Date: 15th March 2024

BETTER FINANCE welcomes and supports EIOPA’s ongoing work on a supervisory toolkit to assess the value for money offered by unit linked and hybrid insurance products. Since its creation, BETTER FINANCE has been fighting for regulatory and supervisory action to improve the returns of long-term and pension saving products. As BETTER FINANCE research shows, high costs of packaged products, in particular in the insurance sector, often result in poor long-term performance and the loss of purchasing power for retail investors.

EIOPA’s consultation paper suggests a three-pronged approach:

  • clustering of unit-linked and hybrid insurance products based on essential product features;
  • selection of relevant qualitative and quantitative indicators together measuring the “quality”
    of a product;
  • setting the indicator levels that should be considered as benchmarks.

It is important to note that EIOPA sees these benchmarks as a complementary tool in a broader value for money assessment. In this context, EIOPA intends for these benchmarks to be used by manufacturers as a self-assessment tool in their product testing, and by supervisors to identify outliers in terms of value for money, which should be subject to enhanced supervision. BETTER FINANCE, however, strongly argues in its response that these benchmarks must also be made public and constructed as a tool to better inform retail investors and facilitate product comparisons.

On the suggested process for product clustering, BETTER FINANCE suggests that products should be clustered essentially based on the underlying unit, with each unit plus its wrapper constituting a ‘product’ for the purpose of the benchmarks.

On the selection of value for money indicators, BETTER FINANCE stresses the need to go beyond mere peer-group comparisons and include indicators of product’s performance compared to inflation and to the investment objective of the product.

For performance and cost indicators, it is critical that EIOPA does not use —as intended— the data from the PRIIPs KIDs, as they are only future projected performances with 4 scenarios not weighted by probability, and based on the last 5-year performance.

EIOPA should use instead (like the French NCA who already started its own "value for money" process on unit-linked products) the actual historical performance of products AND their benchmark chosen by the manager over the recommended holding period or longer. These data are mandatory and standardized at the EU level.

Finally, BETTER FINANCE argues that data for the calibration of the benchmarks should be collected for all products on the market, not merely a sample.

Read the complete consultation below.