The European Insurance and Occupational Pensions Authority (EIOPA) published today its Consumer Trends Report 2022 in which it examines the financial health of consumers and small businesses through their use of insurance and pension savings products. The findings of the report are underpinned by the results of a flash Eurobarometer survey commissioned by EIOPA and other relevant sources.
EIOPA’s Consumer Trends Report reveals that access to affordable insurance and pension products aligned with consumers’ needs remains low: as shown by the Eurobarometer survey, over a third of European consumers do not own any savings products and more than half of them are concerned that they would not have enough money for a comfortable life in retirement. While access to insurance products appears more widespread, mandatory motor and household insurance products make up a large share of all insurance while other categories are scarcely used.
The worsening macroeconomic landscape and the sharp rise in inflation are putting pressure on consumers, who might have to delay purchasing needed insurance coverage, miss regular premium payments or suspend voluntary contributions to pension schemes. The survey shows that affordability concerns and budgetary constraints are already the main reasons keeping consumers and small businesses from buying new insurance or renewing their existing policies. Higher than expected inflation also has a negative effect on real returns for consumers, lowering their future disposable income.
Against this backdrop, consumer-centric product design and distribution processes can help improve consumers’ financial health. While the report notes positive developments in this regard in Europe, instances of poor product design and concerns regarding the value for money of certain unit-linked products remain. The continued digitalisation of the insurance and pension sectors is also leading to expanded access to insurance and pensions products and services, cheaper delivery, and improved pricing. However, digitalisation trends require close monitoring due to cyber-risks and possible discriminatory pricing practices.
Data used for the report reveals a strong increase in the sale of products with sustainability features in recent years. Given rising consumer demand in this type of products, it is important to ensure that sustainability-related claims are not misleading or unsubstantiated. Some national competent authorities (NCAs) already reported that they found evidence of greenwashing in their markets and 58% of responding NCAs said they are planning to carry out supervisory activities to tackle greenwashing.
The report also underlines the existence of gaps in both insurance and pensions – including a gender gap regarding access to insurance and pension products. Half of all consumers and small businesses have no coverage against natural catastrophes, while more than two thirds of small and medium-sized businesses have no insurance against cyber risks. The increasing frequency of systemic events such as pandemics, extreme weather events and cyberattacks may make policies covering them unaffordable or unavailable. High prices and stricter exclusion terms risk leaving consumers and small businesses less protected and more exposed to losses.
Petra Hielkema, Chair of EIOPA said: “Over the past years, policymakers, regulators and service providers have sought to ensure that financial services contribute to the financial well-being of consumers and businesses, helping them meet unexpected costs with insurance and save for retirement through well-designed pension products. Despite some progress, concerns remain and addressing them has become even more important in light of recent shocks. Within our sectors, the current cost of living crisis must be seen as a call to decision-makers along the value chain to remedy known issues with consumer-centric solutions and thus alleviate the pressure on people and small business owners that are struggling to make ends meet.”