EIOPA Consumer Trends Report 2023
On January 23, EIOPA published its annual report on consumer trends in the insurance sector.1 The report provides valuable insights into consumers’ financial well-being in the context of the cost of living crisis and examines fairness across different consumer treatment practices. It addresses hot topics such as value for money, discriminatory practices and the impact of digitalization, backed up by a Eurobarometer survey. This comprehensive analysis makes the report a compelling resource to help understand current financial dynamics and ensure fair treatment for all consumers.
In this article we look at the main findings.
Inflation affecting consumers
Following the COVID-19 pandemic (2020) in 2021, the continued supply chain disruptions, and the invasion of Ukraine by Russian forces (2022), the global and European economic macro-environment changed. After an extended period of low inflation and low/negative interest rates, the economy shifted to high inflation, prompting central banks globally and in the European Economic Area (EEA) to increase interest rates. This new economic reality directly affects insurance and pensions consumers in several ways.
Impact on insurance and pension investments
EIOPA’s 20232 Eurobarometer surveys show that the percentage of European consumers that are confident in their ability to live comfortably throughout their retirement decreased by 3 percentage points from June 2022 to July 2023. Beyond the direct impact of inflation on consumers’ real returns, consumers have less disposable income to allocate to insurance or pensions investments, hindering their long-term financial health.
Impact on non-life insurance consumers
The general increase in the cost of goods and services has led to higher premiums and deductibles for policyholders.
Diversity, equity and inclusion (DEI)
EIOPA’s 2023 Eurobarometer survey confirms that, like in 2022, there’s a clear and evident gender gap in terms of access to insurance and pensions. The attention towards financially vulnerable consumers (those who are vulnerable because of personal characteristics such as age, immigration status, income) is growing.
Value for money in insurance
The value for money of insurance products plays a central role as it is closely correlates with consumer trust in the insurance sector.
EIOPA’s Eurobarometer Survey, as of July 2023, shows that the percentage of consumers who believe their products don’t offer them value for money is the highest for IBIPs (Insurance Based Investment Products) (27%) when compared with household (20%) and motor insurance (22%).The ranges of consumers who believe that their IBIP offers them value for money ranges from below 60% in countries like Belgium, Italy, Malta, Sweden and Lithuania to close to 90% in Cyprus, and almost 80% in Greece and Romania.
The report also highlights high and unjustified costs and complex product characteristics. Beyond value in product design terms, there are continued concerns about the quality of advice and possible conflicts of interests in the sale of IBIPs and in particular in the sale of unit-linked products.
EIOPA’s 2023 Eurobarometer backs up concerns in relation to conflicts of interests and poor advice: 60% of EU consumers believe it’s difficult to get unbiased advice on the optimal coverage for their need. And 29% of EU consumers believe the commissions and fees paid to insurance intermediaries and advisors are transparent and clear.
Digital distribution trends in insurance
Recent years have seen a growth in digital distribution in the insurance sector.
Increasing digitalization provides significant benefits both to consumers (faster and more convenient purchasing experience, and informed decision-making through comparison websites) and to businesses (reduction in distribution costs).
Some 65% of consumers find it easier to gather information and compare products online rather than in person or over the phone. But for more complex products, remote distribution still lacks in terms of advice, and the majority of consumers (about 69%) still prefer to receive personalized advice over the phone or in person.
Digitalization also presents risks, including particularly poor accessibility of information and the spread of unfair commercial practices. EIOPA's survey shows that a significant percentage of consumers reported encountering deceptive sales techniques when buying insurance online (for example, 13% of consumers encountered misleading statements, such as the claim that many other people have already purchased the policy, while 18% reported price indications that vary over time).
Sustainability claims
EIOPA’s Eurobarometer survey shows an increase in EU consumers that have heard about sustainable or “green” products. But it’s important to ensure that the sustainability claims made at product-level and entity level are accurate, substantiated, accessible and don’t lead to greenwashing.
EIOPA’s Eurobarometer surveys show that consumers are sceptical of providers’ sustainability claims, with 51% of EU consumers not trusting providers’ sustainability claims. Moreover, 44% of EU consumers find product’s sustainability related documentation complex (32% find it easy to understand, 24% don’t know).
NAT CAT protection gap
Amid a rising frequency of natural disasters in Member States, some NCAs report issues related to the Nat Cat protection gap causing additional consumer detriment when systemic events materialize.
In some cases, there’s a lack of clarity regarding coverage terms and related exclusions, a discrepancy between consumer expectations and the actual protection offered, and a general slowness in claims processing.
Cross selling
In past Consumer Trends Reports, EIOPA highlighted the risks that can emerge for consumers from cross-selling practices when they’re not implemented in their best interest.
EIOPA’s warning on the sale of credit protection insurance products specifically highlighted risks which can emerge for consumers in the context of cross-sales of credit protection insurance products jointly with loans.
Pension trends
Improved transparency and financial literacy initiatives fostering pension awareness and adoption
According to EIOPA’s 2023 Eurobarometer survey, only 42% of EU consumers are confident that they’ll have enough money to live comfortably throughout their retirement – this varies greatly across countries, with highest levels of confidence in Luxembourg (61%), the Netherlands (59%) and Denmark (58%) and the lowest in Latvia (23%), Slovenia (27%) and Poland (28%).
The low confidence among EU consumers regarding retirement could be partly due to the moderate/low penetration of pension services: 23% of EU consumers are members of an occupational pension scheme and 19% of EU consumers own a personal pension product.
The majority of regulatory authorities believe that to increase these figures, it’s crucial to enhance disclosure and informational transparency and adopt financial literacy initiatives.
Pension market overview
Occupational pension schemes and personal pension products affect Europe's economy by aiding retirement savings and optimizing long-term capital allocation. But the varied characteristics of these investments across countries create regulatory and supervisory challenges.
1Cf.: Consumer Trends Report 2023
2Cf.: Standard Eurobarometer 100 - Autumn 2023
