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 police insists in particular on the violation 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 the elderly. In 2019, almost 60% of people under 35 will have at least one savings product. This percentage rises to 75% among the over 65s.

Savings capacities differ by age, occupation and geographic location. Savings objectives are varied: young people favor long-term projects, while older people rely on prudent planning. These numbers are a reminder of the importance of savings for millions of French. The ACPR’s recent accusation against distributors is therefore justified.

Distributors urged to honor their advisory duty

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

The ACPR also criticizes the habit of distributors, who demand more and more the allocation of part of the payments in funds in euros to account units. In any case, these funds, even if they are more profitable, are more exposed to the risk of capital loss. Normally, UCs are intended exclusively for more cautious rescuers and those with a comfortable financial cushion in the event of a merger. The institution therefore calls the insurance companies to carefully study the financial situation of a client to offer a suitable contract. The AMF considers that the assignments and contracts submitted to the client must be adapted to its needs and financial needs.

Lack of information on entry rights

In its press release,

Important The ACPR emphasizes the potentially harmful nature of unit-linked investments for the most vulnerable households.

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

While waiting for these profits, distributors and managers can not offer a risky allocation to customers whose financial situation is vulnerable. However, the ACPR notes that companies overcome this limit related to common sense and continue to direct part of the customer deposits to funds in Account Units, without informing them in advance. The Autorité asks distributors to stop this practice. She also raises the lack of information the weight of entry fees on the profitability of a commitment in euros or AU.

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. To avoid misunderstandings in the case of early repayment, the ACPR encourages insurers to better inform their clients about entry rights and their impact on the profitability of the contract.

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