Leonardo Badea, the president of the Romanian Financial Supervisory Authority (ASF) spoke at the 5th edition of the European Consumer Protection Conference, where regulators and industry experts gather each year to exchange views and share expertise in order to better shape their approach to consumer protection.
“After the exciting introduction of the esteemed previous speakers in the European context for consumer protection, I would like to outline few points on consumer protection, as one of the ASF’s statutory objectives, and our priorities in the IDD era.
- In recent years, financial consumer protection has become an increasing priority for decision-makers around the world. Protecting consumers from abusive practices and enabling them to make informed decisions about the use of financial products and services is an important policy objective, with implications for the development of the financial sector, financial inclusion and economic growth in general.
- A first area to act on is consumer confidence. We know very well that trust is perhaps the most important capital in the financial markets. Market players need to convince consumers that they can trust optional products and that these products meet their needs and are an important option in managing risks related to their life, health and safety of their goods. How can this be done? Simple – by respecting ad literam the contractual obligations and by settling the claims files without delay.
- I believe that in order to accelerate the maturity and development of the insurance market, we need a joint effort, as a supervisory authority, and of the companies operating on this market. And here I refer both to insurance companies and brokers. This is a complex approach, which involves action on several levels. On the other hand, we must show consumers that their rights and interests are protected in accordance with the legal provisions and that no deviation from these principles is tolerated.
- At the same time, disclosing better information on voluntary products must be a priority for all of us. People need to know in detail the risks they are seeking protection from and must make informed choices when purchasing a life insurance, health insurance or one motor insurance. In other words, both insurance companies and brokers must provide advice at a very detailed level.
- I consider that we need extensive campaigns of financial education at all levels. A financial educated individual can understand and decide much easier, in all awareness when it comes to buying an insurance product.
- The need for financial education in Romania is so important that different training sources need to complement and support each other. In the long run, we aim at introducing financial education into the school curriculum, starting from primary classes, and then gradually developing these concepts throughout the entire education system.
- We have initiated numerous campaigns and financial education programs for children, parents, students and teachers, in collaboration with various educational establishments. The basic concepts were presented in a creative, modern way, aiming at their understanding and easy integration, in order to support financial decisions. To date, the financial education program has enrolled more than 400 lecturers and more than 80,000 students. Early financial education plays a very important role in shaping the future consumer of financial products.
- All activities carried out by the ASF are subordinated to the fundamental objectives of consumer protection and the stability of supervised markets. Together, these two components favor a healthy development with long-term positive influences on economic growth and the development of living standards in Romania.
- We also did our best to update the consumer protection function by: modernizing claims management, releasing consumer guidelines, creating and implementing the national strategy for financial education, conducting mystery shopping programs, issuing warnings and alerts, creating resolution framework, BAAR, SAL-FIN, etc.
- From my point of view, the voluntary insurance market is an area with great potential for growth. Both housing, CASCO, living and health insurance must be boosted because a mature market obviously relies on these categories of insurance. You will naturally ask me if we have solutions to dynamize this market. I believe the effort to achieve this goal must be common: ASF-insurance companies-intermediaries. And when I say this I mean primarily improving the level of information and financial education. We have the duty to make the consumer understand that to secure their goods, health and life is ultimately an investment and not an expense. If we can do this together, then the battle will be won
- Implementing the Insurance Distribution Directive was a recent challenge that aimed to improve the protection of consumers of insurance products regardless of the distribution channel through which they purchase their insurance products, in particular by promoting transparency, developing better supervision and governance of insurance products, and also by imposing obligations on advice on insurance products, training and professional capacity, remuneration and conflicts of interest. The main requirements and new elements implemented through IDD are:
- Consumer protection needs to be improved and secured regardless of the distribution channel through which it purchases the product;
- In order to create a level playing field for all categories of insurance products distributors in all EU Member States, the direct sale of insurance products by insurers is regulated ;
- New standards on the sale of insurance products containing investment items have been aligned with the investment product standards covered by the MiFID;
- Sales of insurance products with investment components are subject to normative acts on sales standards and conflicts of interest, respecting the requirements for advice, consumer information requirements for these products, and transparency requirements;
- Any form of remuneration and incentives in counseling if it is detrimental to consumers is prohibited;
- There is a new obligation for insurance distributors to disclose potential conflicts of interest;
- The need to disclose certain specific information on cross-selling products.
- IDD implementation will have a medium and long-term effect of self-regulation of the insurance market, especially of insurance intermediaries.
- Eventually, improving consumer protection, information and transparency mechanisms will remove some of the market asymmetries and contribute to the development of a more sustainable long-term insurance sector.
I remain an optimist on the European dimension of the financial regulation and supervision and its effects on our markets, which does not equal to an EU ‘one size fits all’ approach. I am confident we can constructively debate on policies and trends that will assist us all in improving the overall climate for insurance consumers”.