Insurance-based investment products
In 2006, a confidential report by the Dutch financial regulator into unit-linked insurance policies revealed the policies sold by insurance firms were often complex, not transparent and that the fees charged to consumers were often excessive. A unit-linked insurance policy is a plan offered by insurance companies that integrates both life insurance (covering the risk of death) and investments (offering the opportunity for the investor to generate capital). These policies were very popular in the Netherlands in the 1990s and 2000s, with an estimated 7.2 million unit-linked policies sold to Dutch consumers. At the end of 2005, nearly €49.2 billion had been invested in these products.
However, an important part of the sum paid in was not invested, but covered the (administrative) costs, commissions and premiums. Often, it was unclear to the consumer how much was actually invested or what the costs of the products were. These policies were mostly sold by so-called ‘independent advisors’, who received attractive commissions from the insurance companies for “advising” on their products.
In 2008, the Dutch Ombudsman issued a recommendation to the Dutch life insurance sector to minimise the costs of these financial products and to compensate in cases where excessive costs were charged to consumers. This recommendation led to several Dutch insurers reaching resolution agreements with Dutch customer interest groups.