Since 2010, when G-20 Leaders asked the Financial Stability Board (FSB) to work in collaboration with the Organization for Economic Co-operation and Development (OECD) and other international organizations to explore options to advance consumer finance protection, the topic of consumer protection has been rising up the international agenda.
In turn, the FSB has called on international regulators to take a lead on global financial consumer protection efforts which have resulted in the development of specific policy recommendations at the IAIS and within other regulatory bodies.
To drive greater coordination, the IAIS is now developing and enhancing supervisory and supporting material related to market conduct supervision, providing oversight to the Financial Crime Working Group (of the IAIS) and coordinating with other international bodies dealing with the market conduct of insurers and intermediaries and financial consumer protection.
The IAIS is also currently developing an Application Paper on Approaches to Conduct of Business Supervision, expected to be adopted in 2014 and recently conducted a survey of IAIS Members (supervisory authorities) on their approaches to conduct of business supervision.
While the US has long-standing market conduct processes, these vary by state and, as a result, the US is also focused on achieving greater uniformity. Indeed, the recent Federal Insurance Office (FIO) Modernization Report has an entire section on market place oversight, consumer protection and access to insurance. Recommendations call for more consistency nationally in market conduct examinations and standards for market conduct examiners.
In Europe, EIOPA also regards consumer issues as one of its main priorities and hopes to bring greater harmonization of practices throughout Europe. In 2013, EIOPA published Guidelines for Complaint Handling by Insurance Intermediaries, following the 2012 release of similar Guidelines for Insurance Undertakings.
Looking ahead, however, we expect to see EIOPA shift its focus on consumer issues towards the appropriateness of products. It will also work on common disclosures with the other regulatory authorities for Packaged Retail Investment Products (PRIPs).
- Need for an integrated pan-European compensation scheme required if system risk to be properly monitored
- Greater EIOPA involvement will continue to put pressure on local supervision in Europe to increase their surveillance – in turn, requiring more attention from insurers
- IMD2 and PRIPS changes will continue to shift focus on consumer issues more towards the appropriateness of products
Those working with more innovative financial products will have noted that amendments have been made to target the scope of the PRIPs regulation at new rules for all investment products to retail investors, with only a few narrow exceptions. As our EIR report suggests, if these amendments proceed it will be the biggest expansion for EIOPA in the area of consumer production.