The Polish Insurance Association has prepared the recommended good information practices related to unit-linked insurance. The core aspect of the recommendation involves the Product Specification. It provides for information duties towards the clients and the form of information to be supplied. It also enables simple comparison of the costs of each insurance versus unit-linked insurance. The recommendation for good information practices is a response of the sector to the needs of clients who find it difficult to obtain comprehensive and clearly phrased information on unit-linked insurance.
“Clients need clear information and easy tools for comparison. When selecting a policy, they naturally choose a service which is quite complex. Now they can be sure to compare the insurance costs and benefits with not much effort and with no need to have the expert knowledge,” says
Jan Grzegorz Prądzyński, President of PIU Board.
The principal section of the recommendation consists of the Product Specification, i.e. a brief and concise document describing the risks, the nature of insurance and all related fees. The Specification will be mandatorily presented to the client before signing the agreement. It standardises the fee-related terminology, which provides the client with a convenient tool for comparison of products of various companies and for selection of the adequate offer. “All fees and risks must be presented in the Specification clearly. Marketing language and insurance slang are forbidden,” emphasises Jan Grzegorz Prądzyński.
It is worth mentioning at this point that currently the European Parliament is working on the regulations called PRIPs. It specifies the information to be provided to clients purchasing any investment products, inclusive of insurance. However, PRIPs is going to become effective in a few months. “Our solution is ready now. We based it on PRIPs to a large extent, but in several aspects we have gone a step further,” says Jan Grzegorz Prądzyński. The Product Specification imposes the obligation to present to the client a simulation of potential profits or losses under the insurance. This solution, just like standardisation of fee-related terminology, is not to be found in PRIPs.
The Product Specification consists of three major sections:
• general – specifying the core information on the product, including its major features, purpose, scope of benefits, duration, manner of premium payment or description of risks;
• fee-related information – fees described in detail and ascribed to each specific category; this section also provides information on potential bonuses and rebates;
• risk simulation – the insurer will have to present to the client a simulation of the course of insurance in three variants: with reduced, regular and increased product return; each simulation will be based on the premium actually paid by the client or on the actual benefits, thus providing useful information.
Unit-linked insurance is one of the major elements of the system of voluntary pension saving in Poland. In the context of the current discussions about the pension system, their importance may be even bigger in the future. “Unit-linked policies are of realistic value for clients. They must not be perceived through the prism of misselling. The Product Specification is definitely intended to radically restrict unethical sales. I believe that the Specification will enhance the confidence in insurance, the role of which for the economy and the capital market growth is hard to be overestimated,” says Jan Grzegorz Prądzyński.
The document was made within 3.5 months. Over this time it was consulted with the entire insurance market and the PIU Council of Good Practices. Also, the opinion of external law firms was obtained. Several days ago the document was submitted for consultation by the Ministry of Finance, the Polish Financial Supervision Authority (KNF), the Office of Competition and Consumer Protection (UOKiK) and the Insurance Ombudsman. The time of entry in force of the recommendation depends on the date of completion of the consultations. After official approval, each insurance company to declare the observance of the recommendation will be given the maximum 12 months to fully adapt all its products thereto. PIU is going to apply to KNF for making the list of companies conforming to the recommendation available at its website.
Complete text of the recommendation
Sample Product Specification