The European Commission
(EC) has proposed a package of legislative proposals to improve
consumer protection in financial services that would impact
insurers’ administrative and operational requirements if they
become effective.
In the first place, the
EC’s is proposing to introduce a new information requirement for
the sale of packaged retail investment products (PRIPs).
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Based on the proposal,
the producers of all investment products, including insurers, would
have to provide a Key Information Document (KID) for each
separate investment created, the standardised format of which
should be “short and plain-speaking”.
Consumer
protection
KIDs will provide
information on the risk, cost and complexity of a product, without
over-simplifying and should “make clear to every consumer whether
or not they could lose money”.
The EC is also proposing
a revision of the Insurance Mediation Directive (IMD), which
currently regulates the sale of all insurance products.
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By GlobalDataAccording to the EC, the
current EU legislation does not deal in detail with the sale of
insurance products, rules differ across member states, and apply
solely to intermediaries.
The Commission has
proposed four major changes to the IMD:
- The same level
of consumer protection will apply, regardless of the channel
through which consumers purchase an insurance product. - Background information on sellers of
insurance, including potential conflicts of interest and disclosure
of remuneration. - A requirement to provide “honest,
professional advice”. - Making it easier for intermediaries to
operate across borders to promote the emergence of a real internal
market
While supporting the
EC’s aim, the Association of British Insurers (ABI) said it has
some concern over the proposals.
Maggie Craig, director
of financial conduct regulation at the Association of British
Insurers, said: “Requiring consumers to take advice when buying an
insurance PRIP, will restrict their access to financial investments
and their ability to make their own investment decisions, and will
have a negative impact on long-term savings.”
She added: “There is no
evidence of existing consumer detriment, and minimal future
benefit, to warrant disclosure of commission on general insurance
products.”
Conflicts of
interest
David Strachan, co-head
of the Deloitte Centre for Regulatory Strategy, added: “While IMD
II remuneration disclosure requirements aim to address potential
conflicts of interest across sales channels, remuneration related
to direct and intermediated insurance sales are different, and vary
depending on the service.
Ensuring that consumers
understand the context in which disclosures are made, and can make
use of this information, will be important to avoid undermining the
commission’s objective of a level playing field. ”
Major insurers contacted
by Life Insurance International said they could not yet
provide any ‘real’ response to the EC proposals
The third EC proposal
aims to boost protection for those who buy investment funds, which
is currently governed by the Directive on Undertakings for
Collective Investment in Transferable Securities (UCITS).
EC internal market and
services commissioner Michel Barnier said: “Retail products must be
safer, information standards must become clearer, and those selling
products must always be subject to the highest
standards.”
