The European Insurance and Occupational Pensions Authority (EIOPA) published today its 2024 Consumer Trends Report, highlighting the main trends in consumers’ experience with insurance and pension products. The report explores four key areas: the role of digitalisation in shaping the insurance and pension sectors, the transformatory power of AI in insurance, consumers’ appetite for supplementary pensions in light of increasing pension gaps, and the real/perceived value for money of insurance and pensions products. The findings of the report are underpinned by various data sources, including the results of EIOPA’s Eurobarometer survey.
As the pensions gap is expected to continue to widen, the report examines to what extent EU citizens decide to purchase supplementary pensions. EIOPA’s Eurobarometer survey shows that only 42% of EU consumers are confident that they will have enough money to live comfortably throughout retirement. While supplementary pensions could help bridge this gap, pension participation remains low, especially among women. The survey reveals that only 20% of EU consumers are members of an occupational pension scheme, and only 18% own a personal pension product. The lack of financial resources, high costs and the perceived complexity of some products are the main reasons for the low uptake of personal pensions.
The report shows that consumers are increasingly using digital tools when engaging with insurance and pension products, allowing them to easily compare offers, expect faster processing of their claims and make projections of their future pension entitlements. However, not all consumers benefit equally from digitalisation. While digitalisation offers benefits, it also brings risks such as digital exclusion and misinformation. Some consumers may also require more advice than what is available digitally.
On the topic of digitalisation, the report:
- Analyses governance trends of pensions funds, as good governance is recognised as a key factor in ensuring good outcomes for members and beneficiaries, with overall sound practices being observed across the EU. Most National Competent Authorities (NCAs) observed sound IORPs governance practices. Moreover, the shift to Defined Contribution schemes and the integration of digital tools by IORPs have, to some extent, contributed towards the implementation of enhanced governance frameworks as the increased risks for members and beneficiaries need to be duly managed.
- In relation to insurance, the report explores how the increased use of AI-based tools by insurers is set to transform the insurance industry. Around half of EU consumers and half of reporting NCAs indicated that the use of automated tools has made claims processing faster and easier to navigate. When used for pricing purposes, AI-based tools are reported to be sometimes helpful in reducing costs and improving insurability. However, AI-based solutions also have drawbacks, including limited consideration of consumers’ specific circumstances as well as excessive standardization in pricing, underwriting and settlement processes. The report also underlines the importance of privacy, security, and ethical considerations when implementing AI solutions in insurance.
Although clear improvements have been observed, the report shows that value for money risks persist, especially in respect of certain unit-linked and hybrid insurance products. National supervisors across Europe carried out supervisory actions to tackle value for money issues in this market segment as a response to issues with high commissions, high complexity and, at times, poor performance of such products. Our data shows that consumers generally feel that the products they purchase offer good value for money. However, for insurance-based investment products, a quarter of Europeans believe that such products do not offer value.
EIOPA’s 2024 Consumer Trends Report highlights additional developments in the EU’s insurance and pensions sectors:
- Access to investment products and to non-life insurance products slightly declined from 2023 to 2024, partly due to the difficult financial situation of European households and to higher costs, driven by inflation.
- An increasing proportion of consumers are considering purchasing insurance and pension products with sustainability features (16% in 2024, compared to 13% in 2023). Given the risk of greenwashing, it is important to continue supervisory activities and ensure fair commercial practices.
- The sale of cross-border insurance products continues to increase moderately, driven by digitalisation. While some consumers say they have access to better-value products, others have little trust in insurance products sold from a different country. This barrier may be exacerbated by the current challenges to cross-border supervision.
Petra Hielkema, Chair of EIOPA said: “Over the past years, policymakers, regulators and industry have made efforts to ensure that consumers receive valuable, well-designed and suitable insurance and pensions products and services. We are beginning to see improvements in areas needed; however, concerns remain and addressing them has become even more important in light of the effort to move towards a Savings and Investments Union.”