According to a survey of compliance with the principle of equity published by the Financial Supervisory Authority (FIN-FSA), there are some large variations in life insurance companies’ principles for distribution of bonuses. Customer bonuses granted by companies for their savings and pension insurance policies have gradually decreased over the past ten years. Total returns on insurance policies, however, have exceeded, on average, both the change in consumer prices and market interest income.
Findings made in the study
- The principle of continuity required by the principle of equity was generally fulfilled and companies complied with their agreed principles for distribution of bonuses.
- In accordance with the principle of equity, the companies had taken into account equity between the different insurance policies of their customers.
- The information disclosed by companies on the principle of equity and compliance with it varied in quality, but was acceptable in the case of all the companies.
- The information on the distribution of the surplus among policyholders and shareholders was not disclosed such that policyholders could assess the equity of the distribution of the surplus.
The coronavirus pandemic that began in 2020 has disrupted and is likely to continue to disrupt the real economy and thus also the financial markets. For this reason, the FIN-FSA recommends that companies adopt a policy of restraint in distributing profits to shareholders.
Principle of equity guides distribution of surpluses
The principle of equity refers to how companies distribute surpluses between customers, on one hand, and customers and company shareholders, on the other. The principle of equity also requires compliance with the principle of continuity: companies must undertake to maintain the level of bonuses for their customers. The definition of objectives for the principle of equity is based on provisions in the Insurance Companies Act.
The FIN-FSA collects insurance statistics on life insurance companies annually, and this information is used in the survey of compliance with the principle of equity. The survey compares the bonus distribution objectives disclosed by the companies on their websites as well as reports on the actual achievement of the said objectives.
The survey is in Finnish and contains a summary in Swedish.
For further information, please contact
Jari Niittuinperä, Chief Actuary, telephone +358 9 183 5517 or jari.niittuinpera(at)fiva.fi
Appendices (in Finnish)
This news item was originally published by the Financial Supervisory Authority (FIVA FI). For more information, please see the Source Link.