EIOPA consults on its methodology for setting value-for-money benchmarks

EIOPA has initiated a public consultation on its proposed methodology for establishing value-for-money benchmarks for unit-linked and hybrid insurance products. This effort is part of EIOPA’s ongoing work to provide supervisors with risk-based tools to identify products that may not offer fair value for money in the market. The consultation outlines a three-step approach:
1. Product Clustering: EIOPA suggests categorizing unit-linked and hybrid insurance products with similar features into groups based on policyholders‘ needs. This aims to bring comparability to a market with diverse products.
2. Indicators for Benchmarks: Building on a methodology from October 2022, EIOPA proposes indicators around which value-for-money benchmarks should be developed. These indicators are revised and supplemented based on feedback.
3. Data Collection and Benchmark Calibration: EIOPA recommends leveraging existing data collection processes to minimize the reporting burden. The annual Cost and Past Performance report is suggested for data collection, with adjustments as needed.
EIOPA’s approach emphasizes a gradual development of benchmarks, which will undergo regular reviews and adjustments. The benchmarks are intended to support supervisory activities by identifying products with higher value-for-money risks and aiding manufacturers in assessing the value of their offerings in comparison to the market. While the methodology is not meant for consumer disclosure, it aims to facilitate a more risk-based approach to supervision and product testing. The consultation also seeks stakeholders‘ views on the benchmarks‘ functionality, usefulness, and potential publication.
This initiative aligns with EIOPA’s commitment to consumer protection and enhancing supervisory tools for addressing value-for-money risks in the insurance market.
The consultation invites stakeholders to provide feedback through an online survey until 15 March 2024. The methodology, independent of the EC’s Retail Investment Strategy, aims to address concerns related to the complexity of certain insurance products and mismatches between expected returns and actual benefits for consumers.