Members of the European Parliament (MEPs) have overwhelmingly rejected a draft law that would change the way life insurance and other retail financial products are being sold.
The legislation on “packaged retail and insurance-based investment products” (PRIIPs) will now be sent back to the European Commission after MEPs voted 602 to four on Wednesday in favour of amending the proposed measure.
Lawmakers supported the view of the Parliament’s economic and monetary affairs committee that proposed regulatory technical standards (RTS) for the PRIIPs legislation are inadequate.
According to
Reuters, the proposed rules will force banks and insurers to use a standard “key information document” (KID) to help consumers compare financial products.
The KID, which should accompany savings products, derivatives and life insurance policies, must use jargon-free language to show potential future performance and total costs.
The committee thumbed down the legislation last month, calling it “misleading” and “flawed.” Lawmakers said that the proposed adverse scenario to be used to indicate a product’s potential performance was too optimistic.
With the Parliament’s disapproval, the EU Commission will now have to propose new RTS for implementing the PRIIPs legislation, which is due to come into force on December 31.
“The European Commission will now have to go back to the drawing board and come up with something that will actually deliver,”
Reuters quoted British centre-right lawmaker Syed Kamall as saying.
The Association of British Insurers is “pleased” with the Parliament’s rejection of the proposed insurance shake-up, according to James Bridge, the industry body’s head of conduct regulation.
“We support the consumer objective of the PRIIPs Regulation, but have consistently highlighted why the RTS need significant changes to ensure consumers can compare investment products before making a decision,” Bridge said.
“It is right that the RTS is now reviewed to ensure the original policy objectives can be met. This will take time and means that the PRIIPs implementation date of December 2016 must also now be delayed.”
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