‘I love deadlines,’ Hitchhikers Guide author Douglas Adams once remarked. ‘I like the whooshing sound they make as they go by.”
Insurance providers, under ever-fiercer regulatory scrutiny, can’t afford to be so blasé. In the world of insurance deadlines tend to bring a sense of dread.
So it was that, in December last year, many insurance people breathed a sigh of relief on hearing that implementation of the Insurance Distribution Directive (IDD) would be put back from February to October this year. But regulatory deadlines (delayed or otherwise) always come round in the end.
By the time you read this, IDD Day will have come and gone. Some firms will have been ready. Others will still have some catching up to do. We can easily infer this from the fact that we’re still getting plenty of bookings for training preparing for IDD after the deadline has passed.
One of the key aims of the EU’s IDD (Insurance Distribution Directive) regulations was to ensure that the interests of customers, large or small, would always be adequately protected. Another was to promote healthy competition within the EU. It’s hard to say exactly how Brexit might affect that second aspect of it over time. But IDD is upon us, and UK firms, distributing insurance, must now comply.
The Insurance Distribution Directive aims to avoid misunderstanding or confusion on the customer’s part, by insisting that providers need to be clear whether they’re intermediaries or ‘undertakings’ (i.e. risk carriers).
They must also be absolutely clear (clearer, even, than the politicians who so often, and so falsely, claim this virtue) whether they are offering a personal recommendation – and whether they’re acting purely on the customer’s behalf or on that of the ‘undertaking’.
Insurance advisers must also disclose any potential conflicts of interests, such as holding capital or voting rights in an insurer with whom they are placing business, whether they are offering ‘fair and personal’ analysis, whether their recommendations are restricted to a certain panel of insurers, and whether they have contractual requirements to place a certain amount of business with particular insurers.
Insurance intermediaries must also disclose the nature and source of any remuneration that they and/or their employees receive in return for placing the customer’s business with a particular risk carrier. They must also explain clearly and comprehensibly their precise reasons for making a particular recommendation.
None of this – nor any other of IDD’s many provisions (into which we clearly don’t have space to delve here) – is a million miles away from what is essentially just good practice in the market already. But the net is clearly drawing tighter around those who aren’t best serving their customers’ interests.
One upshot of the new regulations that’s currently keeping us busy, here at Searchlight, is a renewed enthusiasm among insurance providers for continuing professional development (CPD).
Recognising, with impeccable logic, that you can’t get good advice from someone who isn’t a good adviser, IDD ’s (Insurance Distribution Directive)authors have introduced a new stipulation that all UK insurance distributors now need to ensure that their staff complete a minimum 15 hours’ training and CPD annually.
In an ideal world, of course, they would all be doing this already. But it’s a competitive market out there for insurance providers, and many have seen ongoing staff training as a suitable corner to cut. That calculation will now have to change.
The FCA (Financial Conduct Authority) has been clear that, under the new rules, customer-facing staff will need to gain knowledge of, the products they are selling, the structure and workings of the insurance market (including its legal aspects), basic financial competence, assessing customer needs, claims handling, complaints handling, and an awareness of the ethical dimensions of the business, including treating customers fairly and avoiding conflicts of interest.
Only a cynic would suggest that a sudden surge of renewed interest in the training we offer on topics like these is simply the outcome of regulatory intervention. But something has certainly concentrated minds out there.
Whatever its causes or motivations, it’s hard to argue with the proposition that better trained insurance advisers can only be good news for customers and providers alike. And if it helps sell a few extra training hours, who am I to quibble!