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Serious concerns raised on ESA’s approach to fixing PRIIPs KID

A group of financial associations – including Insurance Europe – has written to the European Commission to warn that the approach being taken to fix problems with the regulatory technical standards (RTS) of the Packaged Retail Investment and Insurance-Based Products (PRIIPs) Regulation is fundamentally flawed and will negatively impact consumers.

The letter sets out the following concerns:

Timing — The timing of the European Supervisory Authorities' (ESAs) review is unhelpful. While consumer testing is already being carried out by the European Commission to inform the future full review of the PRIIPs Regulation, the ESA’s will not be able to properly take this testing on board when proposing any of their own amendments to the PRIIPS key information document (KID) in the meantime. Moreover, changes to PRIIPs will only be meaningful and effective if they are made as part of the full review of the Regulation, rather than as short-term ‘quick-fixes’.  

Consumer testing — Any changes to the PRIIPs KID must lead to consumers having a better understanding of insurance-based investment products. It is also important that any new proposals are tested, not in isolation, but as part of the complete information provided to consumers. Given the broad and varied scope of the PRIIPs Regulation, they must also be tested on a significant range of products to ensure they are suitable for all products in all markets.

Constant changes — Since its entry into force two years ago, the PRIIPs framework has already been subject to a series of refinements and changes. These create a significant compliance burden for companies and are detrimental to consumer understanding. To avoid further piecemeal changes, there must be a comprehensive assessment of how the PRIIPs KID is received in practice to examine whether there is a need to overhaul the entire document.

Ensuring information is meaningful — A ‘one-size-fits-all’ approach will never be able to make the PRIIPs KID work for consumers. The EC and ESAs must instead reconsider the entire PRIIPs framework as part of the official review of the Regulation, and develop solutions that, based on solid evidence, will effectively improve consumer understanding and be workable for all PRIIPs in the different markets.  

Published 22 January 2020