16 June 2014

EIOPA: Smarter regulation will benefit consumers

Speech by Gabriel Bernardino, AMICE Congress 2014, linked to smart regulation - proper regulation and supervision add credibility to the market and can be a catalyst for a healthy market development.

In today’s society consumer satisfaction is taken as the best guarantee for any company’s continuity. Rule number one in the financial sector business should be: the consumer is always at the heart of the provider’ business.

Consumers need to trust in the financial services providers. For this to happen any firm should do business in a decent and honest way, have good governance arrangements, offer transparent products and have a company culture built on integrity.

This is first and foremost the responsibility of the firm itself, but regulation and supervision can also play an important role. Proper regulation and supervision add credibility to the market and can be a catalyst for a healthy market development.

For Mr. Bernardino consumer protection in the insurance sector has two main dimensions:

• First, it is about ensuring that undertakings are soundly managed and have a robust solvency position in order to fulfil, on an on-going basis, all the commitments made to their customers.
• Second, it is about making sure that customers receive the information they need on conditions, costs and risks of the products, that they are treated fairly and that they get value for money.

The EU regulatory framework has always captured these two dimensions. They were improved and adapted to the new developments in the economy and society, with a clear objective of increasing consumer protection.

To conclude Mr. Bernardino put forward a question: have we lost regulatory balance? He doesn’t think so. Among regulators there is the general consciousness of the possibility of unintended consequences of regulation. And there is the recognition of the need to pause and let the new regulatory approaches settle to see what needs adjusting, what needs to be calibrated. Ceaseless change should not become the ‘new normal’.

What is needed is not more (or less) regulation, but smarter regulation. Mr. Bernardino said: "Smart regulation:

• Takes consumer behaviour into account: the ‘homo economicus’ has never lived, we have to put the consumer as they really are at the heart of regulation, rather than the consumer regulators wish for.
• Recognises the limitations and biases in consumer decision making.
• Is proportionate: regulation that reflects the evidence of what works and what doesn’t.
• Looks forward: regulation that looks to anticipate problems, rather than address only the problems of the past.“

Full speech

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