The effects of financial standard products on the functioning of financial markets

The Dutch Ministry of Finance has asked the Netherlands Authority for Consumers and Markets (ACM) to conduct a study into the opportunities and risks of standard products the functioning of financial markets.

ACM concludes that consumers are not always better off if banks and insurers are required to offer a standard product, for example, for individual retirement plans or disability insurances. Competition between providers is not likely to increase. As a result, prices and quality will not become better. In addition, other perceived problems such as choice overload and wrong product choices are not reduced either. In fact, the introduction of standard products may even lead to consumers making fewer right choices.

ACM therefore advises to have more empirical studies be carried out first before introducing standard products. Such studies should determine, among other things, what problems currently exist in the various financial markets, and what intervention could be the best solution to them.