Insurance Europe: the four essentials to allow insurers fulfilling their social role

12 December 2019 — Daniela GHETU
European insurers pay out almost EUR 3 billion a day in claims to help businesses and individuals through difficult events and in benefits to long-term savers, states the most recent publication by Insurance Europe.

In order to do that the insurance industry requires a tailored regulatory approach that reflects its unique business model and special features.

The new publication from Insurance Europe, titled "Why insurance is unique - and offers unique benefits for consumers" urges policymakers to make sure the industry's special features are taken into account when developing insurance regulation.

There are four essentials, according to the paper:

  • The freedom to underwrite - Standardizing policies or introducing compulsory schemes can have a negative effect on the cost and availability of policies. Insurers must be able to develop products that meet their customers' expectations, fit their risk profiles and meet legal and fiscal national requirements.
  • Tailored prudential regulation - The regulatory framework needs to reflect the fact that insurers usually have stable, up-front and long-term funding and low exposure to liquidity risk and market volatility.
  • Regulation that reflects unique distribution and varying consumer needs - Insurance products are distributed completely differently to investment products. Regulation needs to reflect this, or it could lead to fewer points of sale and less consumer choice.
  • Flexibility to present products and costs in a comprehensive way - The EU's PRIIPs Regulation that governs disclosures for insurance-based investment products fails to capture the key features of insurance products and as a result misrepresent certain information that is important to retail investors.

Insurance Europe's latest paper is available here.

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