# 3. Distribution, ethics and product governance

URL: https://insurancelawestonia.ee/insurance-law-cpd/distribution-ethics-and-product-governance/
Author: Dr Olavi-Jüri Luik, Partner, Head of Insurance Law, attorney at law (Advokaadibüroo WIDEN OÜ)
Last updated: 2026-11-11

> CPD module 3: the concept of insurance distribution, conflicts of interest and remuneration, target markets and the role of the IPID.

Module 3 of 20 · Theme: Foundations and distribution · Level: Specialist · Suggested study time: 90 minutes 

**In short.** This module covers the general distribution rules: what counts as insurance distribution, how to identify conflicts of interest and the effect of remuneration, what a product's target market means and what role the information document plays.

## Learning outcomes

After completing this module you will be able to:

- identify conflicts of interest in remuneration and sales targets;
- distinguish a product's target market from a particular customer's needs;
- justify and document a sales recommendation.

## Key points

### Distribution is an activity, not a job title

Insurance distribution means advising on, proposing, preparing and concluding insurance contracts and assisting in their administration and performance; it also covers comparison platforms through which the customer can conclude a contract (KindlTS § 5(1); IDD Art 2(1)(1)). The distribution rules depend on the actual activity, not on the employee's job title.

### Conflicts of interest and remuneration

A distributor must act honestly, fairly and professionally in the customer's best interests; remuneration and sales targets must not create an incentive to recommend a product where another product would better meet the customer's needs (IDD Art 17). Disclosing the remuneration does not make an unsuitable recommendation suitable: the conflict must be identified, prevented or managed, and the decision documented.

### A target market is not a needs analysis

The insurer defines a product's target market and ensures that the product is offered to it (KindlTS § 103²; Delegated Regulation (EU) 2017/2358). This is a product-level decision; the particular customer's insurable interest and requirements must still be identified (KindlTS § 221(1)).

### The information document is a summary

In non-life insurance a standardised insurance product information document (IPID; Implementing Regulation (EU) 2017/1469) is given before the contract is concluded. It does not replace the policy terms: the scope of cover follows from the contract as a whole. The information document requirement does not apply to large risks.

## Read before the quiz

Articles on this site:

- [Insurance distribution in Estonia: IDD rules for brokers, agents](https://insurancelawestonia.ee/guides/insurance-distribution-idd-estonia)
- [Insurance regulation in Estonia: FSA, IDD and EEA passporting](https://insurancelawestonia.ee/services-for-insurers/regulatory-and-distribution)
- [EIOPA guidelines and Estonian insurance market self-regulation](https://insurancelawestonia.ee/legal-framework/eiopa-and-self-regulation)

Legal sources:

- [KindlTS §§ 5, 103², 221](https://www.riigiteataja.ee/akt/KindlTS)
- [IDD (EU) 2016/97, Arts 17–20 and 25](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016L0097)
- [Delegated Regulation (EU) 2017/2358](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017R2358)
- [Implementing Regulation (EU) 2017/1469](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32017R1469)

## Practical case

*Write down your own answer before opening the suggested approach.*

An agent earns a higher commission on product A than on product B. Product A excludes the customer's main risk (water damage in a building materials warehouse); product B covers it with a EUR 1,000 deductible. Prepare a reasoned recommendation and a file note.

Suggested approach

The recommendation must follow the customer's need: product B covers the main risk, so it should be recommended, or it should be explained why no suitable product is offered. The file note should record the customer's business and main risk, the products compared, why product A is unsuitable (the exclusion), the explanation of the deductible and the customer's decision. A higher commission is no justification from the customer's perspective; the conflict must be identified and managed, not merely disclosed (IDD Arts 17 and 19).

## Self-check quiz

Answer the three questions and press "Check answers". An explanation is shown for each question.

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