EIOPA outlines ‘value for money’ methodology in unit-linked market

Written by Michael Griffiths

31/10/2022

EIOPA has published a new methodology for “assessing value for money” in the unit-linked market.

The methodology outlines a common European approach on how to identify unit-linked products which may offer poor or no value for money and require a close monitoring by national competent authorities (NCAs).

The authority stated that this move is to ensure risks are sufficiently “identified, monitored and mitigated”.

It follows a top down process based on three layers of analysis: a market wide assessment, an enhanced product analysis and an assessment of the product oversight and governance (POG) process and documentation. For each layer, EIOPA said the methodology indicates different tools and provides information on how to perform the analysis.

While the objective of the methodology is to ensure a minimum common approach towards addressing value for money by NCAs, EIOPA also said that it will welcome and encourage additional steps taken by NCAs.

“The methodology offers more clarity to insurance manufacturers and distributors regarding the supervisory expectations when addressing value for money,” EIOPA stated.

“To achieve consistent consumer outcomes in all European markets, the methodology provides flexibility to take into account market specificities and to address emerging risks, such as rising inflation.

“EIOPA will continue addressing the emerging risks and challenges affecting some unit-linked products, including in light of current high inflation, and will eventually revise the methodology to reflect further the supervisory experience.”

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