Training in a year of multiple regulatory deadlines

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For our clients in the general insurance sector, 2018 was blessed – or burdened, depending on your viewpoint – with an unusually generous helping of regulatory change. Workshops and online courses on three major regulatory strands – GDPR, IDD and SM&CR – were in high demand throughout the year.

It’s not just insurance providers, of course, who’ve been focusing on data protection issues. But the coming into force of the General Data Protection Regulation (GDPR) on 25 May 2018 was certainly a landmark for this sector.

Insurance providers have traditionally held and processed huge amounts of personal information on their clients – not always in an especially disciplined fashion. The process of putting the necessary systems, processes and policies in place to comply with the new legislation has been quite an adjustment for some firms.

Brexit – in whatever form it finally arrives – seems certain to throw up a raft of new compliance issues

A second major landmark on the general insurance regulatory landscape in 2018 was the EU’s Insurance Distribution Directive (IDD). This replaced the previous Insurance Mediation Directive and aims to better protect the interests of customers large and small. Originally slated for implementation on 23 February 2018, IDD was then put back until 1 October. Sighs of relief were duly heaved. Demand for related training grew stronger than ever.

IDD requires insurance providers of all kinds to be fully transparent on the basis of their involvement in the insurance sales process – and on any remuneration they receive in consequence of that involvement. Intermediaries must clearly explain the rationale for – and disclose any factors that might influence – any recommendations they make.

Aside from training on the detail of the regulations themselves and how to prepare for compliance, IDD has also fuelled a big uptick in demand for CPD. On the assumption that you’re unlikely to get good advice from anyone who is not a good adviser, the IDD’s authors stipulated that all UK insurance distributors’ staff must complete a minimum 15 hours’ training and CPD annually.

Specifically, depending on their precise role, under SYSC 28.2.3, customer-facing staff are now required not only to know about their own products but also to understand the structure, workings and key legal aspects of the insurance market, to have basic financial competence, be able to effectively assess customer needs, understand their firm’s claims handling process along with complaints handling procedures, and to have an awareness of the ethical dimensions of the business, including treating customers fairly and avoiding conflicts of interest.

The third key piece of regulation affecting businesses in 2018 was the Senior Managers & Certification Regime (SM&CR), which replaces the Approved Persons Regime, widely seen as seriously deficient in the wake of the 2008 financial crisis.

Amongst the aims of SM&CR were: encouraging a culture in which staff at all levels take personal responsibility for their actions, ensuring they and their employers clearly understand where responsibility lies in any given situation, and embedding personal responsibility into the functions of board members and other senior staff.

SM&CR came into force for insurance firms regulated by both the FCA and PRA (i.e. underwriters/insurance carriers) on 10 December. Those regulated solely by the FCA (typically brokers and intermediaries) have the best part of another year in which to prepare themselves. Although it’s worth bearing in mind that, if past experience is anything to go by, the 11 months from early January to the end of November will soon pass by – and it’s never too soon to start preparing! Dual-regulated firms should by now have identified those members of their staff requiring certification and provided appropriate training for them and for their senior managers.

Helping insurance brokers prepare for SM&CR will no doubt keep us busy during the coming year. As will catering for the insurance sector’s newly revived enthusiasm for CPD. There are other regulatory changes looming on the horizon. If nothing else, Brexit – in whatever form it finally arrives – seems certain to throw up a raft of new compliance issues with which we’ll all need to contend.

We may not soon see another year that’s quite so busy on the compliance training front. But, just as commercial lawyers can sleep soundly at night in the confident expectation that people will not all suddenly wake up one day and agree about everything, providers of training on insurance regulation can be fairly sure that – one way or another – there’ll be plenty to keep them busy for the foreseeable future.

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SEARCHLIGHT INSURANCE TRAINING - Arranging training and consultancy for the Financial Services industry - Setting up and developing a new insurance company - Leading an asset finance company - Non-Executive director Specialties: - A versatile and innovative professional executive with proven track record - Experienced non-executive director - Experienced in takeovers and mergers - Liveryman at the Worshipful Company of Insurers - Chartered Insurer

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