MFSA mystery shopping finds weak sales practices in insurance investment products
The MFSA's 2026 mystery shopping exercise uncovered recurring weaknesses in how insurance-based investment products are sold, raising compliance risks for intermediaries.
The Malta Financial Services Authority has published the key findings of its 2026 mystery shopping exercise examining the distribution of insurance-based investment products and retirement products by tied insurance intermediaries.
The exercise identified recurring weaknesses across the sales process. These include inconsistent completion and documentation of customer demands and needs assessments, insufficient evidence supporting appropriateness assessments, shortcomings in pre-contractual information, and inadequate explanations of product costs, risks and features.
The MFSA also found instances where comparisons with competing products were not sufficiently objective or substantiated. Communications risked creating the impression that investment advice was being provided, and discussions emphasised tax-related incentives above actual needs.
The exercise comprised 17 mystery shopping interactions with selected TIIs distributing such products. The selection followed a risk-based approach, with particular focus on distribution models involving corporate TIIs and sales practices relying significantly on cold-calling.
The exercise covered approximately 50% of applicable TIIs, representing approximately 58% of IBIP-related gross written premiums reported to the MFSA.
The assessment focused on the pre-contractual stage of the customer journey, including the quality of information provided, demands and needs assessments, product comparisons, disclosure of risks and costs, and the distinction between factual product information and regulated investment advice.
The MFSA expects Insurance Undertakings and TIIs to ensure that customer assessments are carried out adequately and documented, product information and comparisons are objective and balanced, and customers receive relevant pre-contractual documentation sufficiently in advance of making an investment decision.
The Authority also expects distributors to clearly distinguish between factual product information and regulated investment advice, and to present potential returns, risks, costs, product features and tax considerations in a fair, clear and balanced manner.
Insurance undertakings are expected to maintain effective governance, oversight, training and quality assurance arrangements over their distribution networks. The MFSA also encourages firms to consider periodic mystery shopping of their own distribution channels as a complementary oversight tool.
The MFSA said it will continue to monitor industry practices through its ongoing supervisory activities, including further mystery shopping exercises, and may consider regulatory action against TIIs and their principals where shortcomings are identified.
For Malta's financial services sector, the message is clear: the regulator is watching distribution practices closely, and firms that fail to tighten their sales processes face potential enforcement. The findings also suggest that the industry's reliance on cold-calling and corporate distribution models may come under greater scrutiny going forward.