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 investment
product 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.”
