GEMA (Groupement des entreprises mutuelles d’assurance)
With regard to insurance based investment products, we believe that the most appropriate method to evaluate the risks is to refer to each underlying investment’s risk indicator. We consider that an aggregated risk indicator could be misleading and makes no sense at the insurance contract’s level.
A reasonable method could be to group financial underlying products representing similar risks and make the risk indicator move according to the allocation determined on these groups.
GEMA members are against the fact that the performance scenarios should be based on probabilistic modelling. They want something simple and insist on the fact that it is possible to describe past performance but not future performance.
We think that the most appropriate time frame for the performance scenarios is 8 years after the subscription of contract. It is a very common length for life insurance products in France mainly because the income tax is lesser beyond this term.
We do not want a precise performance indicator, because we fear that unsatisfied consumers could appeal against a KID with a too precise risk indicator. We repeat that it is possible to describe past performance but not future performance. We also fear that insurance undertaking have to update frequently a very precise KID.
We imagine that the following template could inspire the performance scenario: see the attached document
Moreover when being too precise (with absolute figures or monetary amount for example), the risk indicator could be counterproductive. We are indeed concerned by the fact that these indicators could restrain investments in products that help financing the economy. This would conflict with various national and European messages.
We feel that the performance scenarios should be link to the risks indicators.
Regarding life insurance contracts, these risk indicators should focus on the risk for the consumer to lose capital. When the invested amount is not guaranteed, it should be clearly disclosed and the consumer should be aware that he takes a risk.
This allows presenting various risk indicators for different groups of financial products.
Regarding life insurance products, the consultation paper describes entry costs (acquisition costs, structuring costs, marketing costs, and costs for biometrical risks and for medical check-ups); ongoing costs (fund related costs, costs for managing capital investments, individual costs in case of changes in the method of payment for example) and exit costs (early redemption fees and penalties).
Some remarks need to be made on this cost structure:
- We do not understand what « biometrical risks » mean?
- Under French law, these costs are already disclosed to consumers through a specific boxed text added to the information note which derives from the solvency 2 Directive. How will this KID and national information document be connected? For us, it is necessary to abrogate this type of national regulation. An orientation in this sense would be pertinent.
- How will these costs match IMD 2?
In our point of view, the key challenge in standardising the format of costs information across different PRIPs is not to give false information to consumers. These products are completely different in terms of functioning, risks and guarantees in case of failures of the insurance undertaking.
Regarding insurance contract in France, the format of costs is already standardised. Indeed the boxed text which is added to the information note sets four categories:
- Where applicable, costs supported by the underlying investment (its existence; details are provided for in the information note).
- Costs at the entrance and on payments,
- Ongoing costs during the life of the contract,
- Exit costs,
- Other costs.
This last category shows that, even at national level and regarding one product out of the different PRIIPs, the definition of a strict and exhaustive list of costs is impossible.
No, we do not want the integration of market, credit and liquidity risk in an investment based insurance’s KID.
In our view, the risk indicator of the insurance based investment products should be limited to refer to the underlying investments' risk indicators. The underlying investments bearing the same risks could be put together, so that the risk indicator mentioned on the KID of the insurance based investment product could be set according to the allocation made under these underlying investments groups.
Furthermore, we consider that the KID of the insurance based investment product would cover the DPF fund (which is a fund with a discretionary participation features – a non UCITS and secure fund - widely distributed in France). In our view, it is unnecessary and undesirable to create a specific KID for this particular DPF fund.
No. In our view, the KID should not vary with the options chosen by the consumers. It is a pre-contractual document which should remain as a standard version.