Are insurers complying with the European PRIIPs Regulation’s provisions on key information documents for packaged retail and insurance-based investment products (PRIIPs)?

This question was at the heart of the online research (see info box) that BaFin’s Consumer Protection Directorate conducted a few months ago to check the key information documents of 20 insurers. BaFin’s staff specifically checked whether consumers would be able to easily find these key information documents, whether they were up-to-date and whether they met the formal requirements under the PRIIPs Regulation. The supervisors took a closer look at a total of 36 documents for unit-linked annuity insurance policies. A number of shortcomings were then identified. However, these primarily concerned formal aspects and were therefore not serious shortcomings, such as calculation errors in performance scenarios or cost information. The insurers have since remedied all the shortcomings that BaFin identified.

The aim of key information documents is to inform consumers about the most important features of a product and to allow them to compare different insurance-based investment products. The documents include key data and facts about the risk and reward profile and the costs, including various return scenarios and information on the consequences and costs that consumers must expect if they terminate the product.

No major shortcomings

While conducting its online research, BaFin’s staff did not find any major shortcomings that would require product distribution to be stopped. For examples, shortcomings are considered major if a document does not contain any information on the risk factor or if the risk factor has clearly been assigned to a category that is too low.

BaFin identified a total of 91 shortcomings that primarily concerned formal aspects. Most of these shortcomings were found in the “What is this product?” section.
This section must include specific information, such as information on how returns are calculated. This information was missing in the majority of the key information documents. As shown below in Figure 1, the shortcomings are broken down based on the nine sections that must be included in the key information documents.

Figure 1: Breakdown of shortcomings based on the sections of the key information document

© BaFin

Only one insurer with no shortcomings

In this sample, BaFin found shortcomings in the key information documents of almost all insurers. Only two key information documents of one insurer had no shortcomings. By contrast, one insurer had a key information document that contravened ten aspects of the requirements under the PRIIPs Regulation. Consequently, this was where the most shortcomings were identified.

Shortcomings remedied

All of the shortcomings have now been remedied. BaFin stressed the importance of revising the key information documents promptly – prioritising based on the significance and number of shortcomings – to ensure that consumers were provided with accurate information.

In addition to examining whether the requirements under the PRIIPs Regulation were met, BaFin’s supervisors took advantage of its online analysis to examine other aspects. They looked at the structural differences between the insurers’ key information documents. Here, too, the aim was to improve product comparability and ensure that providers met their transparency obligations.