Finally, today, December 14, 2015, a ministerial order comes into force that will oblige all insurance companies to report the profitability of their savings products, in terms of A.A.R.E. (Annual Percentage Rate), i.e. net of expenses and other commissions . In other words, what the customer gets clean.
Why it was necessary to provide APR information
This will make it much easier to compare life-savings products offered by insurance companies and banks. This will make it easier for savers to make their investment decisions. In this sense, Flavia Rodríguez-Ponga, Director General of Insurance and Pension Funds, has announced it.
In this way, we forget about the “technical interests” which, in many cases, meant distorting the real profitability figures, which made it very complicated for the client, but also for the intermediary, to explain the real yields of the insurance.
Of course, this is a measure that mainly affects the advertising of guaranteed savings products, where the risks are borne by the insurance companies, not by the saver. The client guarantees his principal capital as well as the advertised return.
We are talking about Assured Pension Plans, the PIAS that are not Unit-Linked (i.e. that have neither fixed nor variable income) and the SIALP and other savings products that are not linked to investment funds. If you are not clear about the difference between these products, in a few weeks we will publish a post explaining them.
Comparison with bank savings and investment products
It is clear that this is a step forward, which will help customers to take out more savings products. This will also allow direct competition with bank deposits. And, although many already knew about these products, as well as their better profitability, it will now be easier to check them out. The question is whether the banking sector will also become more transparent in all its products, and when the regulator will stop being so benevolent with them.
Insurance companies, for their part, are relaxed about the change, as they are aware that their products are more competitive than many of those offered at bank branches.
For more information about savings and investment products, do not hesitate to contact us. First we will listen to you, then we will advise you.
The increase in current account balances
While all this is going on, customers are leaving their cash in checking accounts.
Why is this happening?
- Due to the decrease in the profitability offered by bank deposits
- Because the only alternative presented by the banks themselves are investment funds, in which the risk of loss is assumed in full by the customer.
- Due to people’s lack of knowledge of existing alternatives, which do offer more interesting returns, through entities with higher solvency than the banks themselves (this is where the savings products offered by insurance companies come in).
Do not hesitate and find out about all the options offered by insurance companies. PIB Group Iberia e Inversión will help you find the product you need.
