Information on some complex products

​​In this section you will find information on three complex products, where EIOPA has recently undertaken consumer protection related work. These products are:

What is a Variable Annuity?

A Variable Annuity is a contract between you and an insurance company. The insurer agrees to make periodic payments to you. You purchase such a contract by making either a single or a series of payments. A Variable Annuity offers a range of investment options. The value of your investment will vary depending on the performance of the investment options you choose.

What has EIOPA done?

EIOPA has concluded in a report that you should be provided with:

  • Specific product information to inform you about its complexity and
  • General information on the insurer and the legal and supervisory regime it operates under.

In relation to selling practices EIOPA concludes that:

  • You should only be sold a Variable Annuity if you are advised by a suitably qualified person, and
  • There should be a focus on your demands and needs.

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

What is a Defined Contribution Pension Scheme (DC)?

In a DC Plan fixed contributions are paid into an individual account by employers and employees. These contributions are then invested, for example in the stock market, and the returns on the investment (which may be positive or negative) are reflected in the individual's account. On retirement, the member's account is used to provide retirement benefits. Only the contributions are known, not the outcomes.

What has EIOPA done?

EIOPA has presented a report with good practices on how to provide information to members of a DC Plan. EIOPA argues that effective information should be presented to you in two layers. The first one provides simple, essential pieces of information that you actually read and understand. The second layer consists of the more legal and technical substance that is available on your request. All advice provided to you should best suit your demands and needs.

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