Insurance Europe: An outright EU-wide ban on inducements would undermine the goals of the EC's Retail Investment Strategy

12 January 2023 — Daniela GHETU
Insurance Europe has sent a letter and a position paper to the European Commission to explain why an outright EU-wide ban on inducements would limit consumer's access to financial advice, and so undermine the goals of the Retail Investment Strategy (RIS), the insurers' federation informed.

Instead, Insurance Europe said, a combination of measures promoting transparency, value for money principles in product design and financial education would deliver more tangible benefits to consumers.

Insurance Europe understands that the Commission is currently considering different policy options to increase consumers' participation and confidence in financial markets as part of the RIS. This may include regulatory interventions on the remuneration of advisors.

It is essential that the EU regulatory framework takes into account the unique features of insurance products (e.g insurance cover, guarantees or capital protection mechanisms, flexibility of payments etc.), the diversity of European markets and the fact that consumers value professional advice when investing.

In many markets, inducements are an indispensable part of the distribution system for retail investment products, without which consumers' access to professional advice would be significantly curtailed. In member states where the provision of advice is mandatory, an outright EU-wide ban on inducements could inhibit consumers' participation to financial markets even more. The commission system allows customers to access as much pre-contractual advice as they need free of charge, as this is effectively pre-financed by existing insured customers. This increases the affordability of advice, which is particularly important in markets with low levels of financial literacy. In many markets, the insurance distribution system still relies to a large part on face-to-face advised sales.

The Insurance Distribution Directive (IDD) provides robust rules for the distribution of insurance products, allowing additional measures at national level if necessary. The existing IDD rules, with member state options, take the right approach, establishing a robust set of rules and enabling national governments to take further measures appropriate for their market. A minimum harmonization Directive tailored for the insurance sector proved to be the best approach to respect local market structures and consumer needs and must be preserved.

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