The European Insurance and Occupational Pensions Authority (EIOPA) has launched a consultation on value for money risk in the European unit-linked insurance market. EIOPA has previously expressed concern that while unit-linked products can offer important benefits for policyholders, costs for some products remain too high.
The low interest rate environment, in addition to market shocks and the risk that many households may have reduced incomes, means that unit-linked products must offer consumers real value. As part of its consultation, EIOPA presents a framework that sets out how to assess whether unit-linked products offer value for money. To do this manufacturers of unit-linked products should assess products to take account not only the product as a whole, but also the value of each component offered. They should test the product features in relation to the target market and, where products are complicated, ensure that the target market is precisely defined.
The framework, set out in the consultation paper, includes four principles around which unit-linked product governance should be structured.
Stakeholders are invited to provide feedback on the principles and guidance by 16 July 2021.