Insurance Europe outlined a number of concerns in its response to the European Supervisory Authorities’ (ESAs) technical discussion paper on packaged retail and insurance-based investment products (PRIIPs).
In its response, Insurance Europe emphasised that it is not appropriate to include the biometric risk premium (fair value) in the cost section of the key information document (KID). It pointed out that premiums for protection against biometric risks are not costs because the retail investor receives insurance benefits for these payments.
Insurance Europe is of the opinion that reduction in yield (RIY) should be used as a cost indicator. In Insurance Europe’s view, RIY is more suitable than the total cost ratio (TCR), since it can capture the costs of life insurance products appropriately.
Insurance Europe believes that the “what-if prescribed approach” with defined scenarios is valid and meaningful for PRIIPs. It said that high-level general principles should be set up at EU level, while fine-tuning or detailing of the assumptions to be used should be developed at a national level.
Insurance Europe also stressed the need for the KID to be provided at the pre-contractual stage and, therefore, not be a personalised document. It is, therefore, not appropriate to consider several KIDs dependent on the “age of the customer and other parameters”. Risk assessments for life insurance products take into account a large number of factors and criteria. Differentiation according to all the other factors would be unfeasible. This would also lead to insurers providing retail investors with an overload of KIDs.