04 December 2015

EIOPA recommends improvements to the sales of mobile phone insurance

The EIOPA published a Report on Consumer Protection Issues arising from the sale of Mobile Phone Insurance (MPI) in which it analyses sales practices for this type of insurance product, that provides coverage against loss or theft of mobile phones or physical damage to them.

MPI can provide European consumers with useful coverage for a product – mobile phones – that is becoming increasingly important. However, in the Report, European Insurance and Occupational Pensions Authority (EIOPA) addresses potential "gaps" that could exist between consumer expectations and what insurers actually offer.

When buying an MPI policy, consumers might not be properly informed about what is not covered by the contract. Cases can also arise, where consumers remain unaware, due to poor disclosures, that when purchasing a mobile phone, opening a bank account or buying a credit card, they are also purchasing at the same time an MPI. Furthermore, commission rates for MPI are high, with an average of 40% of the premium paid by consumers spent on payments to the sales channel. The procedures for making and receiving claims are also sometimes unreasonably long and burdensome for consumers.

The Report includes a series of recommendations on how to best improve consumer protection, such as:

• increasing transparency in MPI selling practices;
• providing consumers with a clearly disclosed opportunity to opt out of the MPI when it is sold alongside with the purchase of mobile phones or other products;
• setting up transparent and efficient administrative procedures for processing MPI claims; and
• ensuring that MPI distributors and salespersons are properly trained as relevant.

Most of these recommendations have already been reflected in the forthcoming Insurance Distribution Directive (IDD), which aims to enhance consumer protection in the process of selling insurance products more generally.

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