From the point of view of the financial supervisory authority Bafin, life insurance, a classic old-age provision, should offer appropriate customer benefits. The authority wants to put a stop to excessive costs. “It’s about preventing or preventing excesses in commission-based sales,” said Germany’s top insurance supervisor Frank Grund on Monday. Conflicts of interest when selling these products should be avoided. The commissions for the old-age provision classic are a thorn in the side of consumer advocates.
The Bafin published a leaflet on Monday. According to this, life insurance companies must achieve return targets with a sufficient degree of probability. When setting these targets, insurers should distinguish between a positive return after costs (nominal) and real success, i.e. a positive return after costs and inflation. Wrong incentives in sales are to be avoided by means of specifications for sales remuneration. During an investigation, the supervisory authority found a “considerable spread” in particular in the distribution costs for life insurers.
The Bafin wants to take a closer look at these insurers
The supervisory authority takes a closer look at insurers where the effective costs for endowment life insurance are very high compared to the industry. The effective costs indicate how the costs of the respective contract affect the return. Insurers whose expenses for intermediaries are noticeably high are also examined more closely.
Consumer advocates are calling for a ban on acquisition commissions that insurance companies pay insurance agents and brokers for arranging life insurance. The interest on the classic old-age provision only refers to the savings portion after deducting acquisition and administration costs, among other things.
EU wants to present retail investor strategy
Most recently, a commission ban for financial products was up for debate in Brussels. However, EU Finance Commissioner Mairead McGuinness recently said that other measures such as transparency obligations should be considered instead of a commission ban for more consumer protection. Even if there is no commission ban, that means “no free pass for the financial sector”. The Commission intends to present details of its retail investor strategy at the end of May.
There had been great resistance from the financial sector to plans by the EU Commission to ban commissions. Consumer advocates criticized the decision. “For customers in the financial sector, this means: Above all, it is sold and not advised. Commissions and conflicts of interest remain part of everyday life,” said Britta Langenberg, consumer protection expert for the Finanzwende citizens’ movement.
