In the past, many unit-linked insurance policies have been sold. They often yielded less than expected. Insurers are committed to offering customers perspective with such insurance. The Association supports insurers in this. Read more about unit-linked insurance policies and why consumers took them out in the frequently asked questions.
Unit-linked insurance became popular in the 1990s for paying off a mortgage or building up capital for supplementary pensions. According to the Netherlands Authority for the Financial Markets (AFM), the costs of about half of the unit-linked insurance policies sold turned out to be too high. In total, this involved about 2.6 million insurance policies. Due to the high costs, these unit-linked insurance policies were nicknamed usury policies.
Insurers consider it important that customers with unit-linked insurance know where they stand. They are committed to offering customers the best possible perspective. For example, they have financially compensated customers with insurance whose costs later turned out to be too high in compensation schemes of insurers with consumer organisations. Insurers and advisers have also entered into discussions with customers to see if the situation of customers can be further improved. In the future, they will continue to help customers with unit-linked insurance to improve their prospects. The Association supports insurers in this.
Cost transparency Insurers provide customers with more information about the costs of unit-linked insurance policies. Since 2008, customers who want to take out insurance have received an overview of the amount of the premium on paper in advance. It also states which part of the premium is used to invest and which part is spent on costs and covering the death risk. Customers also receive an annual overview of the costs that have been charged and insight into the development of the value of the insurance.
The cost transparency is a result of the 'De Ruiter Committee' that was set up by the Association in 2006. The committee's recommendations were enshrined in law in 2008.
Compensation On the basis of the recommendation of the Financial Services Ombudsman, insurers have concluded and implemented general and widely supported agreements with consumer foundations, such as the Losspolis and Woekerpolisclaim foundations, and with the support of the parties involved, such as the Homeowners' Association and the Securities Owners Association, for compensation to consumers. With these agreements, the cost level of unit-linked insurance policies is in line with the Ombudsman's recommendations. Insurers paid a total of more than 3 billion euros to customers.
Flanking policy In 2011, insurers made agreements with the Ministry of Finance. These agreements ensure that customers can improve their situation, for example by adjusting, buying off or converting their insurance to another product. This so-called flanking policy should ensure that customers know what they have, know what they are getting, and are better off for the future.
For example, insurers have paid the compensation directly into the insurance policies, so that customers are free to adjust or cancel their insurance immediately. Barriers that make switching or adapting have also been removed. For example, customers no longer pay surrender costs and can switch to a cheaper fund once free of charge.
Aftercare policy Insurers have activated all customers with unit-linked insurance policies. This means that they have provided customers with up-to-date information about the insurance, its (expected) value accrual and have helped customers make a conscious choice about the future of their unit-linked insurance policy: continue, adjust or stop (surrender) unchanged. They have also offered free repair advice. This so-called aftercare policy was laid down by law in 2015. By 2017, all customers had been activated. The total overview of the activation per insurer can be found here.
Together with Nibud, insurers created a website on which customers could find information about unit-linked insurance policies during the statutory aftercare process. This allowed them to prepare for the conversation with their adviser or insurer.
Unit-linked insurance policy recovery advice desk In order to be of service to customers who no longer have confidence in their own adviser or insurer with recovery advice, the Association has set up the Recovery Advice Desk for Investment Insurance. During the statutory aftercare process, customers could receive free repair advice from an adviser who is not affiliated with an insurer. In total, about 1600 people received recovery advice via the desk.
Permanent aftercare Insurers will continue to help customers with unit-linked insurance if they need it. For example, customers who want to change their previously made choice, or customers who have not yet made a conscious choice despite the information provided by the insurer. Insurers are also continuing their flanking policy. Customers will therefore not have to pay surrender costs in the future, and can switch to a cheaper fund once free of charge.
In accordance with legislation, insurers will continue to monitor their portfolios for unit-linked insurance policies that – for whatever reason – still become non-accrual. Insurers approach and activate these customers and offer them a suitable solution.
Leniency Insurers, in consultation with consumer representatives, have made arrangements for policyholders in a so-called distressing situation. These are situations where, after the application of the general compensation scheme, the policyholder is still faced with a significant loss due to the specific product characteristics (other than the normal investor risk). A committee chaired by Dr M. Oosting has assessed whether the insurers have correctly applied the agreed scheme. In accordance with the decision of the two foundations and the insurers, the committee ended its activities in 2017. In the future, insurers will continue to assess a customer's situation on its own merits, and will offer an appropriate solution where necessary.
Since the emergence of the unit-linked insurance problem, the position of consumers, with the support of the insurance sector, has been further strengthened through additional self-regulation and legislation. For example, a ban on commissions has been introduced for the sale of complex financial products. The provision of information has also been improved, duty of care has been strengthened and further requirements have been set for the product development process.
An investment insurance policy is a life insurance policy in which the insurer invests the premium for the customer. The goal is twofold: to build up wealth and to cover financial risks in the event of death. Part of the deposit is invested to build up capital, for example to pay off the mortgage or to supplement the pension. At the end of the term, the insurer pays out the value of the insurance to the customer or to the lender for repayment of the mortgage. The value depends on the investment result. Some insurance policies have a guaranteed minimum payout or a guaranteed minimum return.
Another part of the deposit is used to pay for costs and premiums of (for example) the linked term life cover. This premium can also be charged to the accumulated capital of the unit-linked insurance policy. If the insured dies before the maturity date, the insurer will pay an agreed amount to the next of kin. This amount can be used, for example, to (partially) pay off the mortgage. This makes it financially easier for the surviving partner to continue living in the house.
From the 1990s onwards, the combination of a positive stock market climate, favourable tax rules and active marketing led to high sales figures for unit-linked insurance policies. The objectives of consumers were diverse. Unit-linked insurance policies were purchased in combination with a mortgage, to build up capital for study or retirement, or primarily as insurance in the event of death. Unit-linked insurance policies were also taken out for free capital accumulation, without a specific purpose. To meet these diverse wishes, there was a great diversity in the offer. Target capital, amount of deposit, types of additional coverage, investment policy and communication vary greatly.
Unit-linked insurance policies yielded less due to disappointing stock market returns in combination with cost deductions for some of the unit-linked insurance policies.
The AFM has conducted an investigation into unit-linked insurance policies. In 2008, the regulator concluded in the so-called fact-finding investigation that about half of the 5.7 million policies that were active on 1-1-2008 had too high costs. Insurers paid financial compensation for 2.6 million policies (45%). In total, they paid more than 3 billion euros to customers.
Insurers have entered into agreements on a contribution to the costs with the Losspolis Foundation (an initiative of the Homeowners' Association and the Association of Securities Owners) and the Woekerpolis Claim Foundation. They represented hundreds of thousands of customers. Insurers have reduced costs in accordance with the agreements in these agreements.
If an insurer has deducted more costs than agreed in the agreements, the customer has still been reimbursed the difference by the insurer. The schemes do not compensate for investment losses, they only compensate for the excessive costs.
In general, customers were compensated for cost deductions that:
That doesn't include the cost of warranties. If the insurance has a guarantee, the costs for this may not exceed 0.65% on top of the regular costs.
In the years 2008-2012, the group of customers whose unit-linked insurance policies had too high costs were compensated. At the time, insurers paid more than 3 billion euros. The excessive costs over the entire life of the product are thus compensated. A number of consumers felt that they were entitled to more and started to litigate, sometimes through a claim foundation. That is why legal proceedings are still ongoing.
The legal rulings so far are not unambiguous. There are also various appeal options for both insurers and claim foundations before both the Dutch courts and the European Court.
The possible financial impact of this legal aftermath is unclear while the proceedings are still ongoing. There are still several questions to be answered, such as the scope of the regulatory framework during the period when insurance was taken out, the individual information provided by insurers and/or advisers and various aspects of the insurance itself.
In some cases, the customer and insurer make an agreement together to end a dispute about a unit-linked insurance policy, even if they do not agree with each other. In that case, the complaint will be resolved with a settlement. The Association has drawn up information for consumers about settlements that insurers can publish on their website. Read more about arranging.
Insurers will continue to help customers with unit-linked insurance if they need it. For example, customers who want to change their previously made choice, or customers who have not yet made a conscious choice despite the information sent by the insurer. Insurers will also continue the accompanying policy. Customers will therefore not have to pay surrender costs in the future, and can switch to a cheaper fund once free of charge.
If a customer finds himself in a distressing situation, insurers will always assess the customer's situation on its own merits, and will offer an appropriate solution where necessary.
The number of unit-linked insurance policies has fallen sharply since its peak in the late 1990s. At the end of 2022, there were still 1.25 million unit-linked insurance policies, a decrease of about 31% compared to 2018.