26 May 2016

Insurance Europe: Regulation must enable insurers to put customers first

Badly designed regulation can harm consumers with information overload, duplicative disclosure requirements and excessive capital charges, according to Insurance Europe’s president, Sergio Balbinot.

Policymakers must take action to ensure that EU and international regulation allows insurers to continue to put consumers at the very heart of their business in the future. For that to happen, rules need to be clear, simple, fit-for-purpose and well tested, according to Insurance Europe, the European insurance and reinsurance federation.

Unfortunately, there are numerous examples of where European legislation — despite being well intentioned — is none of these things, according to Insurance Europe’s president, Sergio Balbinot, in his opening speech to the federation’s 8th Annual International Insurance Conference.

While explaining how new overlapping EU rules will result in consumers being overloaded with information, Balbinot said: “In order to comply with the Insurance Distribution Directive (IDD), the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) and Solvency II, a person buying an insurance product will now receive 148 different pieces of pre-contractual information. Will this help that person understand the product they are buying, or maintain insurers’ reputation for clear and simple consumer friendly communication? Clearly not.”

The president also highlighted that prudential rules can have unintended negative impacts on consumers. While the move to risk-based regulation through Solvency II is fully supported, the president said concerns remain that the Solvency II measurements are overly volatile and do not measure the risks correctly.

To address these issues, Balbinot called on policymakers to adopt a genuinely consumer-centric approach to regulation, which would involve:

• Addressing the cumulative impact of proposals to delete duplication and clarify contradiction. That would include looking, not only at the Level 1 legislative act, but also at Levels 2 or 3.
• Focusing on the real — rather than perceived — needs of consumers.
• Carrying out consumer testing and cost benefit analysis to ensure that each new proposal delivers its expected benefits to consumers in practice.
• Recognising that unnecessarily high capital requirements can be detrimental for consumers and therefore ensuring that risks are measured correctly to ensure requirements are appropriate.

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