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Encouraging more people to save for retirement via the EU’s Retail Investment Strategy

The European Commission aims to encourage more people to participate in capital markets through its Retail Investment Strategy (RIS). Insurance products make an important contribution to this goal.

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© Rioji Iwata / Unsplash

With the Retail Investment Strategy (RIS), the EU wants to bring more people into the capital market.

The proposals submitted by the European Commission contain some good ideas. However, based on our assessment, the goal to motivate broad sections of the population to save via financial markets will not be achieved with the presented package of rules. It is too bureaucratic and not oriented towards people's real behaviour. In the further course of the procedure, the German insurers will work to further elaborate the opportunities presented by the review of the rules and present concrete proposals for solutions. In this context, the following topics are of high priority for the German Insurers: 

Remuneration models should ensure fair and independent advice 

The European Commission has proposed partial bans on commissions, for example for independent advice on insurance-based investment products. GDV advocates for the co-existence of different types of remuneration. Currently, consumers have the choice of buying insurance directly from the insurer, paying fees to an advisor or leaving the remuneration of the intermediary to the insurer. We advocate for preserving this choice for consumers. 

Products shall offer fair value-for-money  

Obviously, products must bring benefits to consumers. For this, a fair cost-benefit ratio ("value for money") is crucial. Therefore, insurers are only permitted to offer products that meet the demands and needs of consumers. The German national competent authority BaFin supervises this. BaFin monitors the market and intervenes if necessary. However, the new rules proposed by the European Commission could in fact lead to product and price controls. This would not be in the interest of consumers as it would inhibit innovation and reduce product diversity. Benchmarks are not suitable as a general and binding benchmark in manufacturers’ pricing process as suggested by the European Commission. However, Benchmarks could be useful as tools for supervisory authorities to identify outliers.  

Streamline and simplify consumer information 

The European Commission originally intended to streamline and modernise the requirements on consumer information. The proposal contains some good ideas in this regard. For instance, the digital transmission of consumer information is to be standard in future - and this for all insurance products. This is an important step forward. However, the potential for streamlining the information requirements is far from being fully realised. There is still a lot that needs to be done in order to ensure that consumers are not overwhelmed by pages and pages of information. 

Co-determination rights of Parliament and Council should not be undermined 

Almost all provisions in the Commission’s proposals are to be developed in detail later on – either by delegated regulations of the European Commission or requirements to be developed by the supervisory authorities. This makes it particularly hard to suggest improvements. Now it is up to the co-legislators, the European Parliament and the Council, to ensure that key decisions are taken by them and formulated as concretely as possible. It is key that it is precisely expressed what is to be regulated and how. Moreover, it is important that the time frame for the implementation by companies should not run until all the new rules have been formulated in detail and have been adopted. 

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