The European Insurance and Occupational Pensions Authority (EIOPA) has published a staff paper outlining a four-pillar framework to support supervisory authorities with applying behavioural insights in their conduct of business supervision.

The paper aims to improve consumer outcomes by providing supervisory authorities with information on integrating the understanding of how people make financial decisions.

EIOPA said this would help explain why some consumers fail to plan adequately for retirement.

It set out four pillars for integrating behavioural insights into supervisory work.

These included defining and assessing consumer outcomes, focused on consumers’ financial health; and understanding consumer behaviour in practice by examining how they make decisions and the factors that influence their choices.

The other two pillars were: considering interventions at different levels, including market, product and distribution level rather than solely targeting changes in the behavior of individuals; and combining evidence-gathering methods through the use of appropriate research method to understand behaviour and assess the effectiveness of interventions.

EIOPA said the paper illustrated the proposed approach through three examples of its work: the natural catastrophe insurance protection gap; credit protection insurance sold through banks; and the sales process for insurance-based investment products.

“A realistic and evidence-based understanding of how consumers make financial decisions is fundamental to effective consumer protection and overall societal resilience,” the paper stated.

“Such behavioural insights, together with an assessment of systemic and supply-side factors, can inform the design of policy and supervisory measures that promote better consumer outcomes.

“This is why EIOPA places consumer behavioural insights at the core of its consumer protection work.”

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