Showing posts with label PRIIPs. Show all posts
Showing posts with label PRIIPs. Show all posts

Wednesday, 22 January 2020

Serious concerns raised on ESA’s approach to fixing PRIIPS KID

A group of financial associations – including Insurance Europe – has written to the European Commission to warn that the approach being taken to fix problems with the regulatory technical standards (RTS) of the Packaged Retail Investment and Insurance-Based Products (PRIIPs) Regulation is fundamentally flawed and will negatively impact consumers.
The letter sets out the following concerns:
  • Timing — The timing of the European Supervisory Authorities' (ESA) review is unhelpful. While consumer testing is already being carried out by the European Commission to inform the future full review of the PRIIPs Regulation, the ESA’s will not be able to properly take this testing on board when proposing any of their own amendments to the PRIIPS key information document (KID) in the meantime. Moreover, changes to PRIIPs will only be meaningful and effective if they are made as part of the full review of the Regulation, rather than as short-term ‘quick-fixes’.
  • Consumer testing — Any changes to the PRIIPs KID must lead to consumers having a better understanding of insurance-based investment products. It is also important that any new proposals are tested, not in isolation, but as part of the complete information provided to consumers. Given the broad and varied scope of the PRIIPs Regulation, they must also be tested on a significant range of products to ensure they are suitable for all products in all markets.
  • Constant changes — Since its entry into force two years ago, the PRIIPs framework has already been subject to a series of refinements and changes. These create a significant compliance burden for companies and are detrimental to consumer understanding. To avoid further piecemeal changes, there must be a comprehensive assessment of how the PRIIPs KID is received in practice to examine whether there is a need to overhaul the entire document.
  • Ensuring information is meaningful — A ‘one-size-fits-all’ approach will never be able to make the PRIIPs KID work for consumers. The EC and ESAs must instead reconsider the entire PRIIPs framework as part of the official review of the Regulation, and develop solutions that, based on solid evidence, will effectively improve consumer understanding and be workable for all PRIIPs in the different markets.

Monday, 13 January 2020

ESAs proposals on PRIIPs: going from bad to worse

Insurance Europe has serious concerns about the review currently being undertaken of the Packaged Retail Investment and Insurance-based Products (PRIIPs) Regulatory Technical Standards (RTS). Proposals put forward in a consultation by the Joint Committee of the European Supervisory Authorities (ESAs) on changes to the PRIIPS RTS would make things worse for both consumers and insurers.
Rather than improve the quality of information in the PRIIPs Key Information Document (KID) — which is intended to inform consumers about insurance-based investment products (IBIPs) — the proposals would:
  • Increase the complexity of the methods and presentation of information, making it even more difficult for consumers to understand.
  • Lead to misleading figures being given to consumers.
  • In general, overload consumers with information.
Insurance Europe also has serious concerns about the “quick-fix” approach taken in the ESAs’ consultation. It is vital that any new measures address the underlying problems with the PRIIPs KID and do not attempt to find superficial and ineffective solutions.
The ESAs therefore must conduct a more well-considered and better evidenced approach when proposing amendments. It needs to be clearly demonstrated that consumers will benefit from any alterations, given the significant compliance costs those changes will impose on insurers.
Fundamental changes that are required to address flaws in the PRIIPs KID should therefore only be considered as part of the official overall review foreseen by the PRIIPs Regulation. Such amendments require a thorough impact assessment and proper, holistic consumer testing of all aspects of the KID, to ensure that consumers are provided with meaningful information.
Insurance Europe’s other concerns include:
  • The introduction of any interim measures must be avoided, as they would incur additional compliance costs without achieving any added value for consumers. Repeatedly changing the presentation and the contents of the PRIIPs KID only confuses consumers and undermines their trust in the PRIIPs KID.
  • Proposals to integrate more features from the UCITS key investor information document (KIID) into the PRIIPs KID, would make it even less suitable for IBIPs, and even more confusing for consumers. IBIPs represent around 80% of the current PRIIPs market, and the PRIIPs KID must therefore be fit for insurance products.
  • Proposed changes for multi-option products (MOPs) would be particularly burdensome for insurers to implement and not add any value for consumers. On the contrary, the introduction of additional layers of information, including cross-references, and complex costs tables for MOPs would confuse consumers and expose insurers to significant liability risks.
The full response to the consultation is available here.