Publication alert: EIOPA - Credit Protection Insurance (CPI) sold via Banks
We communicate that the European Insurance and Occupational Authority (EIOPA) has published the Warning to insurers and banks on Credit Protection Insurance (CPI) products.
1. Context
The European Insurance and Occupational Pensions Authority (EIOPA) with the support of National Competent Authorities (NCAs) have conducted a thematic review, looking at the functioning of the EU market for credit protection insurance (CPI) products sold via banks. These review key issues that can negatively impact consumer outcomes.
In this context, and following the thematic review, the EIOPA has issued a warning aimed at insurers and banks acting as insurance distributors to ensure that CPI products offer fair value to consumers. Furthermore, the EIOPA expects all insurers and banks acting as insurance distributors to fully comply with the Insurance Distribution Directive (IDD), including the product oversight and governance (POG) requirements.
2. Main points
EIOPA’s expectations. It is expected that insurers and banks to put customers’ interests at the heart of their business model and take relevant measures to prevent the occurrence of consumer detriment. Should this occur, all insurers and banks concerned should take remedial actions to improve consumer outcomes by mitigating the situation and preventing further occurrences of the detrimental event. EIOPA considers that action should be taken in the following areas:
- Manufacturing of CPI products. Manufacturers of CPI products should ensure, among others, that:
- Their products are designed to meet the needs of the identified target market, meaning offering fair value and ensuring fairness in pricing practices. In order to do so, their product approval process should be designed in a way that is proportional to the complexity and the risks related to the relevant business model, the CPI product and the target market.
- Make use of the available data (such as complaints, rejected claims and other) and conduct relevant analysis to ensure proper product monitoring, including whether the product offers value to the target market.
- Monitor that the banks acting as insurance intermediaries act in accordance with the objectives of their product approval process and that sales schemes, in place at the bank level are not detrimental to consumers.
- Distribution arrangements of CPI. Insurers and banks are expected to assess and review their distribution and remuneration arrangements to ensure that they always act honestly, fairly and professionally in accordance with the best interests of their customers. It is also expected that product distribution arrangements to take into account the level of complexity and the risks related to the products, as well as the nature, scale and complexity of the business of the distributor (bank).
3. Next steps
EIOPA and NCA will prioritise monitoring the European CPI market and when needed, exercise their supervisory powers including via on-site inspections and other investigatory methods. In the event of a breach appropriate sanctions and administrative measures may be applied.