EIOPA has recently published a brief formal “Opinion on sales via the internet of insurance and pension products“.
Long story short: EIOPA has carried out a fact-finding exercise into the way that insurance and pension products are sold via the internet,and other “digital and remote channels“. In the course of this exercise, EIOPA “has found consumer protection issues in a number of [so far un-named] Member States, with regard to online distribution“. It has therefore issued an Opinion, addressed to the supervisory authorities in the European Member States, which:
- Reminds them that, the fact that insurance and pension product distributors carry out online distribution activities should not affect their ability to comply with European law;
- Recommends that the relevant authorities take steps to ensure that:
- Online distributors comply with their duty of advice (if they have one); and
- Customers are provided with appropriate information on the selling process used by online distributors, so that they can avoid “unsolicited or mistakenly concluded contracts” (A mistakenly concluded contract might exist when another product is sold, in circumstances where a series of add-on product options have been pre-selected, so that a customer choosing to buy the main product will also buy the add-ons, unless he notices that he needs to deselect the add-on options and he has the confidence to do so);
- Recommends that the authorities prevent consumer detriment by (a) taking a more proactive approach to the collection of information about online distribution activities; (b) identifying the consumer protection challenges online distribution activities create; and (c) taking steps to address the risks and issues they identify at national level;
- Asks the authorities to give EIOPA information about the investigations and regulatory or supervisory actions they have taken before the end of July 2015.
The FCA has already done some work in this area; and the most obvious examples, when taken in the context of EIOPA’s concerns, are in the general insurance add-on products market. (See, for example, the FCA’s Market Study “MS14/1 : General insurance add-on products provisional findings of market study and proposed remedies“; and “Occasional Paper Nos 3. : how does selling insurance as an add-on affect consumer decisions?“).
The FCA put a lot of emphasis on the results of these studies, and the selling / mis-selling issues they drew our attention to, when they published. Most of this work is now a year or more old. The FCA may therefore regard itself as effectively bound to re-open the issues / re-investigate the way in which add-on and other general insurance and pension products are being sold on-line today (*). If it does, supervisory interventions are bound to follow. Firms have therefore been pre-warned.
(* EIOPA has chosen not to use its formal “comply or explain” “guidelines and recommendations” power (see article 16 of the EIOPA regulation). There may therefore be an argument about whether the FCA is legally bound to do any of these things, but that may not matter, if it regards itself as practically bound to do so; or it’s looking for an excuse to dust-off and reapply the behavioural economics work it seemed to love so much a year or so ago. We’ll see.)