Insurance products are unique due to their long-term nature and the fact that they can combine investments with insurance cover. These characteristics are key to consumers’ protection and purchasing decisions and should, therefore, be recognised by EU rules and properly represented in the disclosures made to consumers. However, this is currently not the case.
The consultation on the RIS therefore provides an excellent opportunity to learn lessons from the successes and failures of previous EU legislative initiatives. This would enable retail investors to take full advantage of capital markets, which in turn can help to underpin Europe’s economic recovery from COVID-19 and the transition to a sustainable economy.
Insurance Europe’s key messages on the RIS are:
• The current regulatory and supervisory framework on insurance distribution is robust and provides a very high level of consumer protection — The framework includes new strong rules in the form of the Insurance Distribution Directive (IDD) that are complemented at both EU and national level by easy access to redress, transparency and conflicts of interest rules and appropriate intervention powers. The IDD also contains rules on commissions that are appropriate for the insurance sector.
• The EC must act to reduce information overload and to adapt the framework to modern consumer habits and expectations — A full assessment is therefore needed to simplify information requirements and to reduce the overall volume of disclosures. Any reform must, however, be subject to extensive consumer testing to ensure that disclosures are meaningful, workable and improve consumer understanding. Legislators must also assess rules’ cumulative impact and remove inconsistencies and duplication.
• Disclosures must properly represent the benefits of insurance products — Disclosures must help consumers to better understand an investment product’s features and therefore should specifically highlight whether or not insurance cover is included. Current rules mean that, if no cover is included, it is simply omitted from the disclosures.
• The regulatory framework must be digital friendly — The IDD and the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation should be amended to be digital by default, with information provided on paper when requested by the consumer. It is also important to ensure that new entrants to the market, such as BigTech, are subject to the same regulatory and supervisory framework (ie “same activities, same risks, same rules”) to ensure a level playing field and to maintain a consistently high level of consumer protection.
• Action is needed to increase financial literacy across Europe — Financial literacy is an essential skill that enables citizens to take charge of their personal finances and here the Commission should play a greater role: for example, by supporting the development and implementation of national strategies for financial literacy and education, including insurance education.
Moreover, it should be noted that there are several inaccuracies in the Commission’s questionnaire regarding the insurance market.
These include questions on Insurance Product Information Documents (IPIDs) and the pan-European Personal Pension Product (PEPP) that are simply not applicable to the current retail investment market. Insurance Europe therefore urges the Commission not to draw any conclusions from these questions.
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