MFSA flags shortcomings in insurance costs and customer protection

Insurance companies have been urged to improve transparency over costs and strengthen customer protections after the Malta Financial Services Authority identified several shortcomings in their practices.

The findings emerged from two reviews examining life insurance policies offered in Malta and other insurance products sold abroad by Maltese-authorised companies.

Outdated cost disclosures, inadequate monitoring and weaknesses in customer complaint procedures were among the shortcomings identified in the MFSA’s report.

Life insurance: Outdated information and lack of assessment

The first review looked at investment-linked life insurance policies offered by four insurance companies in Malta, covering around 44% of these products on the market.

Such policies combine life insurance with investments, meaning the money customers get back depends on how well those investments perform.

The MFSA found that some insurers were not providing clear or up-to-date information about costs, while others were not adequately monitoring the investments linked to their policies.

Some companies also failed to show that they had properly assessed how long customers would need to keep their policies before recovering their costs.

The authority also raised concerns over insufficient assessments of customer outcomes, including cases where policy-holders ultimately surrendered their insurance policies.

Such shortcomings could leave customers unaware of how much they are paying in fees, how long it might take to recover their investment costs, or how much money they stand to lose if they cancel their policies early.

Following the review, the MFSA urged insurance companies to provide clearer information about costs, regularly monitor their products, and ensure customers are getting value for money.

Insurance sold abroad: Gaps in documentation and unjustified costs

The MFSA’s second review examined travel, gadget, accident, and health insurance products sold abroad by Maltese-authorised insurers.

Here, the authority identified gaps in documentation tied to product approval and reviews, together with insufficient justification for certain costs and commissions.

It also found weaknesses in how insurers monitored insurance claims and customer complaints.

These shortcomings highlighted the importance of identifying potential harm to consumers and ensuring that policyholders fully understand what their insurance policies cover and exclude, the MFSA stressed.

Insurers were subsequently urged to strengthen their oversight of products sold internationally, justify their costs and commission structures, and use information gathered from claims to identify problems.

MFSA urges corrective action

Following both reviews, the MFSA underlined that insurers must assess whether their products offer value for money throughout their entire lifecycle, being from their initial design and approval to distribution.

The authority added that it expects the insurance companies concerned to review their practices against its findings and take the appropriate corrective action.

The MFSA concluded by affirming that it will continue monitoring developments as part of its supervisory work, with particular emphasis on ensuring fair outcomes for customers and that insurance products meet the needs of their intended markets.