The European Parliament’s economic panel has rejected proposed rules for selling life insurance and other retail financial products, describing them as misleading and flawed.
The Economic and Monetary Committee voted 55 to 0 to dismiss proposals that would change the law covering “packaged retail and insurance-based investment products” which have a €10 trillion market in Europe.
The proposed law forces insurers, banks and financial advisers to use a standard “key information document”, or KID, which is meant to provide consumers with information about the features, risks and costs of an investment product.
According to Reuters
, a KID document should use jargon-free language to show a product’s potential future performance and total costs. The goal is to have an easier comparison of products across the EU financial sector for the first time to promote competition and slash costs.
Parliamentary member Sven Giegold of Germany argued that proposed methods for predicting product performance contained flaws.
Giegold said these flaws would make performance look far better than it was likely to be.
“People must know when they take a risk, but this information is misleading,” he said.
The proposed legislation on retail financial products is scheduled to come into force at the end of 2016.
Following the committee action, the measure will now be put to a full plenary vote in September and Parliament must now either support or reject the motion.
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