One of the key drivers for change within any training organisation is the need to anticipate, absorb and keep our customers up to date with forthcoming legal and regulatory developments.Along with the EU’s General Data Protection Regulations (GDPR) and the FCA’s Senior Managers and Certification Regime (SMCR), one key concern right now for our clients in the insurance and financial services sector is the introduction of the Insurance Distribution Directive (IDD) in February next year.The IDD is an EU regulatory initiative aimed at encouraging cross-border competition whilst ensuring consistent and appropriate levels of protection for insurance customers – from private individuals to multinationals – EU-wide.
Just as with GDPR, the prospect of Brexit by no means signifies that firms who ‘distribute’ insurance in the UK (i.e. insurance firms – along with other distributers of insurance like banks and retailers for whom it is not their core business) don’t need to bother with IDD. Consequently our training around this new directive is currently in great demand.
Although the precise details around how the FCA and HM Treasury will implement IDD have yet to be fully buttoned down, it is certainly not too soon to give firms a good of idea about how to prepare. This is just as well, with implementation now just a few months away!One key consideration is that UK insurance distributors must ensure all staff involved in sales and product development complete 15 hours of properly evidenced training and CPD each year. The FCA has made clear that it will be taking a distinctly dim view of any deficiency in their knowledge or competence.
The FCA has made clear that it will be taking a distinctly dim view of any deficiency in their knowledge or competence.
Specifically, staff in these roles will need to know about the structure and workings of the insurance market (including its legal aspects), basic financial competence, assessing customer needs, claims handling, and the ethical dimensions of the business, including treating customers fairly and avoiding conflicts of interest.
The IDD also requires that firms offering insurance products on a ‘non-advised’ basis ensure these genuinely meet the needs of those to whom they’re sold. A particular concern is that add-ons are (demonstrably) only sold where the customer has made a fully informed and deliberate decision to purchase them.
Also included are new requirements to make clear the precise basis and extent of any commission earned by insurance intermediaries on a sale and on any fees that will be charged. There is also a strengthened focus on potential conflicts of interest. Wherever these cannot be entirely avoided, they must be spelled out clearly to the customer.
Product documentation requirements have also been expanded, with firms now required to provide a new Insurance Product Information Document (IPID, or just PID). This should be a two-to-three page document produced to a prescribed format, featuring infographics-style icons for maximum clarity, telling policyholders as plainly and unambiguously as possible what is and is not covered.
There are also new duties and responsibilities relating to the sale of insurance through businesses not directly authorised by the FCA, so-called Ancillary Insurance Intermediaries (AIIs). In essence, the IDD brings what’s expected of such intermediaries very closely in line with what’s expected of firms whose primary business is insurance.
Where product governance is concerned, the IDD’s requirements shouldn’t come as too great a change for firms already up to speed with the FCA’s current requirements, but there are a number of innovations to note in terms of product development, review processes and clarity on intended target markets (with a view to deterring the sale of unsuitable products).
Naturally, there is a great deal more to IDD than that. We are busy delivering workshops covering a full range of IDD related topics including conduct of business requirements, pre-contract disclosures, transparency and avoiding conflicts of interest, distinctions applicable to advised and non-advised sales, considerations applicable to cross-selling and working with AIIs.
Beyond this, we are also working with a number of our clients on a consultancy basis to help them prepare their organisations more broadly for IDD implementation.
We are assisting some clients to create customised e-learning and blended training materials to help them ensure their sales and product development staff are fully up to speed and competent – along with e-learning assessments to test whether they have the requisite levels of knowledge and competence.
Whenever something like IDD comes along to change the insurance landscape we need to move fast to offer our clients the solutions they need, when they need them. Our customers may not always experience unalloyed delight when rules and regulations change, but it keeps us busy and on our toes!