The Importance of EU Soft Law in Insurance Distribution: The Case of Poland

This represents a departure from the traditional perception of soft law as an instrument set aside for the EU to carry out activities of a purely supportive, coordinating or complementary nature to the actions of member states. In terms of the functioning of the EU single financial market, the legislator has equipped supervisory authorities (national and EU) with the power to issue soft law, which not only interprets the provisions contained in directives and regulations, but also supplements and clarifies their provisions.

The author indicates that there is a trend away from binding, binding norms of insurance market law toward issuing rules and soft law. Although soft law is not legally binding it can often pave the way for legally binding standards (it can lead to the initiation of legally binding standards). The actual effectiveness of soft law becomes important especially in those areas where there is a lack of legal regulation or there are loopholes, most recently in the field of new technologies.

Opinions, resolutions, recommendations, list of warnings of supervisory authorities (national and EU) do not have legal binding force (binding), but they have certain effects in the sphere of law and as also enforce their application on participants of the insurance market (insurance distributors, customers).

This article is largely concerned with the new instrument of supervision of the insurance market, which are recommendations issued by EIOPA and the Insurance Supervisory Commissions (in Poland). In particular, the location of recommendations within the legal system, the procedure for issuing them, as well as the assessment of the impact of recommendations on the proper and safe functioning of insurance distribution will be considered. In addition, the article attempts to assess whether the past actions of the supervisory authorities are appropriate and whether soft law is an appropriate and effective supervisory instrument in terms of eliminating regulatory gaps.

The tasks of EBA, ESMA i EIOPA (hereinafter referred to as the Authorities or ESA) have been specified in Regulations (EU) 1093/2010, ² 1094/2010 ³ and 1095/2010, ⁴ and they are similar, with certain differences following from the characteristic features of the specific market segments (banking, investment, insurance) in which the Authorities operate.

Micro-prudential oversight is a type of external supervision of individual nature, exercised by administrative authorities. It is a manifestation of state intervention in the functioning of the financial market and economic activities of an entrepreneur (financial institution and financial intermediary). This supervision is exercised so as to ensure proper functioning of the internal financial market of the European Union. In a broad sense, the oversight implements the licensing function (by granting authorizations for the establishment of an entrepreneur and initiation of business, permits for appointing particular persons as members of the management board), the regulatory and administrative review functions, current (prudential) supervision, ⁵ consolidated supervision ⁶ and supplementary supervision. ⁷ In a narrower sense – it covers the activities of defining, applying and enforcing prudential standards. Prudential standards define specific operative models intended to ensure the security and stability of operations of supervised institutions. Their application allows to cut down the risk to an appropriate level, which translates into the security of the entire financial system. One of the instruments of intervention of EBA, ESMA and EIOPA in the internal financial market of the EU is the delivery of guidelines and recommendations addressed to appropriate national supervisory authorities or financial market operators (financial institutions). Although the guidelines have no binding force, in certain cases, once the conditions of the EIOPA regulation are met, the national supervisor may be bound by the actions and decisions of the ESAs, which have so far had soft functions such as signalling, warning and coordination. ⁸

The question of legal status of recommendations adopted by KNF has been given much attention in Polish literature. ²⁰ KNF recommendations are an instrument of influence on the financial (banking, insurance and investment) market operators and, therefore, according to the principle of legality and in the interest of legal transactions, the basis for their adoption should be clearly stipulated in the provisions of law. The principle of legality has been expressed in Art. 7 of the Constitution of the Republic of Poland, and it consists in the requirement imposed on public authorities to act under and within legal provisions. ²¹

According to Art. 365 of the Act of 11 September 2015 on insurance and reinsurance activities, ²² KNF was given the right to issue recommendations addressed to insurance and reinsurance undertakings ²³ to an extent necessary to implement guidelines and recommendations adopted by EIOPA in accordance with Art. 16 of Regulation (EU) 1094/2010. ²⁴ EIOPA may deliver guidelines and recommendations addressed to appropriate authorities supervising the insurance market which operate in the Member States. Accordingly, so as to enable KNF to legally introduce in the Polish insurance market EIOPA’s guidelines and recommendations addressed to national insurance and reinsurance undertakings, it was necessary to vest such an instrument of impact in the supervisory authority. It must be emphasized that the Act on insurance and reinsurance activities confers on KNF the power to adopt guidelines to an extent necessary to implement EIOPA guidelines and recommendations delivered under Art. 16 of Regulation (EU) 1094/2010. Moreover, the legislator, under Art. 365 (1) item 2 u.d.u.r., confers on KNF also the power to adopt guidelines for the following purposes:

In the light of the above, the Act on insurance and reinsurance activities provides for extensive powers of KNF to deliver guidelines whenever the supervisory authority ascertains a violation to legal provisions or infringement of interests of policyholders, insured persons, beneficiaries, or threats to the fulfilment of obligations (implementation of EIOPA guidelines and recommendations probably fits also into the purposes specified under Art. 363 (1) item 2 u.d.u.r.). In the explanatory memorandum of the draft u.d.u.r., it was argued that adoption of such guidelines would allow for quick reaction (communication) of the supervisory authority when the authority identified a risk of unlawful behavior of insurance or reinsurance undertakings without a need to initiate individual proceedings. At the same time, this would also guarantee to supervised entities access to knowledge about the position of the supervisory authority in respect of proper operation of the insurance market.

Another important novelty introduced in Art. 365 u.d.u.r. is the possibility left to an insurance or reinsurance undertaking to declare that the undertaking does not intend to comply with the recommendation. ²⁶ This refers to situations in which an insurance undertaking does not comply with the recommendations of the supervisory authority delivered in implementation of EIOPA guidelines and recommendations. In such situation, the insurance undertaking is obliged to notify that to KNF, and the latter is obliged to publicize (disclose) the information.

Such legal solution confirms previous opinions expressed in literature of the subject that recommendations are standards of conduct recommended by KNF, whose observance cannot be enforced by the supervisory authority through imposing sanctions. Recommendations should be approached as instructions for conduct, making an instrument of preventive impact on insurance practice. Nevertheless, this legal solution can be treated as an additional element reinforcing the protection of the customer of an insurance service through information in the form of public warning about non-compliance of insurance undertakings with recommendations adopted by KNF. Such obligation is prescribed under statutory law, which obligates KNF to make available to the public information on the insurance undertakings that decided not to follow the recommendations of the supervisory authority. Such publicized information can be an obstacle for insurance undertakings to acquire new customers, and for the existing customers – and inspiration to change the insurer in the future. In situations when recommendations are adopted by KNF for the purposes laid down in Art. 365 (1) item 2 u.d.u.r., the legislator also leaves an option to an insurance undertaking to not to comply with the instrument delivered. However, in such event, the legislator imposes on the insurance undertaking a requirement to indicate the methods according to which the undertaking is going to achieve the purposes of conduct laid down in the guidelines. Information about the scope of non-compliance with the provisions of the recommendation and information about the methods of achieving the purposes laid down in the recommendation must be provided by the insurance undertaking to the supervisory authority, and the authority makes the information publicly available. It should be emphasized that provision of such information is an obligation of insurance undertakings. As a consequence of the above, when it comes to recommendations delivered by KNF to insurance undertakings as a part of implementing the purposes laid down in Art. 365 (1) item 2 u.d.u.r., an insurance undertaking has no real possibility to opt out of implementing the recommendation, however, the undertaking is free to choose the methods according to which it is going to achieve the purposes laid down in the instrument (there is no leeway when it comes to the implementation of purposes, however, the addressee is in a position to achieve the purposes through means chosen at the addressee’s discretion). An analysis of the discussed provision leads to a conclusion that the insurance undertaking must implement the recommendation, possibly, using methods other than the ones indicated by KNF.

As a result, it should be concluded that, in the applicable provision of Art. 365 u.d.u.r., the legislator points to instruments adopted in implementation of EIOPA recommendations – and they are non-binding on insurance undertakings both when it comes to the means and purposes. ²⁷ On the other hand, other recommendations are binding on insurance undertakings when it comes to implementing the purposes, and non-binding when it comes to the means of such implementation. ²⁸

Therefore, a question arises what happens if the insurance undertaking does not comply with the recommendation adopted by KNF under Art. 365 (1) item 2 u.d.u.r., which is identified in the course of ex-post supervision. By their very nature, recommendations do not belong to the category of legally binding legislative acts, and KNF may not enforce their observance by the insurance undertaking through supervisory measures. As a result, de lege ferenda, it would be legitimate to introduce a legal provision under which, in case of an omission to provide information about the lack of intention to follow an adopted recommendation by an insurance undertaking, the supervisory authority would be empowered to publish such information ex officio. Such public information, announced as a warning, would reinforce protection of the customer of an insurance service. In practice, it can be imagined that an insurance undertaking does not comply with the obligation to provide KNF with information about non-following the recommendation.

The Act also contains a provision on the statutory obligation to conduct consultations of a draft recommendation with interested parties and institutions and to assess predictable social and economic consequences (in terms of costs and benefits) of the instrument before preparing the draft guidelines. ²⁹

Therefore, it seems legitimate to say that recommendations are standards of conduct recommended by KNF whose observance, however, cannot be enforced through state coercion. ³⁰ These are general and abstract norms, being a reaction of the supervisory authority to identified threats to the operation of insurance undertakings. They should be approached as instructions (principles) of recommended conduct. Therefore, the opinion expressed in literature seems legitimate that recollection of such principles is not legislating but fulfilling the mission of market supervisor who must make sure that supervised entities operate according to the applicable law. ³¹ For the above reasons – as opposed to other instruments prepared under statutory authorization – KNF recommendations may not impose on their addressees any obligations but only recommend specific actions. ³²

In addition, it must be emphasized that KNF recommendations do not fit into the category of generally applicable legislation since they have not been referred to in Art. 87 of the Constitution of the Republic of Poland. ³³ For the above reasons, KNF recommendations cannot serve as basis for the delivery of an administrative decision in the light of their non-imperative status (no sanctions imposed by KNF), and cannot be subject to the review of administrative courts. ³⁴ In case of delivery by KNF of an administrative decision based on a recommendation, a possibility is postulated to declare its invalidity on account of missing legal basis for its adoption, under Art. 156 (1) item 2 of the Polish Code of Administrative Procedure. ³⁵ On the other hand, the legal basis for decisions and judgments may be the provisions of generally applicable law interpreted according to the recommendations. ³⁶ In consequence, recommendations cannot be considered the sources of generally applicable norms. In literature, it has been pointed out that they also cannot be treated as sources of internal law (internal management acts) because, in the light of Art. 93 of the Constitution of the Republic of Poland, insurance undertakings (including banks) are not organizationally subordinated to KNF. ³⁷

Guidelines and recommendations are supervisory measures of corrective status and fit into preventive supervision. KNF is responsible for proper operation of the insurance market and, thanks to guidelines and recommendations, it can prevent unfavorable phenomena in that market by influencing the operations of supervised entities.

As a result, it should be concluded that the national legislator adjusted u.d.u.r. to the requirements of Union law in respect to the adoption of recommendations and guidelines for insurance undertakings also when it comes to the use of insurance agents’ services. ³⁸

Such provisions are missing in the currently applicable Polish Act of 15 December 2017 on insurance distribution ³⁹ (implementing the Insurance Distribution Directive ⁴⁰). Therefore, de lege ferenda, it should be postulated that in the future u.p.u. the legislator includes legal provisions analogous to the ones adopted in u.d.u.r. when it comes to the delivery by KNF of guidelines and recommendations in relation to insurance brokers since – as highlighted above – KNF exercises direct supervision over their activities. In addition, KNF must have a legal basis to introduce, in the Polish insurance market, EIOPA’s guidelines and recommendations in relation to insurance brokers and other insurance distributors. ⁴¹

The above considerations allow to assume that the micro-prudential supervisory authorities (on the national and EU level), to a large extent, eliminate gaps in the legislative framework by adopting guidelines and recommendations addressed to financial institutions. The lack of legislation on the Union level forces the national supervisory authorities to search for appropriate and effective supervisory instruments in the legal solutions adopted in other countries across the world and in Europe for the development of InsurTech and their cooperation with the traditional insurance distributor. An adequate example may be the activities undertaken in the context of creating Innovation Hubs and Regulatory Sandboxes. ⁴²

In literature of the subject an opinion was expressed that oversight over financial innovations is connected with the concept referred to as policy trilemma. Under this concept, supervisory authorities should aim to: 1. provide clear rules, 2. maintain market integrity, and 3. encourage financial innovation. ⁴³ According to academic authors, the main burden of monitoring the market in this regard will be on supervisory authorities. They will use the so called mechanisms of market self-regulation by issuing guidelines or creating Innovation Hubs or Regulatory Sandboxes. Such activities should be based on rules simplicity but, at the same time, enhance transparency, reduce bureaucratic burdens so as to ensure certainty, predictability, stability and coherence of financial provisions, as well as increased competition. Rules simplicity can, by extension, help promote capital formation, hedging, and other financial services by lowering costs to consumers and thereby encouraging a larger and more diverse group to enter the market. ⁴⁴ In this context, there are new opportunities for innovation and growth and new challenges, particularly for regulation and regulators. Lately, the particular challenge for regulators has been the need to encourage and support disruptive innovation in order to enhance financial inclusion and support economic growth. ⁴⁵ Extensive interaction between regulators and market participants provides the necessary background for cautious experimentation with, and regulation of Innovation Hub, that is an institutional solution as a part of which FinTech entities, both regulated and non-regulated (e.g. enterprises which fail to obtain license), establish a relation with the regulatory authority to discuss matters relating to their activities (sharing information, opinions, etc.) and to obtain clarification relating to the legality of their business models (regarding the models of cooperation, among others, between innovative insurance companies (InsurTech) and traditional insurance distributors) without the option to test innovative solutions on customers. As a part of an Innovation Hub program, an operator in the InsurTech industry may obtain assistance in identifying appropriate legal provisions, rules or supervisory positions applicable to the given operator, business model, offered product or financial service and, on top of that, the operator may obtain information on the terms of the exercised supervision, procedures of licensing a given type of activity or documents and guidelines available on the website of the supervisory authority. The purpose of such Innovation Hubs is to promote certainty among InsurTech companies and encourage development by such companies of the research previously carried out. On this occasion, supervisory authorities play the role of a consultant, and their position is not binding, which means that it does not guarantee that the suggested solution is the right one. Such opinions may not be relied on before state authorities or courts, because they do not constitute legal opinions or interpretations of law. Undoubtedly, however, Innovation Hubs imply a completely new role and a completely new approach of supervisory authorities in relation to InsurTech. ⁴⁶

So, a significant step activities undertaken by supervisory authorities in the world (apart from Innovation Hub) was launching virtual Regulatory Sandboxes, ⁴⁷ which offer controlled space to innovative enterprises in which such enterprises may test innovative FinTech solutions for a limited period with the support of national supervisory authorities (the authority may intervene at any stage of product testing) before they meet all the requirements in the licensing process or succeed in that regard to a limited extent. Innovative enterprises are obliged to file an application (they undergo a simplified authorization process adjusted to their needs) to join the program, and the mere acceptance of their application by the respective supervisory authority is to increase their credibility both among customers and investors. Regulatory sandboxes in different countries differ from one another, however, the scope of this article does not allow to discuss such questions in more detail. Still, the policy of regulatory sandboxes reduces the risk of court proceedings for violation by InsurTech companies of their obligations to regulatory authorities, and helps the supervisory authorities monitor the market, by enabling them to weigh advantages and disadvantages for the sake of preserving appropriate competition on the market. Sandboxes expressly seek to encourage innovation. They offer regulators a means to acquire insight into the development process for innovations, give input into their design, and better understand how emerging products and services might operate in the real world. Particularly for early-stage innovations, sandboxes can be helpful in reducing the pervasive information uncertainties attaching to the growth of algorithms and Al, as well as to the viability of new data. Although sandboxes come in different guises, with Innovation Hub and jurisdictions varying in what terms they offer, the guiding idea is simple enough: rather than be subject to restrictive or complex rules that elevate regulatory risk and potentially stifle innovation, the sandbox offers a means of testing new ideas in a simplified, interactive regulatory environment. ⁴⁸

For example, the lack of legal regulations resulted in the fact that the decisive importance in terms of the possibility to apply cloud solutions on the Polish financial market should be attributed to the Communiqué of the Polish Financial Supervision Authority of 23.01.2020. (hereinafter: the Cloud Communiqué) ⁴⁹ At the same time, it was emphasized at the outset that any guidelines, recommendations or other documents presenting the position of European supervisory authorities, including EIOPA, on the identical subject do not apply to supervised entities. ⁵⁰ This provision may be seen as problematic in the case of projects within international capital groups involving Polish supervised entities. Nevertheless, according to the Cloud Communiqué referred to here, the European guidelines do not apply to Polish financial entities supervised by the ESA:

The version of the EIOPA Guidelines on Cloud Insurance Outsourcing in force until the end of 2024 was addressed to national supervisors and informed insurance market participants on how outsourcing regulations should be applied to cloud service providers. Insurance intermediaries (agents, insurance brokers) are not part of this circle, which seems to distinguish the EIOPA Guidelines from the KNF Communication. Thus, however, according to the position taken by the KNF, the ESA Guidelines were not at all applicable to domestic entities to the extent that they overlap with the FSC Communication. ⁵⁶

Such a solution may raise some doubts - but it seems clearer for supervised entities than a situation where two different documents regulating the same issues in practice would be in place. Undoubtedly, however, the relationship between the EIOPA Guidelines and the KNF Communication, as well as the potential differences between these positions, are of particular interest in the context of the requirement for national supervisors and financial institutions to make every effort to apply the EIOPA Guidelines under Article 16(3) of Regulation 1094/2010. However, this provision provides for the possibility not to comply with the EIOPA Guidelines and Recommendations, which the FSC has used by presenting a national approach. ⁵⁷ Such an approach by a national supervisor may, however, raise concerns, as the EBA and EIOPA aim to harmonize at the EU level the regulatory requirements for outsourcing and, in particular, cloud outsourcing, ⁵⁸ which, in practice, will be the case, e.g. when a foreign branch of an insurance company operating in Poland will apply the KNF’s Communication and a major insurance company from an EU Member State will apply the EIOPA Guidelines. ⁵⁹

The KNF’s position in the Communication in question took the form of a practical map for the regulated sector in the process of migration to cloud computing. The Communication, on the one hand, met the expectations of direct support for supervised entities and, on the other hand, set itself the goal of eliminating interpretation doubts. The KNF concretized many concepts, creating new definitions and clarifying existing requirements, while addressing most of the demands raised in industry discussions. ⁶⁰

Another problem in the Polish insurance market is the performance of an analysis of the customer’s needs and requirements by the insurance distributor. According to the Polish Insurance Distribution Act (implementing the IDD) - before concluding an insurance contract, the insurance distributor determines, on the basis of information obtained from the customer, the customer’s requirements and needs and provides objective information about the insurance product in an understandable form, in order to enable the customer to make an informed decision.

So much for the recipe, but in practice it is unclear exactly what this APK should look like. On the Polish market, one encounters a rather different approach to this process, ranging from a rather cursory questioning of the customer very generally about their needs, through the implementation of various tables and forms to streamline the process, to the implementation of a needs and requirements analysis into sales systems.

All of these solutions have their advantages and disadvantages, but we also see in the course of the audits carried out by the FSC that the expectations of the national authority regarding the analysis of needs and requirements are quite clear. It certainly cannot be a process done in a shoddy manner and definitely needs to be properly documented.

However, apart from the guidance from the audit, the Commission has not yet generated any concrete position on what an analysis of customer needs and requirements should actually look like by 2023. There are also no such recommendations and guidelines at EIOPA level. This is probably related to the different distribution models in the member states and the fact that the IDD has a minimum scope of implementation.

Due to a problem in the Polish insurance market with regard to the preparation and documentation of the customer needs analysis by insurance distributors, the FSA has taken action in 2023. 26 June 2023. The KNF Authority unanimously adopted a new Recommendation U on good bancassurance practices. ⁶¹ The aim of Recommendation U is to improve the standards of bancassurance activities and to define the conditions for stable development of the bancassurance market. A key element of the new Recommendation U is to ensure that insurance products offered through bancassurance provide adequate value for the customer. ⁶²

A distributor, which is an insurance intermediary, should have procedures in place to prevent the offering of insurance products that are not adapted to customers’ requirements and needs. The procedures should include both rules for the identification of customer requirements and needs and how to assess whether the insurance product is in line with the customer’s requirements and needs. What is important is that such procedures should relate not only to the identification of the customer’s requirements and needs itself, but should also describe how the distributor came to the conclusion that this and not another product is best for the customer in question. One could say that this is the most difficult part of such a procedure.

The KNF has also proposed a very interesting construction when it comes to third-party insurance. Namely, a policyholder (a party to an insurance contract) intending to conclude such an insurance contract should have procedures in place allowing it, as a policyholder, to obtain information on the requirements and needs of potential clients so as to enable the insurance distributor to offer an insurance contract meeting the requirements and needs of such clients. Thus, we are faced with a rather interesting construction, where the duties related to the analysis of needs and requirements are in practice shifted to the policyholder (party to the insurance contract for a third-party account). After all, the Act on distribution clearly states that it is the distributor’s task to obtain information from the customer in the process of needs and requirements analysis, and in the light of TSUE case law the policyholder (in a contract for a third-party account) is the distributor. ⁶³

Thus, in the process of analyzing needs and requirements, the customer should be asked, among other things, about the risks it wants to insure, which in total is quite obvious and already implemented in practice today. At the same time, the KNF also expects the customer to be shown the limitations and exclusions of the insurance company’s liability.

As another example of the analysis of customer needs and requirements in the Polish insurance market, the KNF has submitted for consultation a draft of new recommendations for insurance companies regarding insurance distribution. ⁶⁴ Their overriding aim is to ensure that companies offer products that have an appropriate value for customers. Through the recommendations, the KNF also wants to increase the level of protection of customers’ interests by ensuring that insurers apply the law on insurance distribution in a uniform and consistent manner, and to eliminate irregularities it has identified in this process.

With regard to the obligations of the insurance company vis-à-vis customers in insurance distribution, the draft primarily regulates the analysis of customer needs and requirements. In addition to the obligation to clearly separate the needs and requirements analysis from the other distribution stages, to keep the questions simple, to provide the customer with adequate time to read and respond, the KNF obliges insurance companies to ensure that the needs and requirements analysis of the customer shows, in particular:

The national supervisory authority also emphasized that the use for the needs and requirements analysis of information provided by the customer at earlier stages of the cooperation (e.g. when concluding other insurance contracts) is only permissible with the express consent of the interested party and provided that the scope and source of the information is specifically indicated to the customer and that confirmation of its correctness and validity is obtained from the customer. The client’s refusal to provide the information necessary to identify his or her requirements and needs does not allow the company to make an offer. The exception is compulsory insurance, but then the insurer ensures that it can prove that the customer refused to provide additional information for the assessment of its requirements and needs prior to the conclusion of the insurance contract.

The manner in which the needs and requirements analysis is documented should ensure that the undertaking is able to prove that the information and data it has used for that purpose were obtained from the customer and that the customer has confirmed their accuracy. In turn, the documentation should be retained until the insurance contract’s statute of limitations has run.

In this area, the KNF also recommended that the insurance company should only make contract proposals to the customer that are in line with the customer’s requirements and needs, and familiarize the customer with the provisions of the contract template and other information and documents required by law and supervisory recommendations.

In my view, the draft recommendation should be extended to include insurance intermediaries (in Poland, insurance agents and brokers), as over 90% of insurance contracts are concluded in Poland through insurance intermediation.

It should be noted that there is a lack of guidance related to the analysis of needs and requirements by robo-advisers (via online platforms or mobile applications), which use algorithms to automatically create a customer profile of an insurance product. The insurance product data is assessed by an algorithm and the robo-advisor matches the financial product to the customer and risk profile and generates the required insurance service. Identifying the legal framework for robo-advisers and their responsibility for performing the analysis of customer needs and requirements is a challenge for the EU legislator, as well as for supervisors.

The lack of EU regulations forces national supervisory authorities to look for appropriate and effective supervisory instruments in the adopted solutions of other countries in the world and in Europe for the development of InsurTech and their cooperation with the traditional insurance distributor. The activities undertaken related to the creation of Innovation Hubs and Regulatory Sandboxes seem to be the right way out in this situation. In the absence of consistent and unambiguous guidelines at EIOPA level, Innovation Hubs and Regulatory Sandboxes are not homogeneous institutions, as each country decides on their subject matter. In view of the freedoms and rules of the EU single insurance market in terms of cross-border business, de lege ferenda more activity and concrete solutions should be requested from EIOPA on this and other topics. Legal solutions in this respect in the insurance market are far from the banking and investment market. Certain issues in the insurance market are treated selectively, which adds to the lack of legal certainty and inconsistency, thus hindering the development of new technologies in the insurance market.

New technologies pose new challenges for supervisors, the greatest after the 2008 global financial crisis. The lack of regulation is forcing national supervisors to step up and assign them new roles. They have to take into account new risk models and new business models, and thus innovative technologies in the insurance market will have to be supported by supervisors. As far as action is concerned, it is related to the creation of expert working groups and forums, the publication of communications, guidelines and recommendations, which are proposals for new policies for the insurance market to benefit from new technologies while being prepared for the resulting potential risks. Their new role is that, in the absence of regulation, they actually have to find on their own (using models from other countries) a way to prevent disruptive distortions of competition or customer safety, while encouraging and supporting innovation. ⁶⁵

Finally, it is difficult not to see that the introduction of new technologies in the insurance market is mainly based on market self-regulation through ‘soft law’ (guidelines and recommendations). An analysis of the current construction of guidelines and recommendations in the current legislation allows the thesis that the legislator has ‘reinforced’ the implementation of these guidelines and recommendations by their addressees. They are binding on the addressees as regards the realization of their objectives, but not as regards the means of their realization. The disciplinary tool in this construction is the possibility for the supervisory authority to disclose (publish) the information it has received regarding the refusal of the supervised entity to comply with the issued guidelines and recommendations. All these solutions mean that the introduction of new technologies in the insurance market can take place through the issuance of guidelines and recommendations, but solutions in this regard developed at EU level are necessary. ⁶⁶ The design of the EU single insurance market means that action on this issue should be mandatory, harmonized and consistent for the entire market and individual Member States.