On 26 April, EIOPA published a report on its thematic review of consumer protection issues in the unit-linked life insurance market arising from business links between providers of asset management services and insurers.
The aims of the thematic review were to establish the existence, magnitude and structure of monetary incentives and remuneration payments received from asset managers, the impact of that on how the assets of unit-linked products are managed and to assess how insurers manage and mitigate conflicts of interest that emerge from these monetary practices.
EIOPA's key findings include:
» 81% of participating insurers received monetary incentives and remuneration payments from asset managers totalling 3.7 billion in 2015;
» 69% of insurers do not disclose monetary incentives and remuneration received to policyholders; and
» Insurers typically have policies in place to ensure they act in the best interests of customers, with specific reference made to conflicts of interest. However, the implementation of these policies varies significantly and the selection of asset managers and investments is, in some cases, constrained by existing business relations with asset managers and do not follow proper governance processes.
EIOPA identified several sources of potential customer detriment arising from its findings, including no or poor disclosure of monetary practices, higher costs for policyholders, and poor investment outcomes. The sample of participating insurers represents around 70% of the unit-linked market, measured by assets under management.
The full report is here.