Insurance Europe fully supports the goals of the Retail Investment Strategy (RIS) published in May this year: to address the low-level of retail investment participation in financial markets, while protecting investors from mis-selling practices. Yet, the industry is concerned that some of the European Commission's RIS proposals will make it much more complicated for consumers to invest and, subsequently, discourage them from doing so or steer consumers towards buying the cheapest, rather than the best, product.
1. The package proposes multiple bans on inducement which run counter to the RIS goal of making investing more inclusive, as it will be difficult, or even impossible, for consumers to consider shopping around and to take investment decisions without having to pay an upfront fee. Insurance Europe recommends maintaining consumers’ choice and flexibility for EU member states to apply and decide stricter requirements on the payment of inducement if they feel it's necessary.
2. While the value for money principle is welcomed by the industry, the approach to cost and performance benchmarks needs to be reviewed. This is against the market's freedom to design products and would lead to price controls and other unintended negative consequences for both insurers and consumers.
3. Many provisions will make the consumer investment journey longer and more burdensome. Instead, it is important to ensure leaner, more streamlined and more cost-efficient sales processes, while preserving the interests of retail investors and making the information provided clearer and meaningful.
4. The RIS proposals will push consumers towards the cheapest product, even if it means having fewer or no guarantees or lower insurance coverage and less flexibility, which may not be in their best interests. The current proposals should better consider the diversity of insurance distribution systems and IBIPs' features.
5. More can be done to streamline disclosures and make them more user-friendly. The Key Information Document (KID) needs to remain a standardised document and better display insurance features.
6. Too many requirements would be developed at EU technical level – specifically Level 2 and Level 3 - and removed from the political debate. To facilitate implementation, Level 1 needs to be sufficiently clear and leave some flexibility for national adaptations.
What’s next: The European Parliament and European Council will now begin discussing and negotiating the RIS proposals as part of the co-legislative procedure. On 5 September, the European Council's Working Party on Financial Services and the Banking Union will meet.