragraphs 1 and 2, of [DDA]. These records include in particular the information obtained from the client and any document agreed with them, including documents defining the rights of the parties as well as the other conditions under which the insurance intermediary or the insurance company will provide services to the client. These records are kept for at least the duration of the relationship between the intermediary or the insurance company and the client."

Article 19-410 of the regulation specifies that "the records are kept on a medium that allows the storage of information in such a way that they can be consulted later by the competent authority. The competent authority is able to access them easily, reconstruct each element clearly and precisely, easily identify any change, correction, or other modification, and return to the content of the records prior to these modifications."

Furthermore, regarding rules applicable to personal data protection, falling under the competence of the CNIL, professionals marketing life insurance contracts are required to respect the principle of relevance and proportionality of collected data with regard to the purpose of the processing in order to ensure compliance with the principles of the Law of January 6, 1978 and the GDPR.

In accordance with the provisions of Articles 12 to 22 of the GDPR and Article 48 of the Law of January 6, 1978, professionals marketing life insurance contracts must provide concise, clear, and understandable information as applicable:

• under Article 13 of the GDPR when personal data (PD) are collected from the insurance candidate;
• under Article 14 of the GDPR when PD were not collected directly from the insurance candidate.

3. Scope of the recommendation
   This recommendation formulates recommendations addressed to insurance and capitalization companies governed by the Insurance Code, mutuals or unions governed by Book II of the Mutual Code, and provident institutions governed by the Social Security Code (hereinafter, "insurance companies") and insurance intermediaries, including when these insurance companies or insurance intermediaries operate in France under the freedom to provide services or freedom of establishment. The recommendation covers the marketing of contracts mentioned in Article L. 522-1 of the Insurance Code, hereinafter "life insurance contracts", with the exception of contracts referred to in Article L. 441-1 of the Insurance Code, both with physical presence of the parties and by distance selling. It recommends best practices to intermediaries and insurance companies regarding information collection from clients for the exercise of the duty of advice and the provision of a personalized recommendation service. Insurance companies and insurance intermediaries can implement the recommendation taking into account the complexity of the proposed insurance contract.

10 This article belongs to Section 3 of Chapter III of the regulation and is applicable both for the assessment of appropriateness and for the assessment of suitability.

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4. Recommendation
In order to provide the client with advice or a personalized recommendation service, the ACPR recommends, in accordance with the provisions of Articles L. 612-1, II 3°, and L. 612-29-1, second paragraph, of the Monetary and Financial Code, to insurance companies and insurance intermediaries:

4.1. On the methods of collection and traceability of information
4.1.1. To inform the client that the collection of information is carried out in their interest and has the purpose of delivering appropriate advice or a personalized recommendation service adapted to them.
4.1.2. To collect client information using clear, precise, and understandable questions. The implementation of an appropriate decision tree, for example in the form of logical questioning, can allow for proportionate questioning.
4.1.3. In order to improve the quality of collected information:

• to draw the client's attention to the fact that providing complete and sincere information is an indispensable condition for delivering adapted advice;
• to accompany the client during the assessment process by providing them with the information allowing them to understand the questions and their purpose;
• to invite the client to make necessary modifications when the provided information presents obvious inconsistencies between them.
  4.1.4. To put in place an internal procedure on the methods for updating collected information (periodicity, nature of changes in the client's situation likely to modify the profile, etc.).
  4.1.5. To update, as necessary, previously collected information so that the advice or personalized recommendation service provided is adapted to the client's profile:
• at the time of subscription of the life insurance contract;
• on the occasion of a new payment, a partial redemption, or an arbitrage between funds, when these operations are likely to lead to a significant modification of the life insurance contract.
  4.1.6. To ensure the traceability of collected information by:
• verifying that the information collection document has indeed been handed over to the client or made available to them, for example in the case of distance selling;
• ensuring the conservation of collected information and their accessibility, throughout the relationship with the client and beyond, in accordance with the rules attached to the statute of limitations.

4.2 On the content of information
4.2.1. To collect information, when relevant, on the client's family, asset, and professional situation. The relevance of the collected information is analyzed with regard to the contracts subscribed.

This information could include:

• regarding the family situation, information on:
  • the identity of the client, tax residence, the marital regime of spouses, the identity and number of dependents (for example, child, protected adult), their age,
  • where applicable, the spouse/PACS partner (for example, identity, age);
• regarding the asset situation, information on:
  • the client's income (for example, nature, amount, and frequency) and, where applicable, the spouse/PACS partner's income,
  • the client's current and possibly future expenses as well as factors likely to influence them,
  • savings capacity,
  • the composition, liquidity, and availability of assets, and the indicative value of asset elements (for example, main residence, secondary residence, savings and investment products),
  • financial charges (for example, mortgage loan repayment),
  • the share of assets that the client intends to invest;
• regarding the professional situation, information on:
  • the professional situation of the client and the spouse/PACS partner,
  • where applicable, the expected date of retirement.

4.2.2. To inquire about the client's knowledge and experience in financial matters using questions:

• not relying exclusively on self-assessment by the client;
• distinguishing theoretical knowledge and the holding of savings and investment products;
• relying in particular on:
  • information on the current or past holding of savings and investment products, their management mode (for example, direct management, managed portfolio, advised management),
  • the existence of gains realized or losses already suffered on different savings and investment products, and the client's reaction to these gains or losses.

4.2.3. To determine the client's subscription objectives and investment horizon by:

• proposing a list of subscription objectives (for example, retirement preparation, transmission of capital upon death, building a precautionary savings, long, medium, or short-term investment), explaining them, and offering the possibility to prioritize them;
• questioning the client on the envisaged duration of the investment.

4.2.4. To objectively determine the client's profile with regard to the return expected by the client and the level of risk they are ready to support by:

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• drawing its attention to the fact that a high yield is likely to entail significant risk, relying, where appropriate, on several scenarios for the evolution of savings (yield, possibility of quantifying what the client is willing to lose or gain, probability of occurrence, etc.);
• defining in a comprehensible and precise manner the different profiles and, where appropriate, technical and/or complex terms;
• relying mainly on questions related to investment.

4.2.5 During the collection of information to provide a personalized recommendation, to deepen the content of the information collected, particularly those referred to in point 4.2.4 of this recommendation for the purposes of assessing the client's risk tolerance and capacity to bear losses.

4.3 On the exploitation of information

4.3.1 To identify and manage responses that are manifestly inconsistent with each other and/or incomplete provided by the client by:

• putting in place alert mechanisms during the collection of information;
• drawing, where appropriate, the client's attention to this situation (for example, information on their financial situation, their subscription objectives, and their knowledge and experience in financial matters).

4.3.2 To exploit all the information collected necessary to determine the client's profile and provide them with adapted advice.

4.3.3 To ensure that the persons in charge of marketing have sufficient knowledge to exploit the tools and/or documents for collecting information.

4.4 On the means and procedures put in place

4.4.1 To implement the necessary means and procedures to ensure compliance with client protection rules regarding the collection of information related to client knowledge.

4.4.2 For entities required to have an internal control system:

• to take into account in the internal control system the methods of collection, management, and exploitation of information provided by the client as well as the functioning of the tool used;
• to be able to justify to the ACPR the means and procedures put in place for the collection of information related to client knowledge.

This recommendation, as amended, is effective from the date of its publication and applies to marketing acts subsequent to this date.