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#EuLex #BeLex #LuLex – #IDD: Results from EIOPA’s first coordinated Mystery Shopping Exercise on Insurance-Based Investment Products (17 June 2025): “Uncovering the IBIP sales process”

EIOPA launched in June 2023 its first coordinated mystery shopping exercise in the insurance sector, focusing on IBIPs (insurance-based investment products).

The results of the exercise confirm informal findings which we have made in our relations with insurance professionals since the implementation of the IDD:

    • The sale of an IBIP is a lengthy process, with lots of formal requirements, but still limited compliance (on average) with these requirements;
    • Insufficient information gathering for the needs assessments compared to IDD’s requirements (especially on risk tolerance and the ability to bear losses, as well as on sustainability preferences);
    • Limited transparency on costs;
    • Mandatory information documents (such as the KID) are in a majority of cases not provided in the pre-contractual phase;
    • The advice given is often not compliant with the formal IDD requirements, even if it is satisfactory for the client;
    • But, overall, even if the formal requirements are met only in a limited way, most of the products proposed to the clients are consistent with their needs and their situation, which is a paradox that would probably need further investigations and be taken into account when revising the European legislative framework on insurance distribution.

Background

Mystery shoppers conducted test-purchases of IBIPs in real-life situations with insurers, banks, agents, brokers and post offices, in order to assess distributors’ information-gathering processes, their information disclosure practices as well as their ability to offer products that match consumers’ needs and objectives.

The campaign took place in 8 EU Member States (from various EU regions and with diverse market sizes) between January 2024 and November 2024.
At least two different distribution channels were selected in each country, focusing on the most relevant ones, with undertakings representing at least 35% GWP (Gross Written Premium).
In total 568 visits took place, of which 454 were considered valid.

The exercise focused on three main questions aiming to understand the customer journey and outcomes:

    • Do distributors ask enough questions to understand consumers’ needs?
    • Do distributors ensure that consumers fully understand the costs and risks associated with IBIPs, including by providing them transparent and timely disclosures and documents?
    • Do distributors offer products that are consistent with consumer’s needs and objectives?

The results to the first two questions rely on shoppers’ perceptions, assessed via a questionnaire. Only question 3 is based on a supervisory assessment of the products that shoppers reported were offered to them.

The findings are intended to serve as a foundation for informing future supervisory and policy work, but not to be used to assess regulatory compliance of distributors.

Main findings from the report:

1. Information gathering during the sales process:

    • Distributors often assessed the mystery clients’ investment horizons (74%), but were less consistent in assessing risk tolerance and the ability to bear losses (45%).
    • Sustainability preferences were not frequently inquired about, and when they were, distributors often lacked knowledge on sustainability aspects.

2. Disclosure and Transparency:

    • Information on returns, risks, and the recommended holding period was generally provided (70%), but detailed cost information was less frequently explained (45%).

    • It is remarkable that only 36% of the shoppers received the Key Information Document (KID), and only 18% of shoppers with sustainability preferences received sustainability disclosures.But is has to be mentioned that the visits ended before the final purchase of the product and it is therefore not possible to determine how many shoppers would have received the KID if the sale had been completed.A more detailed analysis shows a positive correlation between receiving the KID and self-reported product understanding: Of the 163 shoppers who, at the end of the questionnaire, reported that overall, they gained only a limited understanding of the products offered, 30% had received a KID, whereas out of those who reported a satisfactory understanding of the product’s characteristics, 42% had received a KID.

3. Product Consistency with Consumer Needs:

The following five key aspects have been examined:

          • Surrender value at recommended holding period (Liquidity 1)
          • Risk profile of the product
          • Return profile of the product
          • Presence of surrender penalties (Liquidity 2) and
          • Sustainability characteristics.

It was possible to assess the alignment of the product with the shopper’s needs on at least one of the five key aspects in 377 out of the 454 visits.

The main findings are:

    • 84% of the products offered were consistent with at least one of the shoppers’ pre-identified needs and objectives, which looks like a quite promising figure.

In more detail, the results are however less satisfactory:

      • Investment objective: Only 29% of products offered were considered consistent to the stated investment objective (=returns achieving target inflation of 2%).
      • Risk: approximately 25% of the products offered had a Summary Risk Indicator (SRI) of 4 or higher, which was considered inconsistent with the profiles of the shoppers (=medium-high risk aversion and low level of financial education).
      • Liquidity 1: the recommended holding period was the most consistent criteria assessed with 44% of cases where the recommended holding period of the offered products was consistent with the profile’s characteristics (=desired investment horizon of 10-15 years).
      • Liquidity 2: in approximately 60% the product’s liquidity features were deemed consistent with the shopper’s needs (costs and penalties for early surrender and the length of time to receive guaranteed returns).
      • Sustainability preferences: the majority of products offered were consistent with the shoppers’ sustainability preference (a product was defined as inconsistent with shopper’s sustainability preferences if it was disclosing information according to Article 6 of the SFDR6).
    • Quite surprisingly, there is a limited correlation between the completeness of the shoppers’ needs assessment and the outcomes. The results indicate that, in many instances, despite distributors not asking the information to understand shoppers’ needs, they still offer products consistent with the shoppers’ profile.The report does not allow to understand this limited correlation: are the information collection requirements under IDD inconsistent with the realities on the ground, do Distributors compensate the formal lack of information collected with their professional experience, … ?
    • No correlation between the shopper’s perception of advice and good outcomes: even when shoppers were under the impression that they had received detailed advice from the distributors, they actually had not (lack of written advice summary, lack of mandatory documents in several Member States, …), which indicates issues in terms of implementation of advice requirements.
    • No correlation between the time spent with the distributor and shopper outcomes. It also emerged that the sale process can be quite lengthy (visits on average of 42 minutes).
von Marc Gouden