In the placement of unit-linked insurance policies[1], distributors are required to provide policyholders with clear and complete information — in a word, transparent. That is, the client — particularly if a retail investor[2] — must be put in a position to fully understand the characteristics of the product they are about to sign up for and thus be able to make an informed decision.
The transparency obligation cannot be fulfilled solely by the passive delivery of documentation. The information provided by the distributor (more precisely, the intermediary) must be effective, personalized, and genuinely understandable. On this issue, in addition to the courts, the Arbitration Body for Financial Disputes (ACF) has repeatedly stated that disclosure plays a crucial role in the distribution of unit-linked products.
- Introduction
The notion of “insurance-based investment product” was introduced by Article 91 of Directive 2014/65/EU (MiFID II), which defines it as:
“an insurance product which offers a maturity or surrender value and where that maturity or surrender value is wholly or partially, directly or indirectly, exposed to market fluctuations […]”.
For the first time, insurance-based investment products gained formal recognition as an autonomous legal category. In other words, the European legislator, with MiFID II, recognized that such products represent a valid alternative to financial instruments already governed by MiFID I[3], and therefore promoted the introduction of an ad hoc regulatory framework to ensure equivalent protection and transparency for clients (Recital 87). To this end, the legislator first enacted Regulation (EU) No. 1286/2014 (PRIIPs), followed by Directive 2016/97/EU (IDD)[4].
With the adoption of this dedicated regulatory framework, the principle of diligence — as a standard for assessing proper performance of obligations under Article 1176 of the Italian Civil Code — has been replaced by the principles of fairness, integrity, and transparency as the primary means to ensure the best interest of policyholders.
2. The Hybrid Nature of Unit-Linked Policies and Its Implications for Distribution
As highlighted by the extensive legislative developments, unit-linked policies are complex contracts, as they combine both an insurance component and a financial one — hence they are referred to as “hybrid contracts[5].”
This unique structure has drawn the attention of the courts, which — when called to assess its special nature — have classified as “pure” those policies that do not provide any guarantee of return of capital[6].
Such products, that — according to prevailing case law[7] — lack an insurance component[8], have been treated, regardless of their formal classification (nomen iuris), as actual investment products, with all the resulting consequences in terms of transparency, investor protection, and disclosure obligations.
Based on the assumption that “pure” policies do not guarantee the return of capital, some courts have considered them as investment products (sic et simpliciter) and declared the nullity of a unit-linked policy for lack of a framework agreement — regardless of whether the intermediary was a bank or an insurance company (Court of Rome, decision no. 19626 of 28 December 2024)[9].
Although this ruling understandably caused concern among market participants, it is important to note that the Arbitration Body for Financial Disputes (ACF) took the opposite stance. It found that the claim of nullity for lack of a framework agreement was unfounded. The ACF clarified that reference to Article 23 of the Consolidated Law on Finance (TUF) is no longer appropriate, stating that:
«Following the significant changes introduced in insurance regulation after the transposition of the IDD Directive, the amended Article 25-ter[10] no longer refers to the aforementioned provision (i.e., Article 23 TUF). As is well known, in its current version this article provides that “the distribution of insurance-based investment products is governed by the provisions set out in Title IX of Legislative Decree No. 209 of 7 September 2005, and by directly applicable European legislation.” The Private Insurance Code does not establish any obligation to execute a written framework agreement, nor is such a requirement imposed by the relevant European legislation — also considering that the rules on written form ad substantiam in this area do not derive from EU law, but rather from national legislation, having been introduced for the first time by Law No. 1/1991 and subsequently incorporated into the aforementioned Article 23 TUF»
(ACF Decision No. 7443 of 26 June 2024).
The above-mentioned ruling by the ACF appears to be fully aligned with the new regulatory framework introduced by Legislative Decree No. 68 of 2018. Although Article 25-ter (specifically dedicated to insurance-based investment products) substantially incorporates the content of Article 25-bis, the legislator deliberately chose not to include any reference to Article 23 TUF in the new provision — thereby confirming that a framework agreement is not required.
- Unit-Linked Distribution and the Concept of “Effective” Disclosure
At the time of subscription, the policyholder shall receive clear, complete, and tailored information concerning the nature and characteristics of the product.
In other words, it is not enough for the intermediary to simply deliver informational documents to a client with no knowledge or experience; these documents alone are insufficient to support an informed investment decision.
The ACF has developed the concept of “effective disclosure” (informative in concreto), which translates into the intermediary’s duty to assess, case by case, which type of investment and which financial instrument is most appropriate for the client, and to provide all the information necessary for the client to understand how they are investing and what the related risks are[11].
Conversely, an investor who raises a dispute concerning alleged omissions in the intermediary’s disclosure shall prove that they were actively involved in the relationship and did everything reasonably possible to understand the nature and risks of the investment.
In short, while the intermediary is responsible for assessing the product’s suitability, the client must devote sufficient time to completing the questionnaire and asking for any necessary clarification before assuming responsibility for the statements provided (principle of self-responsibility).
However, even if the client assumes responsibility by signing the questionnaire, the intermediary may still be held liable if the questionnaire is inadequate to assess the client’s actual understanding of financial-insurance products.
For a questionnaire to be considered adequate, it shall include questions specifically aimed at verifying the client’s real knowledge of the relevant products, and shall not limit itself to general economic references.
Regarding the issue of suitability, the ACF has clarified that:
«The option selected by the client to indicate prior experience in “shares and insurance-investment products,” by preventing the client from selecting only one of the two categories, is inadequate to clearly and unambiguously determine which types of financial instruments and products the claimant has actually had experience with. Furthermore, the declared experience may have been acquired through third-party intermediaries, and therefore represents data not directly verifiable by the intermediary, who — before proposing such a significant investment — should have ensured the client’s actual knowledge and experience with this type of product» (ACF Decision No. 7554 of 7 August 2024).
With regard to the fulfilment of suitability-related disclosure obligations by the intermediary, the Arbitration Panel (Collegio) has stated that the client’s signature on the declaration confirming receipt of the KID (Key Information Document) is sufficient to consider the distributor’s disclosure obligations as duly fulfilled (ACF Decision No. 6877 of 4 October 2023).
Nevertheless, in the case of multi-option PRIIPs — that is, products allowing the client to allocate the premium among various investment options (MOPs) — the Arbitrator condemned the conduct of a distributor who had delivered a generic KID covering all options, without providing specific information on the option actually selected. According to the ACF, such a disclosure is objectionable, as it amounts to “empty information” that does not enable the client to make an informed decision (ACF Decision No. 7532 of 31 July 2024).
In the context of distribution activities, regardless of whether the client declares to have read and understood the information set (whose delivery is mandatory prior to policy subscription), the ACF considers it crucial that the documentation clearly demonstrates the actual and appropriate fulfilment of pre-contractual disclosure obligations. It cannot simply be assumed that the documentation was effectively made available to the client and, above all, that the regulation of the selected internal fund was also provided — the latter being considered essential for the client to make a truly informed investment choice.
When subscribing to a unit-linked policy, the client shall be explicitly informed that there is no guarantee of return of capital, and there must be consistency between the product offered and the information provided by the subscriber (ACF Decision No. 7830 of 3 February 2025).
For the purposes of effective disclosure, it is also important that the client is made aware of all costs and charges associated with the product. The Arbitration Panel found that the information documents provided at the time of subscription were non-compliant with sector regulations, as they did allow understanding of the total cost amount but failed to present the breakdown clearly, accurately, and in an easily comprehensible manner. In particular, the use of “codes” hindered the client’s ability to understand the incentive and commission structure applicable to the intermediary (ACF Decision No. 7300 of 16 July 2024).
On the subject of costs, the Arbitrator found the information provided by a distributor to be inaccurate and misleading, where the contractual proposal for the portfolio management service stated that redemption fees would gradually decrease to zero after six years, whereas the order forms indicated that such fees were zero from the outset (ACF Decisions No. 7344 and No. 7345, both dated 10 May 2024).
In the insurance sector, given the inherent contractual asymmetry between the insured and the insurer, it is essential that, at the distribution stage, the intermediary supports the client — especially if the client is not classified as professional or qualified — in making an informed decision and in selecting the product most suitable for their needs and risk profile.
4. Conclusions
The transparency and adequacy of the information provided at the time of the execution of the policy are essential from a twofold perspective:
on the one hand, they enable the client to make an informed decision;
on the other hand, they help prevent the risk of disputes that could jeopardize the validity of the contract and result in additional costs for the insurance undertaking.
[1] Unit-linked policies are defined by Article 2 of the Italian Code of Private Insurance (CAP) as life or non-life insurance policies (Classes I and II) whose principal benefits are directly linked to the value of units in collective investment undertakings (OICRs) or internal funds. In contrast, in index-linked policies, the insured benefit is directly linked to the performance of stock indices.
[2] All investors are considered retail clients when investing, except for those who fall within the definition of professional clients or eligible counterparties under applicable regulations. These are investors — including businesses, companies, or other entities — who do not possess specific skills, experience, or knowledge in financial matters (Article 2, paragraph 1, letter g) of the ACF Regulation).
[3] Directive 2004/39/EC (MiFID I) introduced the obligation to profile clients and established three categories of investors: professional clients, eligible counterparties, and retail clients.
[4] Implemented under Italian legal framework through Legislative Decree No. 68/2018, which significantly impacted the transparency regime applicable to unit-linked policies through the introduction of Article 25-ter and amendments to Legislative Decree No. 209/2005 (the Private Insurance Code).
[5] Unit-linked policies contain an insurance component that provides coverage against specific events (such as the insured’s death) and a financial component tied to the value of the investment units into which the premium is allocated.
[6] See Italian Supreme Court decisions: Italian Supreme Court, Civil Section, 18 April 2012; Italian Supreme Court, Civil Section, decision no. 6319 of 5 March 2019, which classified unit-linked policies into: guaranteed, partially guaranteed, and pure.
[7] With regard to the nature of unit-linked policies, see G. VOLPE PUTZOLU, Le polizze linked tra norme comunitarie, TUF e codice civile, in Ass., 2012, I, p. 414, according to which linked policies are not financial products but insurance contracts linked to a financial transaction. In the author’s opinion, the significance of the financial transaction is only ‘indirect’. The author argues that linked policies are not investment products, as the social security purpose normally attributed to life insurance policies does not emerge from any provision of the Civil Code.
[8] According to well-established case law, in so-called “pure” unit-linked policies the biometric (demographic) risk — which is an essential element of life insurance policies — is virtually non-existent, as the insured is not guaranteed any payment (not even a minimum amount) that is detached from the value of the investment units.
As a result, the life event (i.e., the death of the insured) merely serves as a temporal reference point for determining when the benefit will be paid by the insurer (i.e., claim settlement), since the assumption of risk by the insurer is only nominal.
(Italian Supreme Court, First Civil Section, decision no. 9418 of 9 April 2024; consistent with Court of Turin, Fourth Civil Section, decision no. 4173 of 19 July 2024).
[9] On the same issue, however, the Court of Bergamo, in its decision of 21 July 2021, upheld the so-called “dual-track” principle, according to which the rules set out in the Consolidated Law on Finance (TUF) and the Consob Intermediaries Regulation (Regulation No. 16190 of 29 October 2007) on financial intermediation apply to the placement of unit-linked life insurance policies only when the product is distributed by entities authorized under the TUF, and not by traditional insurance intermediaries such as insurance brokers or agents.
[10] The introduction of Article 25-ter followed the transposition of the IDD Directive into Italian law through Legislative Decree No. 68/2018.
[11] The introduction of Article 25-ter followed the transposition of the IDD Directive into Italian law through Legislative Decree No. 68/2018.