Life insurance: what are the risks for profiles in difficulty?

The Prudential Supervisory and Resolution Authority (ACPR) points the finger at failures in the marketing of life insurance contracts to customers in financial difficulty and asks distributors to show discernment.


Penalizing management fees

In a press release dated May 3, the ACPR “calls on distributors of life insurance contracts to better respect the duty to advise customers who are financially fragile or in difficulty”. After a series of checks, the body attached to the Banque de France criticizes insurers for not taking into account the financial health of prescribers who do not have precautionary savings. In question, in particular, “particularly penalizing entry and management fees if [les clients] are forced to quickly redeem their life insurance contract due to a lack of cash. Entry fees of up to 5% with traditional insurers can burden the capital placed in a life insurance contract. These costs are generally absorbed by the progressive return of the product, which implies a holding over several years. Customers who do not have precautionary savings could be led to withdraw part or all of the sums invested to deal with an unforeseen event, losing the entry fees as well as the tax advantage on any gains.

Inadequate risk taking

Another shortcoming noted by the ACPR: the risk-taking associated with contracts backed by unit-linked (UC) units is not suited to the needs of customers in unstable financial situations. In the case of a unit-linked contract, the risk is borne by the insured, unlike euro funds where the insurer guarantees the capital. Still, according to the ACPR, a risky allocation cannot be adapted to the needs of investors in financial difficulty at the time of subscription. This situation would not allow them to absorb any capital losses. A customer who does not have precautionary savings cannot redeem his contract due to a lack of liquidity and thus records a large capital loss, especially if he withdraws his capital when the markets are “in the trough”. of the wave”. The regulator deplores a consequence that is all the more harmful since life insurance is a product which is “designed to constitute stable long-term savings”. The ACPR therefore urges life insurance distributors to exercise more discernment, recalling their “obligation to take into account the financial situation of policyholders, as part of their duty to advise and to verify that the proposed contract is consistent with all customer requirements and needs”.


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