FRANKFURT – A recent mystery shopping campaign conducted by the financial supervision authority, BaFin, indicates that there is “still room for advancement in consultations on insurance products.” The study, which involved six insurers, assessed the quality of advice given to potential customers.

Between March and June 2024, testers participated in 72 consultations with six insurance companies and their sales partners. These consultations, carried out on behalf of the financial supervision, resulted in the conclusion of contracts for insurance system products, which the testers later canceled.

The primary objective of the experiment was to determine whether the representatives were adhering to the required consulting, data, and documentation obligations.

The findings revealed that only about half of the representatives documented whether a recommended product was suitable for the test person. Moreover, the consulting documents were frequently enough described as confusing. However, the test subjects did find the information on risk level and the recommended stop to be adequate.

Key Deficiencies in Information Gathering

BaFin emphasizes that agents should proactively inquire about customers’ wishes and needs to provide appropriate advice. However, the mystery shopping exercise revealed that representatives often failed to ask important questions or only addressed them superficially.

These overlooked points included:

• The previous experience with investment products,
• The financial situation,
• The investment purpose,
• The investment time,
• The risk of risk,
• The liquidity requirement and
• The individual sustainability preferences.

“There is still room for improvement in consultations on insurance products.”

Weaknesses in Consulting Protocols

The study also highlighted discrepancies between the test customers’ subjective perceptions and the documentation found in the consulting protocols. In many instances,the information provided by the test subjects and the documentation in the protocols did not align.

In certain specific cases, contradictions were observed, particularly concerning the risk of risk. Additionally,distributors often failed to adequately clarify the subject of sustainability,even though it is mandatory for insurance system products.

Testers also identified defects in the consulting and contract documents, which frequently enough exceeded 200 pages, and in certain specific cases, even 400. These documents were frequently confusing and sometimes misleading, with unclear connections between offers and basic information sheets.

Delayed Provision of Compulsory Information

In certain instances, essential information, such as the basic information sheet, disclosure of sustainability risks, and advisory documentation, was only provided after the contract declaration.

The majority of the contracts concluded (68 of 72) in the Mystery Shopping survey were multi-option products,offering the option of investing a part or the entire contributions in various investment funds.

• Four contracts were classic insurance plant products, where the insurer invests the contributions in his general investment. Intermediaries tended to agree longer terms than originally wanted by the test subjects.
• 53 of the 72 contracts concluded contained investment components with sustainability features. Half of the test buyers expressed sustainability preferences on their own.