11 December 2017

EIOPA issues recommendations to improve consumer protection in the unit-linked market

The aim of the Opinion is to promote consistent supervisory practices, to support insurance undertakings in addressing the conflicts of interest resulting from the monetary incentives and to ensure that sound principles are used in managing unitlinked products.

The Opinion is a follow-up on EIOPA’s thematic review published on 26 April 2017 that assessed potential risks for consumers due to monetary incentives and remuneration payments from asset managers to insurance undertakings in the unit-linked market. The thematic review concluded that monetary practices between asset managers and insurance undertakings are significant and widely spread across the European Union. In this regard, EIOPA identified risks of consumer detriment relating to unmitigated conflicts of interest and to how the assets of unit-linked policies are managed by insurers.

Existing and upcoming European Union law, including the Insurance Distribution Directive and the Solvency II Directive, already include general principles such as the duty to always act honestly, fairly and professionally in accordance with the best interests of customers or to take all appropriate steps to prevent, identify, mitigate and manage conflicts of interest. These principles also apply to conflicts of interest resulting from monetary incentives received from asset managers and to the management of unit-linked products. 

National competent authorities are expected to provide clarifications to insurers on how to apply these legal principles when it comes to conflicts of interest arising from the monetary practices as well as their practical application to the management of unit-linked products. National competent authorities should provide guidance on organisational or administrative arrangements to prevent conflicts of interest from adversely affecting the interests of policyholders and to manage unit-linked products in the best interest of policyholders, in addition to disclosure enhancements, mitigating the risk of information asymmetries leading to uninformed choices of consumers.

Press release

Opinion

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