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 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:
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.
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 pension 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.
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
2012 EIOPA organised Consumer Strategy Day taking place in Frankfurt am
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.
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
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.
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.
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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