The German Financial Supervisory Authority (BaFin) recently expressed strong criticism of the sale of net policies. An investigation of 22 insurers revealed significant shortcomings in this segment in terms of advice, transparency, and consumer protection. This provides important insights for companies and employers who are responsible for their employees' occupational pension plans.
What are net policies, and what are the risks?
A net policy is an insurance investment product that is sold without any commissions factored in. Instead, customers pay for the advice directly via a fee. The concept is intended to create transparency, but it has significant pitfalls:
- Legal protection does not apply: While gross policies benefit from a cap on acquisition costs in the event of early termination, this protection is ineffective for net policies. Fees paid directly to brokers are not considered acquisition costs and are therefore not capped.
- Inadequate advice: According to BaFin, this difference is often not communicated or only inadequately communicated in consultations.
- Unclear customer benefits: The majority of insurers surveyed are neither aware of the amount of the fee agreements nor can they assess the actual customer benefit, even though this is precisely what is required by the Insurance Supervision Act.
These points mean that net policies do not offer the expected transparency or fairness for many employees, thereby increasing the risk for employers of creating dissatisfied employees or even legal issues.
Why does this also affect employers and companies?
Even though employers do not usually make direct decisions about the remuneration of net policies, companies have a responsibility within the framework of occupational pension schemes:
- Ensuring trust within the workforce: Employees expect occupational pension schemes to be fair and transparent. If risks are not adequately explained during consultations, this can weaken trust in the employer.
- Complying with legal requirements: BaFin makes it clear that insurers are not solely responsible. Employers should also ensure that the pension solutions they offer meet the legal consumer protection standards.
- Understand and question cost structures: Anyone offering occupational pension solutions should be familiar with the different cost models of gross and net policies and critically examine how these are communicated within the company.
BaFin calls for greater consumer protection. What does this mean for companies?
BaFin plans to focus more strongly on consumer protection in the coming years. This results in three key areas of action for companies:
- Checking the quality of consultation: Companies should ensure that differences between net and gross policies are communicated clearly and comprehensively.
- Demanding transparency from partners: Insurers and brokers should be required to disclose cost and remuneration structures so that customer benefits remain transparent.
- Prioritize long-term provision: Occupational pension schemes are a long-term building block for the financial security of employees. Companies should focus on products that are subject to legal protection mechanisms and offer long-term stability.
Conclusion for employers
The BaFin's criticism makes it clear that net policies are not a suitable way to create lasting trust and security in occupational pension provision. Companies that now focus on transparent consultations, fair cost models, and compliant products not only strengthen consumer protection but also their role as responsible employers.
Occupational pension provision remains a long-term process. Those who focus on stable structures and avoid risks at an early stage make a decisive contribution to the financial security of their employees and at the same time increase their attractiveness as employers.
Handelsblatt: Bafin criticizes the sale of policies without commissions
