EIOPA has concluded a thematic review focusing on travel insurance products, in particular with a view to identifying sources of potential conduct risk and consumer detriment.
The key findings of its review included:
- there are strong indicators of potential poor value for money for consumers due to:
- some insurers paying very high (over 50% of premium) rates of commission to distributors; and
- very wide variations in claims ratios between providers, with some being very low indeed.
- the increase in new market players for whom insurance distribution is an ancillary activity creates increased conduct risks.
- there is a high degree of consumer detriment due to the potential high degree of dismissed claims through no pre-contractual medical screening, and around 70% of insurers excluding pre-existing medical conditions from coverage.
- there is potential increased costs for consumers deriving from the practice of insurers assessing overlaps in cover at the claims stage and not as part of the sales process.
By way of immediate follow up, EIOPA also issued a Supervisory Response to the findings of its review. EIOPA has declared that some of the business models identified are, in its view, inconsistent with the IDD, in particular with the principles of acting in the best interests of the customer, and the requirements for product oversight and governance. Insurance firms are warned that NCAs will take action where there is considered to be a breach of the IDD.