Customer needs analysis under the KNF insurance distribution recommendations | In Principle

One of the areas touched on in the new insurance distribution recommendations issued by the Polish Financial Supervision Authority (KNF) is the analysis of customers’ demands and needs, regulated in the Insurance Distribution Act of 15 December 2017. This requirement is vaguely phrased in the act, leading to numerous irregularities in the process of identifying insurance customers’ demands and needs, and consequently the proposal of insurance products to customers not suited to their actual insurance needs.

The Insurance Distribution Act requires insurers in Poland to conduct a customer needs analysis, but does not clearly state which specific information should be obtained from the customer, how the insurance company should document the analysis, what to do if the customer refuses to provide the requested information, or finally, how to analyse the customer’s needs in the case of policy renewals or group insurance. The KNF Recommendations for Insurance Undertakings on Insurance Distribution, issued in June 2026, fill these gaps and should help ensure that customers’ needs are properly met.

The regulator also found it necessary to include in the recommendations a definition of a customer needs analysis, which is not included in the act. Under the recommendations, a customer needs analysis is defined as “actions undertaken by an insurance distributor under Art. 8(1) of the Insurance Distribution Act, involving determination of the customer’s demands and needs for insurance protection, with the aim of proposing an insurance policy to the customer corresponding to those demands and needs.”

In this article we analyse how the recommendations modify the rules for conducting a customer needs analysis in two key insurance distribution channels: by employees of the insurer and by agents.

Duties of insurers conducting their own insurance distribution

The requirements for insurance companies conducting insurance distribution via their own distribution staff are set forth in recommendations 8–10.

Under current hard law in Poland, insurers’ duties involving customer needs analysis are set forth only in Art. 8(1)–(3) of the Insurance Distribution Act. But this provision doesn’t say much. It requires distributors to determine the customer’s demands and needs (based on information obtained from the customer) and to provide the customer with objective information about the insurance product in a comprehensible form. This should enable the customer to take an informed decision on conclusion of the insurance policy or insurance guarantee agreement.

Beyond that, the act requires that the insurance policy or insurance guarantee agreement proposed to the customer must be consistent with the customer’s demands and needs for insurance or guarantee protection.

The new KNF recommendations significantly expand on these obligations. Below we examine in Q&A form the main areas which have been clarified through issuance of the new recommendations. These issues were not previously covered by the earlier KNF recommendations or by the Insurance Distribution Act itself.

What should insurers take into account when drafting a customer needs analysis?

When preparing a customer needs analysis, the insurance company should address, among other things:

• The type of insurance product and the features of the product
• The scope of information essential to identify the customer’s demands and needs, and the sources of this information
• The key exclusions and limitations on liability provided for in the given product
• The distribution channel, the manner of reaching the customer, and the manner of obtaining information on the customer needs analysis.

What should the insurer seek to achieve during the customer needs analysis?

When conducting a customer needs analysis, the insurance company must apply solutions enabling it to:

• Conduct the customer needs analysis in a manner understandable to the customer and enabling the customer to take an informed decision
• Determine the customer’s demands and needs for insurance protection, in particular the circumstances and the period for which the customer would like to obtain insurance coverage, as well as the amount of the insurance or guarantee that will meet the customer’s demands and needs
• Determine the customer’s characteristics or situation, in order to assess whether the exclusions or limitations on liability conflict with the customer’s demands and needs
• Propose an insurance product to the customer meeting their demands and needs, at a premium that is acceptable to the customer.

When conducting the customer needs analysis, may the insurer use information obtained from the customer in the past or from other sources?

Yes. However, the insurance company must notify the customer accordingly and allow them to verify the information. Moreover, at the customer’s request, the insurer must inform the customer of the scope and sources of such information.

How should the insurance company respond if the customer refuses to provide information?

If the customer refuses to provide information required to conduct the customer needs analysis, the insurance company is required to notify the customer of the consequences of failure to provide the information.

How should the insurance company document the customer needs analysis?

The insurance company should document the customer needs analysis to the extent necessary to retain the information obtained from the customer or other sources and to show that the proposed insurance product is consistent with the customer’s demands and needs.

Insurance undertakings may determine on their own the method for documenting and storing customer needs analysis documentation. However, when selecting such methods, they must take into account the specifics of the distribution channel in question and the form of contact with the customer.

Beyond this, the insurer should ensure the customer the possibility of obtaining answers to their questions or doubts in relation to the proposed insurance product and the process of conclusion of the contract—and thus, also in relation to the process of conducting the customer needs analysis.

How should an insurance undertaking conduct a customer needs analysis for an insurance contract concluded on someone else’s account?

In such case, the insurer should obtain information from the party seeking insurance protection concerning the demands and needs of the future insureds.

With respect to group insurance policies, the insurer is also required to determine the demands and needs of the group, based on information obtained from the party seeking the insurance.

Is it also mandatory to conduct a customer needs analysis in the event of renewal or automatic continuation of an insurance contract?

No—so long as there have not been changes to the proposed product resulting in the product no longer being consistent with the customer’s demands and needs. In that situation, the insurance undertaking is required to inform the customer that the renewal or automatic continuation of the contract will occur on the basis of the information in the insurer’s possession, and that the customer may update the information used for evaluating their demands and needs. The insurer should also state the manner and time by which the customer can notify the insurer of their intention to update the information.

But before notifying the customer, the insurer should verify that there have not been changes in the proposed product affecting the scope of the insurance which could make it inconsistent with the customer’s demands and needs identified in the analysis.

What if, based on the customer needs analysis, the insurer identifies several products meeting the customer’s needs?

In that situation, the insurer may propose all of the products to the customer, clearly indicating the differences between them.

If the customer needs analysis shows that the customer’s needs would be met by a product from a target market different from the customer’s target market, can the insurer propose such a product to the customer?

Yes. In that situation the insurer may propose a product to the customer from a target market different from the customer’s target market.

Insurer’s oversight of agents’ performance of customer needs analysis

Formally the new recommendations are addressed primarily to insurance undertakings, but their practical consequences will also be felt by other distributors, including insurance agents. Recommendations 11–20, regulating insurers’ cooperation with agents and effective oversight of the distribution process, including the conduct of customer needs analysis, are of key significance for the everyday practice of agents.

Polish law treats insurance agents as a standalone category of insurance distributors. This means that agents are directly subject to the obligation to conduct a customer needs analysis under Art. 8(1) of the Insurance Distribution Act. They are also subject to other statutory regulations. But in light of the specific nature of insurance agents’ activity, and the legal relationship between the agent and the insurer and the dependence it creates, the regulator decided to impose additional duties on insurance undertakings in this respect.

In KNF’s view, the insurer should be the guarantor of the quality of the services performed by agents. This leads to a significant shifting of responsibility, to avoid leaving agents themselves bearing numerous regulatory obligations. Under 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.” This support is to be carried out through the issuance to agents of rules, guidelines or instructions on the agency activities they perform. Here the regulator places particular emphasis on carrying out the customer needs analysis. Moreover, to the extent agreed with the agent, the insurance undertaking’s support will also cover substantive issues.

KNF has also specified what it expects from insurance undertakings deciding to entrust distribution of insurance to a group of agents, including those operating in a consortium (recommendation 18). In that case, the insurance undertaking must verify that the rules under which the members of the group cooperate ensure proper performance of customer needs analysis. The insurance undertaking must be informed of the allocation of tasks and competencies within the group of agents, and also secure the ability to exercise oversight of all members of the group it cooperates with.

Under recommendation 20, “The insurance undertaking shall exercise effective oversight of agents.” To this end, the insurer must have internal policies and solutions in place for monitoring agents, specifying the rules for taking up and performing oversight of agents in their performance of customer needs analysis.

Significantly, if the insurer’s oversight of agents finds irregularities in the area of customer needs analysis, the insurer will be entitled to:

• Require the agent to take corrective measures
• Take its own corrective measures with respect to the agents, and
• If these measures are ineffective, impose sanctions against the agents.

Moreover, all of the insurer’s oversight activities with regard to agents must be documented and retained in line with the policies adopted by the insurer.

Summary

The Polish Financial Supervision Authority’s Recommendations for Insurance Undertakings on Insurance Distribution greatly expand the framework of obligations concerning the analysis of customers’ demands and needs. This should translate into stronger protection for insurance customers. The new recommendations narrow the leeway insurers have enjoyed in this area under the generally worded Art. 8 of the Insurance Distribution Act. Insurance undertakings will have to develop internal procedures meeting the new requirements.

In the area of insurers’ distribution of their own products, the recommendations introduce a range of requirements more specific than those provided for under the Insurance Distribution Act. When drawing up the customer needs analysis, the insurer will have to consider a number of elements, such as key exclusions and limitations on liability for a given insurance product, to make sure they are consistent with the customer’s needs. Practical issues have also been addressed: for example, an insurance undertaking will be allowed to use information obtained from the customer in the past or from other sources, so long as the customer is informed and has an opportunity to verify the data. In the case of renewals and automatic continuations of insurance contracts, a full customer needs analysis will not be required so long as there have not been changes to the product affecting its consistency with the customer’s needs.

The recommendations also modify the relationship between insurance undertakings and insurance agents. Under the recommendations, it is the task of the insurer to monitor the quality of services provided by agents. Insurance undertakings will have to develop guidelines and instructions for agents, provide them with substantive support, and implement an oversight system. If irregularities are found, the insurer will be entitled to require the agent to take corrective measures, take such measures itself, or ultimately impose sanctions on the agent.

All of these changes should translate into a closer match between insurance products and the customers’ actual insurance needs.

Mateusz Muszyński, Klaudiusz Mikołajczyk, Łukasz Sekielski, Insurance practice, Wardyński & Partners