The Malta Financial Services Authority (MFSA) has identified shortcomings in cost transparency, product oversight and the monitoring of customer outcomes in insurance products, following two reviews examining whether policies offered by insurers provide value for money.
In a statement, the MFSA said it had published the findings of two thematic reviews covering unit-linked life insurance products offered by locally authorised undertakings and non-life insurance products distributed across borders.
Both reviews identified areas requiring improvement in product governance, cost transparency, documentation and the monitoring of customer outcomes, although the authority also identified good practices that could contribute to stronger oversight and consumer protection.
The first review examined unit-linked life insurance products from four insurance providers, representing approximately 44.4% of such products offered by locally licensed undertakings.
The MFSA identified gaps in assessments of the target markets for these products, outdated or insufficiently transparent disclosures of costs and inconsistent monitoring of the underlying investment funds.
It also found that not all insurance undertakings had provided sufficient evidence of assessments covering break-even points and customer outcomes, including cases involving policies that had been surrendered.
The authority said insurers were expected to strengthen their assessments of whether individual products offered value for money, ensure that information provided to customers about costs was clear and up to date, and maintain proper documentation of their ongoing monitoring of costs, investments and customer outcomes.
The second review examined non-life insurance products distributed by Maltese-authorised insurers in other jurisdictions, including travel, gadget, accident and health insurance, particularly through Managing General Agents.
This review identified shortcomings in documentation relating to product approval and review processes, insufficient justification for certain costs and commissions, and weaknesses in the monitoring of insurance claims and complaints.
The MFSA said these findings showed the importance of identifying circumstances that could negatively affect consumers and ensuring that policyholders understood the coverage provided by their policies, as well as any applicable exclusions.
It said insurers were expected to maintain effective oversight of products distributed across borders and their distribution arrangements, provide adequate justification for costs and commission structures, and use information gathered from claims and complaints to identify and address emerging problems.
The authority said both reviews demonstrated the need for insurers to assess value for money throughout the entire lifecycle of an insurance product, from its initial design and approval to distribution and ongoing monitoring.
The MFSA expects the insurance undertakings concerned to assess their existing practices against the findings and supervisory expectations outlined in the respective letters issued to chief executives and to take appropriate corrective action where necessary.
The authority said it would continue monitoring developments in this area through its supervisory work, focusing on ensuring fair outcomes for customers and that insurance products met the needs of the markets for which they were intended.