Survey of compliance with principle of equity by life insurance companies in 2016: principle of continuity required by principle of equity was generally fulfilled and companies complied with their agreed principles for distribution of bonuses
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 nine years. Total returns on insurance policies, however, have exceeded, on average, both the change in consumer prices and market interest income.
The survey focuses attention on the following issues:
- 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.
- The distribution of surpluses between policyholders and shareholders has scarcely been addressed in companies’ own principle of equity reports, even though when the Insurance Companies Act was reformed in 2008 this was stipulated in the justifications for the Act.
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.
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)
- Survey of compliance with the principle of equity by life insurance companies in 2008–2016 (pdf) (Numbers have been updated on page 11 on 25 June 2018 and on page 12 on 31 August 2018.)
- Presentation of the principle of equity and companies’ distribution of bonuses (pdf)