Insurance Europe (IE) recently published a position paper on inducements, urging the European Commission not to adopt a ban on inducements (in particular, the payment of commission to insurance intermediaries) as part of the Commission's Retail Investment Strategy.
IE argues, based on a number of studies cited in the paper, that:
- advice from intermediaries supports customer decision making and improves customer understanding of insurance-based investment products (IBIPs);
- such advice has to be paid for; if it is not paid for in the form of commission, customers will have to pay fees, reducing consumer access to such products (particularly in times of rising inflation where household incomes are squeezed); and
- the Insurance Distribution Directive already establishes a robust set of rules in relation to product oversight and governance, inducements, conflicts of interest and transparency, which enables national governments to take further measures appropriate for their domestic markets.
It remains to be seen whether the Commission will be persuaded by these arguments.
At a national level, the Central Bank of Ireland has also indicated that consideration of whether inducements may impact the duty of regulated firms (such as insurers and intermediaries) to act honestly, fairly and professionally in the best interests of their customer will form part of its review of the Consumer Protection Code.