The Prudential Control and Resolution Authority (ACPR), the policeman of the insurance sector, published a press release on Tuesday in which it “calls contract distributors life insurance to better respect the duty to advise customers who are financially fragile or in difficulty”. She noticed some “failures” on information to individuals. She blames one or more professionals, whose name(s) she conceals, for two things.
Entry fees and risk of capital loss
Firstly, not to specify the consequences of the entry fees (0% to 5%), deducted from the capital paid in by the saver, which thus requires them to remain invested for a few years to be compensated by the performance of the contract.
Secondly, not having sufficiently warned the policyholders of the possible capital losses induced by the subscription of units of account. The “UC” are indeed placed on the markets, therefore undergo fluctuations upwards as downwards, and they often reveal their potential gains only in the long term.
In contrast, the fund in euros, the flagship support of life insurance, is secure, but does not offer the hope of a significant return. “When the contracts are backed by units of account, a risky allocation cannot be adapted to the needs of customers whose financial situation is fragile at the time of subscription”summarizes the ACPR.
Breaches of the duty to advise
These are thus breaches of the duty to advise which is incumbent on distributors and which the law imposes on them. They should also check “the appropriateness of the contract with regard to the financial situation of the customer” and “the consistency of the contracts and allocations offered with all the requirements and needs expressed by the client”recalls the institution.
This warning comes at a time when companies are increasingly asking for a unit share when making payments on euro fundsyet the one that should be strongly – if not exclusively – favored by the most cautious profiles.