Methodology to assess value for money in the unit-linked market

Following the publication of the Supervisory Statement on Value for Money in November 20211, as highlighted therein, EIOPA has worked on a methodology to ensure a consistent and convergent approach towards the implementation of said Supervisory Statement.

While the methodology is for support and use by National Competent Authorities (NCAs), this document aims at providing more clarity for insurance manufacturers and distributors on the supervisory approach to addressing value for money risks when supervising product oversight and governance (POG) requirements.

The methodology aims at fostering a common convergent approach, with the aim of achieving consistent consumer outcomes in all European markets, while allowing for flexibility. Moreover, it is important to note that the NCAs can use this methodology as a basis to assess value for money. This methodology is a common basis for all NCAs and EIOPA welcomes and encourages approaches which, taking into account market specificities and supervisory experiences and practices, develop further indicators to ensure value for money risks are sufficiently addressed in their markets, taking into account also emerging risks such the raising inflationary trends.

The approach is divided into three layers:

  • Market wide assessment (Layer I) through which NCAs would identify products requiring higher scrutiny;
  • Enhanced supervision (Layer II) through which NCAs would assess different indicators and determine whether products offer value or not;
  • Assessment of Product Oversight and Governance (POG) documents (Layer III) for those products for which the enhanced supervision performed in the previous layer does not point at products clearly offering (or not offering) value for money but results in identifying products which may offer value only to some target markets.