KNF recommendations on insurance distribution, and insurers’ cooperation with undertakings referred to in Art. 2 of the Insurance Distribution Act
In June 2026 the Polish Financial Supervision Authority (KNF) issued its new Recommendations for Insurance Undertakings on Insurance Distribution. Although the recommendations are directly addressed to insurance undertakings, they are also of great importance for the cooperation between insurance undertakings and undertakings referred to in Art. 2 of the Insurance Distribution Act. These are businesses acting as distributors of certain add-on or embedded coverage for products, lost baggage, trip cancellation and the like—if they meet certain statutory conditions, these businesses are exempt from the regime of the Insurance Distribution Act.
The KNF recommendations are not a source of universally binding law, but in practice they set standards which the regulator expects insurance undertakings to comply with. Thus they impact the way that sales processes are organised, systems of control and supervision, and the rules for cooperation between insurance undertakings and undertakings referred to in Art. 2 of the Insurance Distribution Act.
What statutory obligations does an insurance undertakings have in its cooperation with undertakings referred to in Art. 2 of the act?
Under Art. 2(3) of the Insurance Distribution Act, an insurance undertaking must ensure that:
- An undertaking covered by this provision acts fairly, honestly and professionally, in accordance with the best interests of customers (Art. 7(1))
- The system for remuneration of the undertaking and the persons assisting it in carrying out its insurance distribution activity does not conflict with the duty to act in the customers’ best interests (Art. 7(2))
- The information provided to customers, including advertising and marketing information, is clear, accurate and not misleading, and meets the language requirements set forth in the act (Art. 7(3))
- The proposed insurance product meets the customer’s demands and needs for insurance protection (Art. 8(3))
- The customer was informed of the possibility of purchasing the product or using the service without purchasing the insurance product (Art. 10), and
- Before concluding the insurance contract, the customer received an insurance product information document (IPID).
Recommendation 24—organisation and oversight of cooperation
A key provision in this respect is recommendation 24, which specifies the manner in which an insurance undertaking should ensure that the undertakings referred to in Art. 2 of the Insurance Distribution Act perform their obligations towards customers.
The insurance undertaking should first and foremost have appropriate internal policies and organisational solutions in place concerning its cooperation with such undertakings. It should also provide them with rules, guidelines or instructions for performance of insurance distribution activities. The aim is to ensure that the insurance products proposed to customers meet their demands and needs and that the other obligations arising under Art. 2(3) of the act are properly carried out.
But the role of the insurance undertaking does not end there. It must also take informational and educational steps to ensure that the undertakings referred to in Art. 2 have an adequate level of knowledge about the insurance products they offer and their duties towards customers.
Recommendation 24 also provides for a duty to effectively oversee the activity of these undertakings involving insurance distribution, particularly in terms of compliance with the obligations referred to in Art. 2(3) of the act. If irregularities are found, the insurer should require the undertaking to take corrective measures, or take such measures itself. If this proves ineffective, the insurer should apply appropriate sanctions against the undertaking. It should also document the oversight activities it has taken, corrective measures and sanctions.
This approach is consistent with the statutory model of responsibility. It is the insurance undertaking that bears the obligation of ensuring that an undertaking referred to in Art. 2 has acted in accordance with the requirements set forth in Art. 2(3). Consequently, it is the insurance undertaking that is responsible to the regulator for ensuring proper performance of these obligations by an undertaking cooperating with the insurer. After all, the oversight duties set out in Art. 2(3) of the act, as well as KNF sanctions for violating them, are directly addressed to the insurance undertaking—which bears regulatory liability to KNF.
Recommendation 25—informational obligations to customers
Recommendation 24 is supplemented by recommendation 25, which focuses on the manner in which undertakings referred to in Art. 2 of the act perform their informational obligations towards customers.
Under recommendation 25, the insurer must define rules for performance of informational obligations by these undertakings, and provide them with appropriate materials intended for customers—specifically the documents and information required by law, including the IPID and contract form.
Significantly, the insurer should also ensure that the contracts between it and these undertakings require the undertakings to comply with the insurer’s rules and materials. This means that the manner of providing information to customers must not be left solely within the undertakings’ discretion. The insurer should set the appropriate standards, provide the required materials, and ensure mechanisms forcing them to be applied in practice.
Recommendation 26—rules for remunerating undertakings
Another important element of the cooperation between insurers and undertakings referred to in Art. 2 of the act is the method of remunerating these undertakings. Under 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.”
In this respect, KNF expects insurers to draw up appropriate internal policies and solutions for compensating these undertakings. These should cover at least the rules for setting and awarding base compensation or bonuses, as well as the rules for holding contests or other motivational schemes.
Of particular importance are the requirements concerning the qualitative criteria for awarding bonuses. They must be appropriate to the scale and nature of the cooperation with the given undertaking. This means that the construction of the compensation system should not be based solely on sales results, if this could lead to a conflict with the duty to act in the customers’ best interests.
Recommendation 26 also imposes a duty on the insurer to periodically review its policies for remunerating such undertakings. The aim of the review is to assess whether the policies and solutions applied could negatively impact performance of the duty to act in the customers’ best interests. If the review shows the need, the insurer should modify the rules it applies accordingly.
In practice this means that an insurer should pay attention not only to the amount of the undertaking’s remuneration, but also the structure of the overall system of incentives. Sales contests, bonuses or special prizes should be designed to avoid creating incentives to offer customers insurance products not matching their needs, or taking actions contrary to customers’ best interests.
What do the recommendations mean for undertakings referred to in Art. 2 of the Insurance Distribution Act?
From the perspective of businesses offering insurance products as an add-on to their own goods or services, recommendations 24–26 will primarily mean greater formalisation of their cooperation with insurance undertakings. These businesses can expect to see more detailed procedures, policies, instructions and materials concerning the manner of offering insurance products, providing information to customers, and performing distribution obligations.
The provisions of contracts currently governing cooperation between these undertakings and insurers may also change, particularly concerning the undertakings’ duty to apply certain procedures and materials, the oversight rules, and the compensation system.
But the statutory allocation of liability will not change. The insurer will remain the entity responsible to KNF for ensuring proper implementation of the duties set forth in Art. 2(3) of the act by these undertakings. Recommendations 24–26 place the responsibility for specific organisational, informational, supervisory and remuneration obligations on the insurer, but will also have a direct impact on how activity is carried out by cooperating undertakings.
Existing contracts for distribution of embedded insurance
The recommendations may also make it necessary to review existing agency agreements concerning distribution of embedded insurance. This applies in particular to contracts providing that the distribution of insurance and cooperation between the parties must comply not only with mandatorily applicable provisions of law, but also with the requirements of soft law—which is precisely what the KNF recommendations are. KNF’s adoption of new standards for organisation of these undertakings’ cooperation, informational obligations, and compensation rules may render the existing contractual provisions inadequate, or may require the provisions to be updated to reflect the current regulatory expectations.
First and foremost, it is insurance undertakings that will be particularly concerned about reviewing their current contracts, but so will entities operating under a binding authority agreement (BAA)—typically these will be managing general agents (MGAs). As a rule, it is the insurance undertaking that bears the main burden of ensuring that distribution of insurance products complies with the law and with the new requirements set forth in the KNF Recommendations for Insurance Undertakings on Insurance Distribution.
Mateusz Kosiorowski, adwokat, Anna Szczęsna, Insurance practice, Wardyński & Partners
