EIOPA issues Opinion on Consumer Protection Issues in Payment Protection Insurance

With this Opinion in the field of consumer protection, EIOPA recommends
national competent authorities (NCAs) to analyse their national Payment
Protection Insurance (PPI) markets based on the findings of this opinion.
PPI is an insurance product designed to provide coverage for the consumer
of a financial obligation generally in the form of a mortgage or a
consumer loan repayment, in case they are unable to fulfil a payment. The
consumer protection issues surrounding PPI have triggered action from
regulatory or supervisory bodies in a number of jurisdictions.

EIOPA acknowledges that PPI products, when properly designed and sold,
serve legitimate consumer needs. Yet, EIOPA also notes that, in a number
of jurisdictions, significant cases of misselling have occurred, to the
detriment of consumers and negatively affecting the reputation of the
insurance sector as a whole. The most frequently arising mis-selling
issues for PPI products are eligibility/suitability issues and providing
misleading information. In these cases, for example, consumers are either
unable to claim benefits, because their individual situation is not
covered by the policy, or they have not yet received the necessary
information to base their choice on. Moreover, market imperfections, such
as the fact that PPI is often sold together with the loan products
(cross-selling) or that consumers do not have comparable information, also
contribute to distorted consumer choice. NCAs are requested to analyse
whether PPI merits (further) investigation and any possible (further)
supervisory and/or regulatory action at national level, based on the
findings of the opinion. The opinion requests NCAs to provide feedback on
their previous activities and on any future actions in this area based on
this opinion within six months from today.
Based on the information received from NCAs EIOPA will decide if and what
kind of further action is needed at an EU level.

As EIOPA's Chairman Gabriel Bernardino explained: "We have observed in
certain countries the emergence in the PPI market of business models where
market power of certain distributors led to disproportionate levels of
commissions, often as high as 80% of premiums paid by consumers. This and
other practices have led to considerable consumer detriment and have been
subject to regulatory and supervisory action. With this Opinion EIOPA
intends to obtain a clear picture of the reality in all the EU countries
in order to better protect consumers and promote regulatory and
supervisory convergence."

The text of EIOPA Opinion on Payment Protection Insurance and the
Background Note can be viewed on EIOPA website:
https://eiopa.europa.eu/publications/eiopa-opinions/index.html
(Link:
https://eiopa.europa.eu/publications/eiopa-opinions/index.html )


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