Hot topics - What has EIOPA done recently in the area of consumer protection?

​​ ​EIOPA promotes transparency, simplicity and fairness in the market for consumer financial products and services across the European Union’s market. Our consumer protection agenda is focused on making markets work better for you.  Among the activities that aim to promote safety and soundness of markets are promotion and enforcement of fair rules and practices across Europe, and regular collection of analyses and reports on consumer trends. In this section you will be able to find some of the recent publications that EIOPA has prepared in different areas of consumer protection.

What is a Payment Protection Insurance (PPI)?

Payment Protection Insurance is an insurance which usually covers your loan or mortgage in case you are not in a position to fulfil your financial obligations anymore. Reasons for not being able to meet these obligations that are generally covered by PPI can be an accident, sickness or unemployment.

EIOPA’s action for better functioning of PPI markets

EIOPA has recently explored the most important consumer protection issues regarding Payment Protection Issues in different European Member States and has published an opinion which aims at drawing Member States’ attention to explore the situation in the national markets. The analysis showed the following challenges related to consumer protection in the area of Payment Protection Insurance:

  • PPI products are often not suitable for the consumer they have been sold to
  • Consumers are not free to choose the products they like (examples: payment protection products are often sold together with loan products, the insurance contract is part of a group insurance contract, providers often don’t include essential information about the product characteristics or there are limitations in coverage etc.)
  • Consumers often lack information that would be tailored to their needs or find the information too complex for making informed choices

Digitalisation: Comparison websites and other sales via the internet

To make sure that the consumer's interests are adequately protected when purchasing insurance and pension products online, EIOPA issued an Opinion​ with recommendations on sales via the Internet. The recommendations are addressed to national competent authorities.

Furthermore, EIOPA has looked into comparison websites of insurance products. These are websites that allow individuals to see and compare different lists of insurance products, their prices and characteristics. Some of these websites also offer the possibility to buy insurance products online. Overall, comparison websites should stimulate competition between insurers and intermediaries and help to enhance the transparency and comparability of information available to consumers.

The Report on comparison websites prepared by EIOPA outlines good practices concerning online comparisons of insurance products. These good practices primarily address the activities of commercial comparison websites and encourage them to check whether their practices are in line with the good practices identified, and to adapt them accordingly, if needed. However, non-commercial websites’ operators are also invited to follow the recommendations prepared by EIOPA.

Personal Pensions

EIOPA strongly believes that there is a clear role for personal pensions in maximising the possibility to deliver adequate, safe and sustainable pensions throughout the EU. The development of a pan-European personal pension product could be an important step forward in this regard. The advancement of personal pensions can have twin benefits: it will enhance pens​​ion adequacy for individuals and at the same time can contribute to the provision of long-term capital for the European economy, its growth and creation of jobs.​

EIOPA is now working on Advice to the European Commission on introducing a 2nd regime for a Pan-European Personal Pension Product (PEPP)​.

In February 2014, EIOPA published "Towards an EU single market for personal pensions - An EIOPA Preliminary Report to COM"​ which proposes several key areas including consumer protection measures that should be addressed to create a single market for personal pensions. In July 2015, EIOPA published a consultation paper on the creation of a standardised Pan-European Personal Pension Product​ seeking Stakeholder’s input on several key areas including consumer protection measures that should be addressed when creating a 2nd regime for the PEPP.  The closing date for this consultation is early October.​

​Occupational Pensions

Currently there is no explicit legal rule on the European level which grants members of supplementary pension schemes the right to transfer their pension rights. EIOPA has mapped national approaches towards individual transfers of vested supplementary pension rights of an individual member. On this basis, EIOPA developed Good Practices​ which aim to facilitate such transfers. The improvement of transferability of pension rights is consistent with international standards including the OECD's Guidelines for the Protection of Rights of Members and Beneficiaries in Occupational Pension Plans. In EIOPA's view, there are in particular three areas which – if addressed – could make a significant difference towards facilitating transferability of pension rights: firstly, by fostering the voluntary cooperation between the pension schemes or their associations or between the social partners in those countries that do not grant members a statutory right to transfer; secondly, by ensuring that the scheme member can reach an informed decision and thirdly, by making the transfer process itself more efficient. EIOPA has consulted on a draft report and submitted its advice to the European Commission. Furthermore, EIOPA has published a Report on issues leading to detriment of occupational pension scheme members and beneficiaries and potential scope of action for EIOPA. The Report focuses on EIOPA's role in the protection of occupational pension scheme members. Against this background, EIOPA's objective related to the protection of occupational pension scheme members should be that market practices enable them to make a more informed decision, which would in the end help them taking a more active stance towards the planning of their retirement income.

EIOPA is also working on costs and charges and investment choices. Costs and charges are a key issue when considering the value for money or affordability that IORPs deliver, since these may have an important, and potentially detrimental, impact on the accrued benefits or calculated contributions. When it comes to investment choices, evidence gathered by EIOPA shows that a majority of participating MS (16 out of 21) have occupational DC schemes where members have no choice. Occupational DC schemes offering a certain level of choices for members (initially and on-going) feature in half of the participating MS (12 out of 21 MS).

Because consumer protection is also about ensuring that pension funds have the money, on an on-going basis, to fulfil all the commitments made to their members and beneficiaries, EIOPA is working on the solvency position of pension funds as well.  ​

Complaints handling by insurers and insurance intermediaries

In 2012, EIOPA published Guidelines on complaints-handling by insurance undertakings addressed to national competent authorities. Guidelines are high-level principles and aim to provide guidance on appropriate internal systems and controls for complaints-handling by insurers. Competent national authorities should ensure that insurers:

  • put in place a “complaints management policy” so that they have steps in place to deal with complaints from their customers;
  • have a complaints management function which enables complaints to be investigated fairly and possible conflicts of interest to be identified and mitigated;
  • provide written information regarding their complaints-handling process on request, or when acknowledging the receipt of a complaint;
  • and provide a response to a complaint without any unnecessary delay;
  • provide information on complaints and complaints-handling to national supervisory Authorities or the Ombudsman.

In 2013, EIOPA has adopted the “Guidelines on complaints handling by insurance intermediaries”. Together with the guidelines on complaints handling by insurance undertakings, the two sets of guidelines should ensure a ‘complete circle of protection’ for consumers, while taking into account the wide variety of intermediaries, (many of which are ’one man bands’) with a proportional approach.

EIOPA has also published a "One Minute Guide on Complaints-Handling by Insurance Intermediaries" and a "One Minute Guide on Complaints Handling by Insurance Undertakings"

Joint ESAs Consumer Protection Day

In order to strengthen co-operation and ensure cross-sectoral consistency between the European Supervisory Authorities, the third Joint Consumer Protection Day took place in Frankfurt on 3 June 2015. This day was a forum for exchange and discussion on important consumer issues as well as on consumer protection supervisory practices, and amongst others welcomed Commissioner Jonathan Hill delivering a keynote speech​. The three main topics were conduct risk, next decade in financial services and digitalisation of financial services.

In June 2014, the second Joint Consumer Protection Day attracted more than 300 consumer representatives, academics, legal and financial consultants, national supervisors, experts from the EU institutions and financial services industry (banking, securities, insurance and pensions). The aim of the event was to gather consumers, regulators and industry participants together to discuss consumer protection-related issues in the financial services area.

In June 2013, the Joint Committee of the European Supervisory Authorities (EIOPA, EBA and ESMA) held its first Joint Consumer Protection Day previously both in 2011 and 2012 EIOPA organised Consumer Strategy Day taking place in Frankfurt am Main. ​

Industry Training Standards

EIOPA published a report about training standards used by the insurance industry in different European countries. It is crucial that distributors of insurance products understand their products and update their knowledge and ability on a regular basis given the increasing complexity of products in the insurance market.

The Report indicates that EU Member States have considerably different approaches for regularly updating knowledge and ability requirements. In some Member States, there are no formal requirements at all while others require a minimum number of hours of continuous professional development courses per year. Some countries require the passing of an updating exam.

As a follow-up to this report, EIOPA will work on a Report on best supervisory practices applicable to industry training standards.

Consumer Trends

To provide an initial European view of consumer trends in the insurance and pensions sectors, EIOPA regularly collects, analyses and reports on consumer trends.

The following key consumer trends were identified in the last report​:

  • Misleading advertising and sales literature, and incomplete or difficult to understand information on costs and charges;
  • Increased cross-selling (tying & bundling) and sale of add-ons linked to large number of financial products;
  • Poor claims-handling or claims management in particular in the area of motor insurance;
  • Conflicts of interests, where life insurers select underlying funds based on the highest commissions received from fund managers;
  • Insurers' sales incentive schemes leading to mis-selling.

Identified trends provide a valuable basis for EIOPA to develop targeted policy proposals. Based on previous trends we have published for instance Opinions on Payment Protection Insurance (PPI) and on Beneficiary Protection Arrangements regarding Life Insurance Contracts; Guidelines on Complaints-Handling by insurance intermediaries; and a Good Practices Report on Comparison Websites. 

Beneficiary Protection Arrangements regarding Life Insurance Contracts

Life insurance contracts sometimes remain unclaimed, because beneficiaries are not always aware of their status or the undertaking they have to contact.

With its opinion on the topic, EIOPA suggests national authorities to help in the creation or adjustment of such an arrangement to ensure that life insurance
policies are paid out to the beneficiaries where due.

Equal Treatment

The ruling of the European Court of Justice in Case C-236/09 (the “Test Achats ruling”) from March 2011, implied that the use of gender as a risk factor by insurers may not result in individual differences in premiums and benefits for men and women, with effect from 21 December 2012.

This ECJ ruling is binding on EU Member States and voluntary for EFTA countries (IS, LI, NO).EIOPA has mapped how the Test Achats ruling had been implemented into the national legal framework and summarised its findings into a factual report. As of January 2014, the Test Achats ruling has been implemented into national legislation in 25 EU Member States. In the remaining three EU Member States and two EFTA countries, the legislation implementing the Test Achats ruling was in the process of being adopted but not yet in force.

Conflicts of Interest in direct and intermediated sales of insurance-based investment products

Consumers should always be confident that they will be offered a fair deal. We believe that it is essential to strengthen rules, so that consumers' interests are not sacrificed in favour of those of insurers or intermediaries. That's why EIOPA has provided policy recommendations to the European Commission on the identification, prevention, management and disclosure of conflicts of interest which may arise in the course of the distribution of insurance-based investment products.

EIOPA consulted its stakeholders before coming forward with the policy recommendations: we launched a Discussion Paper to explore how to tackle these conflicts of interest, and we hosted a public event where views were exchanged on this issue. Furthermore, EIOPA published a Consultation Paper​ and the Final Report on the Public Consultation on the draft technical advice on Conflicts of Interest in direct and intermediated sales of insurance-based investment products.

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