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