BaFin uncovers deficiencies in life insurance advice: Mystery shopping shows risks!

BaFin uncovers deficiencies in life insurance advice: Mystery shopping shows risks!

The financial regulator Bafin has identified significant anomalies in the advice and sale of life insurance and insurance investment products. In a comprehensive mystery shopping campaign, a total of 72 consultations were examined between March and June 2024, with exclusive organizations as well as bank sales and employed field sales being tested as sales channels. Six insurers and their sales partners were involved in these tests. The aim of the investigations was to check the quality of the advice as well as compliance with advice, information and documentation obligations set out in various legal requirements. Bafin carried out covert test purchases to assess how well the products fit the test subjects' investment goals sueddeutsche.de reported.

As part of the tests, two different test customer profiles were used who were between the ages of 30 and 50 and had various liquidity needs and a preference for sustainable investments. The tests were carried out on the assumption that consultants should place the individual wishes of customers at the center of their recommendations. However, the results showed that not all consultants fulfilled their obligations in this aspect.

Results of the tests

The test results revealed a variety of defects. Only around half of the insurers tested properly documented the suitability of the recommended products. The consultation documents were often confusing and sometimes misleading, which the test subjects noticed negatively. While the information about the risk level and holding period was rated positively by the test customers, 68 of 72 contracts concluded showed that the majority of them were multi-option products. Only four were classic insurance investment products.

A striking finding was that 53 of the contracts concluded contained investment components with sustainability features. In 94 percent of the conversations, the test customers were informed about the expected return, and in 81 percent of the cases there was information about the risk level. The costs of the products ranged between 0.71 and 3.29 percent per year, but were only discussed in about two-thirds of the discussions. In addition, the consulting and contract documents were often confusing, often over 200 pages long, which made it difficult to understand the information.

Outlook and measures

In view of the deficiencies identified, Bafin plans to contact the affected companies in order to identify and correct systematic problems. Only 19 of the 72 contracts tested met the European Insurance and Occupational Pensions Authority (EIOPA) criteria in terms of return, risk and sustainability. These results highlight the need for greater quality control in the distribution of life insurance and insurance-based investment products. Customers should be able to rely on sound advice when selecting their products.