EU’s insurance selling practices updated
Rules for intermediaries selling insurance, and information on pricing and commissions have been at stake in a European Parliament vote yesterday.
Monique Goyens, Director General of The European Consumer Organisation, commented:
“Consumers buying insurance will be better protected. MEPs agreed on one of our key demands which is to shed light on commissions paid to people selling insurance products. Consumers should know what the sales-person’s profit is. This is one important way to reduce the detrimental problem of conflict of interest.”
Improvements introduced by the European Parliament to the current system of selling insurances include:
Tying insurance with another financial product, for example a mortgage, or two insurance products together in one package will be restricted. Consumers will have to be provided with the cost for each product and the possibility to buy the two components separately. This will help consumers compare the cost of insurance and could make switching easier.
Stronger disclosure obligations e.g. regarding the remuneration of intermediaries should lower conflict of interests incentives to sell products with high commissions but little value for consumers.
Consumer protection measures related to insurance based investment products (such as life-insurances) have been partially aligned with other kind of investment product (e.g. retirement products). This is important, as both types of investment products are sold to retail customers.
MEPs decided to leave out a lot of small insurances sold by inexperienced staff. On this point Monique Goyens added:
“Unfortunately MEPs left some work unfinished. Especially ‘small’ insurances which cover broken washing machines, failing television screens or broken glasses are often both expensive and futile. They can still be sold by untrained shop staff without proper information on their contract terms and sales commissions.”