Achmea reaches agreement on unit-linked policies
Achmea has signed an agreement with the interest groups Stichting Verliespolis, Stichting Woekerpolis Claim, Vereniging van Effectenbezitters and Vereniging Eigen Huis on the maximum expense loadings and risk premiums for unit-linked products. Customers of Achmea will receive compensation if it is found that the expenses deducted exceed the defined maximum. Achmea is the first major insurance company to agree to compensate customers as soon as the calculations have been made – commencing in 2011 – instead of requiring them to wait until the policies mature. The agreement covers all unit-linked products sold under the Achmea labels Avéro Achmea, Centraal Beheer Achmea, FBTO, Interpolis and their legal predecessors prior to 1 January 2008.
The agreement between Achmea and the interest groups is an extension of the arrangement reached with Achmea in May 2009, which was based on the recommendations of the Dutch Financial Services Ombudsman. Notable elements of the present agreement are the timing of compensation payments to c ustomers and the arrangement covering hybrid products (unit-linked products that allow customers to switch between saving and investment). Achmea is earmarking an additional sum of €65 million for this agreement. This is on top of the compensation payments of €315 million announced in May 2009, making the total amount involved €380 million.
Under the agreement, Achmea will charge a maximum of between 2.35% and 3.3% in respect of expenses each year (see annex). Our customers will receive compensation if it is found that the expenses actually deducted for their policies exceed this maximum figure. Achmea will calculate the amount of compensation due up to maturity of the policy. Achmea will be the first major insurance company to start making payments as soon as 2011 instead of waiting for policies to mature. The compensation will be added immediately to the value of the policy and will therefore appreciate in line with the other investments.
The Achmea arrangement has also been extended to include hybrid life products. These are insurance policies which accrue value through a combination of investing (variable return) and saving (fixed return). The maximum expenses charged by Achmea on the investment component will be 3.3%, with a maximum of 1.25% per annum on the savings component. If the sum of the excess cost of the investment component and the savings component exceeds the norm, we will reimburse the excess costs.
Vary from a few euros to a few hundred euros. There will be no compensation for lost investment income. In some cases, c ustomers will get a revised policy with a more attractive expense schedule for future years.
There has some discussion concerning the transparency of the expenses relating to unitlinked products and the amounts charged. Achmea has therefore conducted a critical review of its own products and related cost levels. ‘It is important that we now have this satisfactory agreement in place. It provides clarity for our customers,’ says Chairman of the Executive Board Willem van Duin. ‘We are going significantly further than other insurers. For instance, as the first major insurance company to do so, Achmea will now be paying compensation as quickly as possible and not waiting until insurance-linked policies mature. This is what our customers asked for. We accept our esponsibility, but realize that the compensation will not make up for the disappointing investment results of the last few years.’
A special support scheme has been agreed by Achmea for exceptional or distressing situations. Customers who through exceptional personal circumstances were forced to surrender their unit-linked policies may in certain cases be able to claim under this scheme.
Custumers will be able to find information on the websites of the various Achmea labels concerned. No action is required on the part of policyholders with a current unit-linked product. They will shortly receive more information by mail explaining the arrangement in greater detail. Policies which have already matured or which have been surrendered are also covered by the present arrangement, provided they ran for longer than five years. We will advise the customers concerned how they can make a claim through notices placed in national newspapers as well as information posted on our websites.
Annex to press release ‘Achmea reaches agreement on unit-linked policies’
In line with the Recommendations of the Dutch Financial Services Ombudsman, the Achmea arrangement provides for a maximum deduction in respect of expenses over the life of a policy.
Achmea has defined four categories, with maximum expense limits of between 2.35% and 2.85% per annum on the value of policies (categories 1–3), with a fourth category involving an expense uplift of 0.45%:
- Category I: 2.85% for unit-linked policies with a gross premium of less than €1,200 in the first year of the policy or a single premium of less than €12,000.
- Category 2: 2.45% for unit-linked policies with a gross premium of €1,200 or more in the first year of the policy or a single premium of €12,000 or more, except for products falling into category 3.
- Category 3: 2.35% for unit-linked policies with a term of at least 30 years and a gross premium of more than €2,000 in the first year of the policy or a single premium of €20,000 or more.
- Category 4: 0.45% expense uplift for the above three categories of unit-linked policies with a guarantee of 3% or more on net fund return (fund return less total expense ratio)
For unit-linked policies with a fund value of more than €100,000, the expenses will be limited to 1.5% per annum on the value of the policy in excess of €100,000. For fund values up to and including €100,000, the above limits apply.In the case of the hybrid products, we will charge 1.25% on the savings component, with expenses on the investment component charged that the above rates.
Achmea is the largest insurance company in the Netherlands and is the parent company of strong brands like Avéro Achmea, Centraal Beheer Achmea, FBTO, Interpolis, Zilveren Kruis Achmea and Agis. Achmea is not a listed company and has a cooperative background. The company aims to strike a balance between the interests of c ustomers, distribution partners, employees and shareholders. Achmea is part of Eureko, a company active in eight other European countries in addition to its home market of the Netherlands.