Actuarial Association of Europe

See our answer to question 2.
As an answer to questions 1 and 2, we think the ESA’s might still have a somewhat too narrow scope for what is happening in the marketplace. It is noted briefly in para 90 that: “The ESAs have also taken note of the potential for increasing fragmentation of the distribution chain if automated tools are provided by different specialist firms performing different elements of the process. In this fragmented financial services landscape, the distribution chain may split up in order to allow the consumer to choose the preferred supplier for each specific financial need, advice being one of them”.
We think this fragmentation is a much broader phenomenon. With technology developing the market will be more and more fragmented and the responsibilities of each actor in the chain become more and more difficult to identify. Who is actually in this chain responsible towards the customer and of which part the responsibility falls to each party in the chain? A further complication is that disputes might be handled in different jurisdictions.
NA
NA
NA
We think the descriptions in the consultation are very good and they give a good understanding of the benefits to customers.
NA
NA
NA
We think the descriptions in the consultation are very good and they give a good understanding of the benefits to financial institutions.
NA
NA
NA
A component of the fragmentation mentioned in our answer to question 2 is that financial products will increasingly be sold packaged with other products, making it harder to understand what is the main product and what rules apply. It can be difficult for the customer to understand the situation.
Additionally, in a fragmented supply chain it will be more difficult than before to prevent or at least mitigate conflicts of interest. Consumers nowadays often start looking for advice with a search engine like Google. But a search engine might not be impartial. The algorithms might give preference to those who pay to the company behind the search engine in highly nontransparent ways. This means that search engines do not necessarily guide the customer to the sites serving customers’ interests in the best way.
Generally, we do not think the consultation takes seriously enough how differently individuals behave and make choices with automated solutions compared to how they act in personal contacts. There is a need to analyse this applying behaviourial economics etc. For example individuals may quite easily tie themselves to unreasonable terms and conditions through automated services, and people expect it to be easier to change provider in automated services.
See our answer to question 14. Additionally, we feel the situation of so-called vulnerable customers should be taken more seriously.
NA
See our answer to question 14.
See the last paragraph of our answer to question 14 – more frequent provider changes lead to increased lapse risk.
In many markets at least some financial products are already nowadays mostly bought through so-called aggregators. These aggregators choose the products with best price for the customer based on information the customer has given. While this increases competition and generally serves the customer, this development also has negative implications. If price becomes the only factor in competition then it is expected that this will influence the process. Often providers need to tailor their products in such a way that their plain vanilla versions do well in aggregator comparisons and lead the customer to their sites where the actual process of trying to create the product for the customer begins.
An additional component to this is that aggregators often require their providers to give the best quote through the aggregator. This will also change the process.
To our understanding there is empirical evidence that people find it easier to lie to a computer than when talking to another person. This creates more scope for fraud. At least in insurance this is an additional risk to be taken into account.
NA
NA
The long paragraph 88 on lower part of page 31 talks of contracts required to be made in writing. An important technology now emerging (and surprisingly not at all mentioned in the consultation) is the blockchain. There are at least speculations on what this technique might to do to personal insurance here. Basically in the eyes of most enthusiastic blockchain developers that technology will make many of earlier financial institutions obsolete (blockchain achieves trusted contracts between parties who do not know each other without the involvement of a third party like a bank). This should nowadays at least be noted when talking of financial contracts.
See also our answer to question 2.
See our answer to question 2.
Michael Lucas
A