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The deadline to implement the changes under the Insurance Distribution Directive is the 1st October 2018. This replaces the Insurance Mediation Directive which came into effect on the 14th January 2005. If you are not yet up to speed with the changes we have summarised the key changes to make for brokers below.
This is a summary of the main changes required, for more details, template documents or support please get in touch.
CPD - A minimum requirement of 15 hours per year is required. The requirement applies to staff directly involved in the carrying out of the firm’s insurance distribution activities, supervisors, and management. The knowledge and competence requirements can be found under SYSC28.2.3R.
Professional Indemnity - You should have minimum levels of cover equivalent to €1,250,000 per claim per year and €1,850,000 per year in aggregate for all claims. Based on current conversion rates this would be £1.2m and £1.75m respectively.
Conduct of Business - In brief a new Customer Best Interest Rule, clear fair and not misleading advertising with marketing materials clearly identifiable as such, and remuneration of staff must not conflict with the customer best interests.
Pre-contract disclosure - The need to disclose; nature of your business (insurer or intermediary), whether you provide advice and whether you act for the customer or insurer. You need to state if the advice is now a “fair and personal analysis of the market” not as currently a “fair analysis”. If you work from a panel then the names of the insurers on the panel must be disclosed, can no longer simply say “a panel” and have this available on request it has to be upfront. These changes can be included in your disclosure/terms of business document issued to customers at the outset.
IPID - This replaces the existing key Features/Policy Summary and will follow a specific format – it is the responsibility of the insurer to issue this.
Transparency - You must disclose the nature and basis of your remuneration in relation to the insurance contract and whether you work from a fee, commission or other form. – Most likely this is commission, so how is this formed and earned. E.g. “We receive commission from all the insurers we use, this is based and a percentage of the total premium paid” You must disclose any and all fees to the customer during the policy term, e.g. cancellation fee, midterm adjustment fees. This must be a specific fee and not an “up to £x”
Documentation - Customers can now request documentation and correspondence in hard copy without cost, you can default to electronic means as a normal method as long as you give prominence to the paper copy option.
Non-advised Sales - You cannot offer products unless they are consistent with the customer’s demands and needs. Purely speculative quotes to entice customers to contact cannot be used. Under a non-advised sale a statement of demands and needs must be issued in all cases, it cannot be generic as it must match some of the customer’s needs to the products offered, but it does not need to be as high level as an advised sale.
Advised sales - You need to provide the customer with a personalised recommendation explaining why the product would best meet the customer’s needs and highlight any needs that can’t be met as well as act in the customers best interests