On 7 October 2024, the European Insurance and Occupational Pensions Authority (EIOPA) released its methodology for establishing value-for-money benchmarks in unit-linked and hybrid insurance products.
The methodology aims to clarify and further strengthen the current value-for-money requirements within product oversight and governance rules introduced by the Insurance Distribution Directive.
EIOPA's methodology focuses on a three-step approach:
Step 1 – Product clusters: EIOPA will define a minimum number of clusters that group together products with similar features based on policyholder needs;
Step 2 – Value-for-money indicators: The benchmark will be calculated for each cluster on the basis of eight indicators (entry costs (divided into entry costs 1 and 2), total costs, reduction in yield, surrender, internal rate of return, insurance benefit and break-even return);
Step 3 – Data collection and calibration of the benchmarks: EIOPA will rely on existing data collection to establish the benchmarks. These benchmarks will be regularly calibrated in order to ensure that they remain up-to-date and appropriate.
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