31 October 2012

Insurance Europe: PRIPs - Quality not quantity of information

The messages also call for the PRIPs Regulation not to apply to pension products and life insurance products where the risk is not borne by the policyholder.

KEY MESSAGES

A. Pensions should be excluded from the PRIPs regulation’s scope

Insurance Europe believes that given these features of pension products, the disclosure requirements suggested in the PRIPs KID are not appropriate. Therefore, it should not be the aim of the proposal to force all pension products within the untailored scope of PRIPs but rather to ensure – as indicated in the Commission’s White Paper on Pensions – that consumer information for individual pension products is improved building on the PRIPs initiative.

►Insurance Europe requests all pensions are outside the scope of the PRIPs regulation.

B. Inclusion of those life insurance products only where the investment risk is borne by the policyholder

Other life insurance products than those where the investment risk is borne by the policyholder contain elements of a minimum guaranteed return and/or profit sharing and do therefore offer comparable or even higher protection against investment risks than some other products excluded from the scope (e.g. deposits). Furthermore, profit-sharing offers an additional bonus for the policyholder based on the profitability of the insurance company. Life insurance products with a contractual agreed minimum rate of return do not have the characteristics of PRIPs because (i) there is no investment risk for the policyholder and (ii) there is no element of wrapping/packaging.

►Insurance Europe advocates only including “life insurance products where the investment risk is borne by the policyholder” in the scope of PRIPs.

C. The KID in its current form can only be applied to underlying funds. If applicable at insurance product level, the KID should highlight insurance features.

Given the lack of information on key features relevant to insurance products, Insurance Europe believes, in its current form, the KID can only be applied at underlying fund level. By providing the KID at fund level, it ensures the underlying funds are comparable to the UCITS funds and other funds within the PRIPs regulation’s scope. Moreover, insurance information is disclosed to consumers on the basis of Solvency II disclosure requirements.

►If the KID is applicable to insurance products, Insurance Europe requests the inclusion of insurance specific features, including a separate section on insurance benefits, to be completed for all PRIPs products.

D. The KID applies inappropriate headings

Insurance Europe supports the use of clear, succinct and comprehensible language. However, the KID headings use rather informal and negative wording, particularly compared to the requirements for UCITS funds. Negative questions such as “Could I lose money” may unduly alarm consumers without achieving the objective of comparability and rather discourage consumers to invest. Finally, using questions in the first person wrongly creates the impression the KID contains personalised information rather than general product information.

►Insurance Europe requests using more neutral headings in the KID.

E. The KID duplicates pre-contractual Solvency II and national disclosures causing consumer confusion

The PRIPs proposal explicitly states Solvency II pre-contractual information requirements should be applied in parallel (Article 3.2 PRIPs regulation). This parallel application of disclosure requirements will cause:

• an unwelcome information overload for consumers as the parallel provision of comparable and simultaneous disclosure under PRIPS and Solvency II along with national disclosure requirements could cause consumers to be overloaded with information;
• legal uncertainty for insurance undertakings as it is unclear whether information covered by Solvency II and the PRIPs KID has to be provided twice or only via the KID.

►Insurance Europe requests identical Solvency II requirements are met by the PRIPs KID.

F. UCITS products should be included in the scope of PRIPs

Insurance Europe believes the UCITS exemption is detrimental to consumers as the parallel use of the PRIPs KID and UCITS KIID negatively impacts the PRIPs regulation’s goal, comparability between investment products.

►Insurance Europe requests UCITS products equally apply the PRIPs KID.

G. Sanctions

►Insurance Europe opposes the introduction of sanctions at European level. As a minimum, the necessary safeguards should be put in place for a product ban and sanctions’ publication.

H. Liability regime

Insurance Europe opposes a strict liability regime for a standardised KID being a first contact with the consumer who may require further, especially personalised, information in a second step to take a well-informed purchase decision. The UCITS regime recognises a standardised document cannot lead to strict liability for the product manufacturer.

►Insurance Europe opposes a strict liability regime.

Key Messages in full

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