The policeman of the banking and insurance sector raises his voice. The Prudential Control and Resolution Authority (ACPR) tapped the table on Monday denouncing the sometimes expensive costs of life insurance contracts. This product attracts almost a third of household financial savings.
All the signals seem (…) to indicate that a movement of professionals would be appropriate, even necessary, indicated ACPR Vice-President Jean-Paul Faugre at the institution’s annual conference in Paris.
This movement should be characterized by a double requirement, transparency and self-assessment, he continued, referring to an ongoing dialogue between the ACPR and the professional federation France Assureurs.
The gendarme of bankers and insurers, backed by the Banque de France, had in early May called life insurance professionals to order both on their duty to advise and on the costs incurred.
Particularly penalizing entry and management fees
He then pointed to particularly penalizing entry and management fees if they (the clients) are forced to quickly redeem their life insurance contract for lack of cash; and criticized the place of units of account (UC), a risky nature allocation not necessarily adapted to the needs of clients whose financial situation is fragile at the time of subscription.
The accumulation of high costs can in some cases reduce any hope of return, Jean-Paul Faugre noted on Monday, the potential return on investment ultimately only benefiting the financial intermediaries.
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Unfortunately, we must note that the account of a good agreement is not yet there today on the subject of the best transparency and justification of the costs of life insurance, had indicated earlier in the day the Governor of the Bank from France Franois Villeroy de Galhau, suggesting the possibility of a new ACPR recommendation on the subject by mid-2023.
Reports on loan insurance
Life insurance remains the investment that captures the most savings in France: its outstanding amounted to 1827 billion euros at the end of October, according to the latest available figures from France Assureurs.
Jean-Paul also mentioned the borrower’s insurance market, another subject of tension this time with the banking players, the latter defending their historical market share linked to the housing loan activity. The ACPR regularly receives reports on practices that are not very compliant, he said, also referring to a new recommendation to come.