MAIN TOPICS: The European Consumer Protection Conference 2017

16 February 2017 — Daniela GHETU

Representatives of insurance and reinsurance companies, regulators, members of professional associations of insurance undertakings and distributors, as well as representatives of authorities and consumer associations gathered on February 16 in Vienna at the third edition of the European Consumer Protection Conference. Here are some of the main topics analyzed during the debates.

Gabriel BERNARDINO, Chairman, EIOPA
  • Today is more important than ever to ensure that the EU respond to the concerns of its citizens.
  • Consumer protection is in the DNA of EIOPA and will continue to be a key strategic priority
  • Our objective is to ensure that ultimately market players treat consumers fairly
  • The difference between conduct of business supervision regulation between member states is much higher than that of prudential regulation
  • We need to move away from the tick-the-box culture of supervision
  • Insurers needs to be a business of the future
  • IDD: EIOPA submitted last week the technical advice to the European Commission. The overall objective is to ensure that the interest of consumers are protected. 
  • I am not advocating the fee-based distribution model in detriment of the commission model
  • IPID: I am really proud of the work we have done. Consumers will easily be able to compare products. The proposed design takes into consideration the digital version of the document. Consumer will be empowered to take informed decision.
  • Fast-evolving technologies are changing our lives. These changes will have an impact on the entire value change. We will see business models being threatened. The use of BigData, telematics, IoT will impact how providers interact with consumer. We need to be aware of potential risks but these all will bring benefits to insured. 
  • EIOPA has launched a public consultation on BigData so I invite you all to contribute. In 2017, EIOPA will also organize roundtables dedicated to InsurTech.
Christian ELTNER, Head of Legal and International Affairs and Head of the Information and Complaints Unit, VVO, Austria
  • Insurance is all about trust - insurers' business is long term oriented and they need the consumer to trust them so this is why companies and the industry as a whole need to do whatever in their power to preserve consumers' trust through best serving their interests
  • In 2017 we will see if Solvency II is fully implemented and how it is working
  • 95% of insurance business in the EU is national business, only 5% is written cross-border, on FOS basis
  • Regulation is perceived as one of the top operational risks within the companies - so we need good, stable and not cost intensive regulation, as finally all the costs are borne by the consumer
  • If the final text of the IDD will arrive in the autumn of 2017 there will not be enough time for the companies to implement it, as it is a complex piece of regulation
  • The implementation time of 2 years seems to be not enough in general, for the European directives - 70% is "lost" with level 2 and 3 regulation; if national authorities and companies have a too short amount of time to implement regulations, the result may be unsatisfactory
  • It is important not to over regulate and to provide for the right level of information on products - too much or too complex information is not only not useful, but it may rather be harmful
Olav JONES, Deputy General Director, Insurance Europe 
  • Insurers work with governments, customers and other stakeholders in several areas to: reduce risk and impacts of natural disasters, improve road safety, raise awareness about health risks etc.
  • Insurers' role as investors is to search for yields and give their customers access to investments that will outperform inflation so that in the end consumers may have a relevant pension revenue
  • Insurers are long term investors, providing a stable source of funding to the economy, even during market downturns
  • Good regulation is vital, as it provides for consumer protection tools, but bad regulation can be worse than too little regulation
  • Consequences of bad regulation: unnecessary costs, information overload confusing consumers, sub-optimal investment strategies leading to low benefits, short term orientation of investments, pro-cyclical behavior
  • For the disclosure regulation to be good, quality should prevail over quantity; excessive disclosure requirements are detrimental for consumers; also some provisions of the PRIIPs, IDD and Solvency II directives are overlapping and leading to an overload of documentation that insurers need to produce and which is clearly duplicating the same pieces of information in different formats
  • The industry strongly supports Solvency II's objectives of risk-based regulation; yet, while SII brings a huge change and improvement, it also brings huge costs and in some respects is too conservative; 
  • According to the UK supervisor estimates, Solvency has cost about EUR 4 billion in UK alone; costs make it especially difficult for smaller insurers
  • Considering insurers as "traders" in what the financial investments are concerned leads to higher capital requirements and consequently to higher costs for consumers or to lower benefits for the long term products such as pensions
  • Good regulation should be as simple as possible, but as complex as necessary
Nathalie BERGER, Head of Unit Insurance and Pensions Directorate General for Financial Stability, Financial Services and Capital Markets Union (FISMA),  European Commission 
  • After one year of full application of Solvency II - is the most sophisticated regulatory framework in the world and also the piece of regulation which opens the market for EU insurers - the right balance between opportunities to insurers and good protection for consumers
  • SII does not treat insurers as traders - there is a specific measure for insurers incentivizing investments in infrastructure - because Brussels sees the insurance industry as the most powerful investor in the EU
  • In 2018 will take place an important review of the Solvency II implementation - the EC is closely working together with EIOPA to understand and decide how can the standard formula be simplified, as well as how can the capital charges be re-calibrated according to the conclusions after one year of implementation
  • The EC is working together with IAIS (International Association of Insurance Supervisors) to make sure that EU insurers get permanently a level playing field at the global level - in this respect, the mutual agreement signed with the US authorities will lift a significant financial burden that EU reinsurers had to bear until now when providing coverage for US clients
  • The IORP directive was revised and formally adopted by the legislators in Decembers and currently is in process of implementation by the national bodies
  • Personal pensions are less developed in the EU, which means an insufficient level of pension savings - the EC is working to present a meaningful proposal by the end of the summer so that providers who want to develop a PP product for different markets to have the right tool to do it; the most difficult issue in designing this tool is the different tax regime in the EU states - the EC doesn't intent to force harmonization but to find the way to "add" to the current regime specific provisions which would allow pan-European personal pensions to develop
Matti LEPPALA, Secretary General, CEO, PensionsEurope
  • Current pensions systems are clearly insufficient and unsustainable, considering the changing saving behavior of the customers, the increased mobility in work etc.
  • Pan-European pensions (PEP) may be the right solution to address this issues
  • PEPs need to be very well configured, as a specific pensions product, so that benefits provided by it overcome that offered by other savings products
Sergej SIMONITI, President, AZN - Slovenian Insurance Supervision Agency
  • The paramount rule for regulators in order to have good regulation should be "if you don't know what to do, better do nothing"
  • Never forget that all regulation costs are shifted to the consumers - so consumers should be aware of what are they paying for
  • Regulators should carefully think to the potential unintended effects of regulation - for example, banning intermediation fees may reduce the overall insurance protection of the population
Alexandru CIUNCAN, Member of IRSG & OPSG of EIOPA 
  • The consumer protection issues have made tremendous steps ahead in the last 15 years - simply put, from almost no concern, to a constant attention. But we are only at the beginning of the journey
  • Good regulation is a fine balancing act - all stakeholders should engage in providing their input and help design good pieces of regulation
Pauline de CHATILLON, ERNST & Young, France
  • There is a strong asymmetry between industry and consumers, so regulation is necessary. 
  • Major principles to ensure consumer protection cover - no aggressive business practices; - no misleading information about the product, including advertising; - give advice; - remuneration should not go against the clients' interest; - distributors have to receive adequate training; - to embed measures to prevent risks of misconduct in the product design
  • In order to find the right balance between consumer protection and consumer responsibility we need to have a good dialogue between insurance undertakings and regulators - but regulators have to stay in the drivers' seat.
Mirenchu DEL VALLE, UNESPA, Spain
  • The main factor that identifies the relationship between insurers and consumers is that the insurance activity generates so many claims that it is simply impossible not to have so many complaints. 
  • In Spain, there are 6.000 complaints managed by the local regulator.
  • Insurers need to focus on commitments and self-regulation, simplicity and digitalization.
Ursula GEROLD, BaFin, Germany
  • Product information in financial services is a trend in Europe that started on the capital moarkets
Misu NEGRITOIU, President, ASF, Romania
  • Everything we do - we do it for consumers. In order to create the awareness we set-up in ASF a Consumer Protection Directorate. And now we see the impact on consumer of the supervisory actions that we took
  • Consumer have rights, but also obligations.
  • Consumer information requirements should depend on the product type and complexity. Investment-related products are much more complex than plain-vanilla motor TPL, in example.
  • In time the perception of over-regulation will disappear, as we do not have any standards for comparison so far.
Peter BRAUMUELLER, Managing Director, FMA-Financial Market Authority, Austria
  • We are currently witnessing the Fourth Industrial Revolution
  • Supervisors should be technology-neutral and should neither encourage or discourage financial innovation and digitalisation. However, supervisors must dispose of and effectively use adequate tools to achieve a similar level of policyholder protection accorss different types of technologies and business models.
  • In the digital world, monitoring business operations becomes much more difficult and therefore supervisory tools need to be adapted to the digital environment because through new technologies, detrimental products or practices can spread out extremely quickly. So time becomes a more relevant issue.
  • Insurers will be highly exposed to cyber risks. Robust risk management will be a prerequisite for carriers.
Chris HALLIDAY, P&C Leader Turkey and Rapidly, Developing Economies EMEA, WILLIS Towers Watson, UK
  • We see a change from product-focus to customer-focus in the global insurance industry.
  • Digitalisation is at the heart of many companies' strategies. Many insurers want to be more digital as this is key to their development in the future
  • There has been a change in a lot of industries in the world. The question is - Is this Insurance Industry ripe for the taking?
  • There is a gap between ambition of insurers to become more digital and innovative projects and that gap is the IT infrastructure
Calin RANGU, Consumer Protection Director, ASF, Romania
  • Operational risks in financial sector is very important as there types of risks are those that affect consumers. Digitalisation is part of operational risks and therefore should be regulated accordingly
  • FinTech companies must be regulated as insurance distributors if they act as insurance distributors.

Daniela GHETU, Editorial Director, XPRIMM Publications & President, PIA-Presse Internationale des Assurances

  • There are already comparison websites that rank products and they eventually need to explain the criteria used.
  • Such providens already work somehow as a rating agency
  • The usage of BigData might cause some clients in an initial phase not getting coverage, but eventually new solutions will appear that will be dedicated to this client segment

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