The ACPR calls on distributors of financial products to better advise their customers

The Prudential Control and Resolution Authority recently noted a number of irregularities in the practices of distributors of life insurance contracts. The insurance policeman insists in particular on breaches of the duty to advise and inform, a potentially dangerous failure for savers with a fragile financial situation.

In France, savings and investment attract both young workers and seniors. In 2019, nearly 60% of people under 35 would have at least one savings product. This percentage rises to 75% among those over 65.

Savings capacities differ according to age, occupation and geographic location. The savings objectives are varied: young people favor long-term projects, while the elderly rely on provident planning. These figures are a reminder of the importance of savings for millions of French people. The ACPR’s recent call to order against distributors is therefore justified.

Distributors urged to honor their duty to advise

For the policeman of insurers present in France, companies must improve the exercise of their duty to advise customers in order to offer them better life insurance. The Authority considers that individuals are uninformed of the risks and financial uncertainties likely to affect the profitability of their investment before committing. However, the companies have the obligation to detail all these complications in the information document – ​​in paper version or online – and during the interview prior to the subscription of a savings product.

The ACPR also criticizes the habit of distributors, who increasingly demand the allocation of part of the payments in euros to units of account. However, these funds, although more profitable, are more exposed to the risk of capital loss. Normally, UCs are aimed exclusively at the most cautious savers and those who have a comfortable financial cushion in the event of a meltdown. The institution thus calls on insurance companies to carefully study a client’s financial situation in order to offer him an appropriate contract. The AMF considers that the allocations and contracts submitted to the client must be adapted to its requirements and financial needs.

A lack of information on entrance fees

In his press release,

Important The ACPR insists on the potentially detrimental nature of unit-linked investments for the most vulnerable households.

These units of account are invested in the financial markets, which are volatile and unpredictable by nature. The potential gains on these investments only appear after two or more years.

While waiting for these profits, distributors and managers cannot offer a risky allocation to clients whose financial situation is vulnerable. However, the ACPR notes that companies circumvent this limit linked to common sense and continue to direct part of the customer deposits to funds in Units of Account, without informing them beforehand. The Autorité asks distributors to stop this practice. It also raises the lack of information concerning the weight of entry fees on the profitability of a commitment in euros or in UA.

These deductions represent up to 5% of the initial payment. To recover these costs, the saver must keep his capital in the contract for several years, even if the money is invested in a high yield fund. In order to avoid misunderstandings in the event of early redemption, the ACPR encourages insurers to better inform their customers about entry fees and their impact on the profitability of the contract.

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