Insurance Europe has responded to a consultation conducted by the EC on its proposals regarding suitability and appropriateness assessments, which will feed into its upcoming EU Retail Investment Strategy.
The proposals would be completely unworkable for insurers and would cause significant problems for insurance customers by restricting their choice of products, limiting their access to high quality advice, and forcing advisers to offer them products based on irrelevant criteria. The EC must therefore completely reconsider its approach.
Insurance-based investment products (IBIPs) are entirely different from other investment products and cannot be brought into the same distribution system. This is because the insurance regulatory framework is different, insurance distribution systems are different, insurance products are different, and insurance policyholders have different needs and expectations from other types of retail investors. If the EC intends to make changes to the existing Insurance Distribution Directive (IDD) distribution regime, these changes must be calibrated specifically for insurance markets.
Furthermore, there is no clear need for these proposals. The IDD provides sufficient safeguards through the whole product life cycle and there is no clear evidence that changes are required to the current suitability and appropriateness system.
In addition, the EC’s consultation contains important new proposals which require stakeholders to consider an entirely new way of conducting suitability and appropriateness tests. It is therefore impossible for the industry to give these proposals full consideration within the four-week deadline set by the EC. Consultations such as this must run for a minimum of 12 weeks in line with the EC’s Better Regulation principles.
Finally, there are also serious open questions regarding how this new system would operate in terms of fair competition, liability, advice, costs and product features, which have been completely overlooked. The EC must therefore urgently examine these issues before proceeding any further with this initiative.