The European Insurance and Occupational Pensions Authority (EIOPA) today issued a warning to insurers and banks regarding their methods of selling creditor insurance. The warning follows an investigation by the police, which raises a certain number of practices that go against the consumer. “This practice (…) gives rise to concerns regarding the correct application by insurance companies and banks of the basic regulatory principles of the Insurance Distribution Directive (IDD)“, Eiopa explains in a press release.
Among the results, the authority notes that the advisors’ solutions are “limited», while the change of supplier turns out to be complicated. She points out that widespread cross-selling practices prevent consumers from moving away from it,”as 83% of banks link credit insurance protection (CPI) to their main credit product“, she explains in her report.
Beware of conflicts of interest
Eiopa also mentions the large margins and high commissions in this market sector. “A large part of the gross premium paid by consumers goes to banks and insurance companies, while consumers receive little compensation for damages. High commissions can lead to significant and harmful conflicts of interest and poor business practices aimed at maximizing profits“.
This call for orders aims to ensure fair value for consumers. The European watchdog “expects all insurance companies and banks acting as insurance distributors to fully comply with the Insurance Distribution Directive (IDD), including the product supervision and management (POG) requirements”. Stakeholders must demonstrate goodwill to resolve wage issues that are considered high and to prevent harmful conflicts of interest.