EIOPA has issued its third consumer trends report providing an overview of the insurance and pensions markets in terms of consumer detriment, mainly from the perspective of national supervisory authorities (NSAs). Although the report does not aim to provide a complete picture of all consumer risks, the main trends can be summarised as follows:
- Lack of transparency for example through misleading advertising and marketing/sales literature, incomplete or difficult to understand costs and charges, performance or investments return information.
- Inconsistent information disclosure continues to make comparisons between products difficult.
- Advertising material for non-life products has tended to focus mainly on price instead of product coverage. Consumer complaints have shown that much more needs to be done to ensure that information provided in the sale of insurance products is fairer, more balanced, clearer or easier to understand, and not misleading.
- NSAs have reported concerns about cross-selling and add-ons with regard to various financial non-financial products. Problems cited include insufficient information, poor product disclosure and selling practices and poor value for money. Competition for add-on products is often not effective as consumers are less sensitive to price at the point-of-sale and less likely to shop around for add-on cover.
- Payment protection insurance remains on the list of consumer detriment issues, specifically the existence of unfair practices and contractual clauses that restrict the cover these products provide. In addition, commissions are generally high in comparison to the remainder of the premium.
- Mis-selling of unit-linked life insurance continues to be an issue. Problems include: disclosure of insufficient or overly complex information about the product and underlying investments; and provision of unsuitable or inappropriate consumer advice. Conflicts of interests have also been identified where life insurers select underlying funds based on the highest commissions received from fund managers.
- Insurers’ sales incentive schemes may also lead to mis-selling, due to insufficient safeguards to ensure the fair treatment of customers or poor conflicts identification and management.
- Due to the prevailing low interest rate environment, some NSAs reported that certain life insurers are developing business models to reduce the pressure of high guarantees given in the past.
- Poor claims-handling including inappropriate claims refusals, compensation disputes, and delays in payments in the third party motor insurance sector have been reported.
- Persistent low levels of financial literacy amongst consumers in many Member States is an issue.
- Supervisory action has been targeted in areas such as beneficiary protection arrangements and comparison websites.
EIOPA suggests that some of these trends may warrant further investigation from a consumer protection perspective. This report is intended to be used in the identification of key consumer protection issues and used to inform the future work of EIOPA and NSAs.
For further information:
EIOPA Third Consumer Trends Report, 2 December 2014