Retail Investment Package

EIOPA Value for Money methodology could lead to less product choice and reduced competition


Insurance Europe has responded to the European Insurance and Occupational Pensions Authority’s (EIOPA) consultation on its methodology for developing Value for Money (VfM) benchmarks.

Ensuring the VfM of insurance-based investment products (IBIPs) is important for the industry. The design and distribution of insurance products, Insurance Europe stresses, is already subject to a robust EU regulatory framework which already provides a high level of consumer protection, and, most importantly, is already enabling national competent authorities (NCAs) to have adequate powers and tools to intervene where necessary.

Insurance Europe is concerned EIOPA’s approach to benchmarks could lead to less product diversity and reduced competition in the market. The increased focus on cost instead of quality and diversity, would make it more difficult for consumers to access products that fully meet their needs, especially in terms of safety and protection. This would not encourage risk-averse consumers to find the confidence to invest and would therefore not help to address the pension and insurance gap in Europe.

It is all very well for supervisors to wish to develop tools to monitor the market and the application of Product Oversight and Governance (POG). However, these tools must remain within the sole remit of supervision to avoid any potential negative consequences in the market. This means that, if applied, such tools should not lead to more data collection or more red tape for product manufacturers, nor be made publicly available nor used for product ranking.

It is worrying that EIOPA’s approach goes beyond mere supervision of the market since product manufacturers would be expected to integrate the benchmarks in their POG process. EIOPA is already collecting more data from insurance companies as part of a complex “data pilot” on Multi-Option Products (MOPs), while plenty of data are already available through Solvency II reporting, national reporting and PRIIPs Key Information Document (KID). It is also concerning that EIOPA might publish the VfM benchmarks in the future, which could confuse consumers and lead to reputation risks for insurers.

Besides, this initiative overlaps with discussions on the Retail Investment Strategy (RIS), on which no policy decision has yet been made. This misalignment is creating confusion in the market.