The Prudential Control and Resolution Authority (ACPR) hit the table on Monday about the sometimes significant costs of life insurance contracts, a product that concentrates almost a third of the financial savings of the French. “All signals seem (…) to indicate that a movement of professionals would be appropriate or even necessary,” ACPR vice-president Jean-Paul Faugère said at the institution’s annual conference in Paris.
“Particularly punishing access and administration fees”
“This movement should be characterized by a double requirement, transparency and self-evaluation,” he continued, referring to an ongoing dialogue between the ACPR and the professional association France Assureurs. The gendarmerie of bankers and insurance companies, supported by the Banque de France, had called life insurance professionals in early May to order both their duty to advise and the fees charged.
He then pointed to “in particular penalizing entry and administration fees if they (customers) are forced to cash out their life insurance contract quickly due to lack of cash”; and criticized the place of units of account (UC), a “risk distribution” that is not necessarily “adapted to the needs of customers whose financial situation is fragile at the time of subscription”. “The accumulation of high costs can, in some cases, amputate any hope of return”, observed on Monday Jean-Paul Faugère, with the potential return on investment ultimately benefiting essentially “only financial intermediaries”.
A new ACPR recommendation in 2023?
“Unfortunately, we have to note that the report of a good deal is not yet there today” on “better transparency and justification of life insurance costs”, had indicated earlier in the day that the governor of the Banque de France, François Villeroy de Galhau, moved forward. the possibility of a new recommendation from ACPR on the topic “mid 2023”. Life insurance remains the investment that provides the most savings in France: its outstanding amounted to 1.827 billion euros at the end of October, according to the latest figures available from France Assureurs.
Jean-Paul Faugère also mentioned the loan insurance market, another subject of tension this time with the banking players, with the latter defending their historical market share linked to the mortgage activity. The ACPR “regularly receives reports of practices that are not very compliant,” he said, also referencing a new recommendation coming.