Retail Investment

EC Retail Investment Strategy must maintain rules that work for consumers and any changes must be proportionate and provide proven benefits


Insurance Europe has responded to a consultation by the European Insurance and Occupational Pensions Authority (EIOPA) on its draft advice to the European Commission on certain aspects relating to retail investor protection.

The advice will feed into the Commission’s proposals for its review of the EU Retail investment Strategy (RIS), which has the potential to significantly impact the insurance industry and its consumers. It is, therefore, vital that the specific nature of the insurance sector and the products it offers are considered in any legislative proposals.

Given that EIOPA acknowledges that the Insurance Distribution Directive (IDD) provides a solid and appropriate framework for the distribution of insurance, priority must be given to maintaining the overall current rules and coupling them with targeted improvements where needed.

Insurance Europe welcomes a number of EIOPA’s proposals that represent a pragmatic step towards a simpler consumer journey, such as the long overdue elimination of duplicative disclosure requirements and the introduction of more digital-friendly rules for consumer disclosures. As to any further initiatives on disclosures, extensive testing on consumers must be conducted by the EU institutions to ensure they lead to clear improvements for all products in scope and do not confuse consumers further.

Moreover, any new proposals must be proportionate. Rules should always be designed to meet the needs of consumers while not being overly burdensome for insurers. This is because additional legal requirements generally lead to increased costs for insurers and ultimately their consumers.

It is also important to note that the IDD was deliberately designed as a minimum harmonisation Directive to allow the necessary flexibility to consider local market structures and consumer behaviour. Access to advice, for consumers who would benefit from it, is vital in all markets to increase consumer participation and trust in capital markets. Measures taken under the RIS should, therefore, not restrict consumers’ ability to access affordable high-quality advice by working within existing market structures. While EIOPA’s proposals to streamline the advice and sales process are welcome, more work is needed to ensure this is appropriate for both on and offline sales, and does not result in an inferior service being provided to consumers.

In regard to product complexity, distinctive features of insurance products such as the long-term duration, agreed benefits at the end of the contract, as well as fixed terms and conditions, financial guarantees or insurance cover do not increase product complexity. On the contrary, they help consumers to manage risks. What does require improvement, however, is the information provided in the Key Information Document (KID), as consumers need to easily understand whether (or not) the product offers biometric risk covers, financial guarantees, other capital protection mechanisms or insurance benefits.