If the ACPR, the insurance regulator, on Wednesday welcomed their efforts in terms of transparency on unit-linked costs in life insurance contracts, it will remain vigilant on the full and complete application of the commitments of insurers.
The Prudential Control and Resolution Authority (ACPR) announced on Wednesday June 14 that it will ensure that insurers follow the new application methods to guarantee that the units of account (UC) referenced in insurance contracts life insurance present a cost / performance ratio sufficiently protective customer interests. The ACPR will thus verify that any maintaining a unit of account in the commercial offer despite a fresh couple/5-year performance degraded will remain, in this case, limit and, qualitatively, justified.
Unit-linked management fees in the crosshairs
The Supervisory Authority had denounced last December the particularly penalizing entry and management fees if they (the customers) are forced to quickly redeem their life insurance contract due to lack of cash. The accumulation of high costs can in some cases cut off any hope of return, then noted the vice-president of the ACPR Jean-Paul Faugre. In his eyes, the potential return on investment in this case ultimately only benefits the financial intermediaries.
France Assureurs then invited insurers to compare the costs of each CU with a reference level, for example the average cost of the CUs belonging to a coherent group. If the costs of a unit of account are found to be significantly higher than this average, for example by more than 50%, it could be useful to examine its performance net of fees compared to UCs of the same categoryexplained France Assureurs in a press release.
The success of unit-linked
In his life insurance contract, the saver can subscribe to a choice of funds in euros, with a capital guarantee with a limited return, or units of account (UC), potentially more profitable, but more risky. Each CU has a risk level ranging from 1 (low risk) to 7 (high risk). The nature and level of risks is indicated in its Key Information Document (KID).
Life insurance is the leading investment in financial savings for the French, with 1,893 billion euros at the end of April, according to the latest figures from France insurers. Since the start of the year, savers’ appetite has been more favorable to unit-linked units, despite a sluggish 2022 linked to market performance, to the detriment of euro-denominated vehicles, guaranteed in capital but whose net inflows have been negative since beginning of the year.
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