19.09.2013
Key Positions

Consumer Protection

Consumer rights in the insurance industry have increased significantly in recent years, in part with the active participation of the insurance industry: The reform of the Insurance Agreements Act is a corner-stone for transparent information to the insured. Moreover, the revision of insurance mediation law, improved consultation practices and transparency:

Supporting documents for advice and product information documents are obligatory in the insurance sector: Before concluding a contract, insurance customers receive all relevant contractual details in a neat and readily comprehensible form. In the cases of life insurance, private health insurance and disability insurance, intermediaries and insurance companies are obliged to disclose their acquisition and distribution costs. Further, customers have to be informed about their right to withdrawal and termination as well as their options for filing an out-of-court complaint. The planned Old Age Provision Improvement Act (“Altersvorsorgeverbesserungsgesetz”) provides for standardised information for all products, allowing the costs and risks of various investment products to be easily compared.

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Improved information requirements and well qualified advice by licensed and registered intermediaries enable consumers to identify their insurance and precaution needs and to make the appropriate choices. Beyond these statutory requirements, the insurance industry has undertaken voluntary initiatives aiming at increasing consumer protection in the insurance sector, e.g.:

  • to strengthen the decision-making authority of the insurance ombudsman, sparing customers lengthy and expensive court proceedings;
  • to issue an association recommendation that ratios be used to make the costs associated with contracts transparent and comparable;
  • to revise non-binding sample terms and conditions together with expert linguists, making gen- eral terms and conditions of insurance easier to understand;
  • to extend the code of conduct for insurance distribution, defining standards for the provision of good advice. Companies agreeing to the new code will have their compliance certified in the future by an independent third party. Further, these insurers will agree only to work together with intermediaries who improve their skills on a regular basis and document such constant further training. The codex explicitly states that customer requests are to be given priority over intermediaries’ interests in provisions.
  • Finally, the industry is designing the further training of its insurance intermediaries more clearly for its customers. A corresponding concept has been presented in spring of 2013.

Financial consumer protection is becoming more of a focus of attention by German and european supervisory authorities and will determine the consumerpolicy agenda of the coming legislative period. The insurance industry is interested in assuring that appropriate goals are pursued and that national and european law interconnects consistently.

Our Positions
Insurance Intermediation: Take account of the variety of national remuneration systems
The revised EU Insurance Mediation Directive (IMD2) aims at avoiding conflicts of interest between consumers and intermediaries, providing inter alia for information requirements concerning the specific remuneration of insurance intermediaries. The insurance industry doubts that consumer protection will significantly improve by disclosing specific remuneration. For life insurance, a disclosure of the acquisition and distribution costs factored into premiums is better suited to facilitate comparisons of the costs charged to insurance companies. The plurality of national compensation systems for insurance mediation should be warranted on European markets.
Exempt pension products from PRIP‘s scope of application
The proposed regulation for packaged retail investment products (PRIP) aims at establishing uniform key information documents (KIDs) for consumers and encompasses classical and unit-linked life insurance in addition to structured (“packaged”) financial products. The insurance industry deems this regulatory framework to be unfair and asks that classical insurance products and all pension products be exempted from the scope. Should insurance products remain within the scope of application of the PRIP regulation, to avert contradictions, it must at least be assured that the regulation specifically tailored to insurance intermediaries and undertakings (IMD2) has priority over the PRIP provisions.
Fee-based advice: No requirement to offer net rates
The insurance industry welcomes the initiative to regulate commercial financial investment advice under the term “fee-based investment advice.” However, the industry opposes expanding the regulatory proposals to include insurance products and legally obliging providers of financial products to offer their products at net rates. Fee-based advice can supplement commission-based distribution, but cannot replace it. It has to be kept in mind that low-income consumers would probably rather not purchase insurance products at all or without obtaining advice in order to save money. The number of underinsured consumers or consum- ers with the wrong insurance would therefore tend to increase rather than decrease. The social policy goal of achieving a dissemination of private old age provision products to supplement the statutory pension scheme would not be met.
Solve conflicts of interest related to consumer policy through minimal harmonization – restrict the issuance of implementing regulations
Consumer protection law is now being written more and more at european level (e.g. the proposals of the EU Commission regarding the mediation of insurance products and key information documents for investment products), continuing a trend towards more stringent regulation of products and distribution. In this regard, a tendency to flush out the details of legal acts through a large number of implementing regulations can be observed. so-called “delegated legal acts” of the EU Commission cannot replace normal legislative proceedings, however. The subsidiarity principle must also be applied with respect to consumer protection.