Understanding the Insurance Distribution Directive (IDD) Changes

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I have trained over 50% of the individuals in the last 8 years that
have gone onto achieve the highest ACII pass in the whole of the
UK.
I train to a pass rate of more than 96% in all CII qualification
levels. Certificate , Diploma and Advanced Diploma.
I deliver the Allianz scholarship and academy programmes in
both the UK and Ireland and I have been a Cii examiner.
I have trained students who have won national prizes in almost
all ACII subjects including Insurance Law (MO5), Liability (M96),
Commercial Property and BI (M93), Personal Lines Insurance
(P86), Business and Finance (M92), Underwriting Practice (M80),
Advanced Underwriting (960), Claims Practice (M85), Advanced
Claims (820), Marketing (945), Advanced Broking (930) and
Advanced Risk Management (992).
 
 
 
Understand the background and why IDD is being
implemented
Who it applies to
Describe what the changes are
Explain the impact on insurance firms and the impact on
customers
Describe what firms should be doing following the
changes
 
The Insurance Distribution Directive  (IDD) is one of
the most significant changes in Insurance regulations
in 10 years
Firms need to understand the changes and have
plans in place to implement the changes
It came into force on 1 October 2018
 
 
Many countries still not prepared and asked for delay
New date of 1
st
 July for each country to publish their
rules
New date of 1
st
 October 2018 for implementation was
agreed and it is now up and running
 
 
 
It replaces the Insurance Mediation Directive
Mediation
 becomes 
Distribution
Its aim is to:
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Harmonise regulation across the EU
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Raise standards of conduct
Improve competition
Improve customer protection
 
 
The Insurance Mediation Directive mainly applied at
point of sale, and didn’t cover product design and
distribution
Didn’t directly cover Price Comparison Sites (though we
did in the UK)
More firms involved in the insurance process rather
than just broker/client or policyholder dealing direct with
the Insurer
 
Applies to Consumer and Commercial Customers
Applies to Insurers
Applies to Wholesalers
Applies to Garages and Shops that sell Insurance as an
ancillary to their main business rather than just pass on
leads
 
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You must disclose the source(s) of your income
You must disclose the type of remuneration
 
 
 
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You must disclose all other sources of income (Profit
Share, Premium Finance, etc.)
 
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Fees must be disclosed in cash terms
Fees of “up to” are not allowed (FCA rule)
Other Fees, for example Mid-Term Adjustments and
Cancellation must be disclosed in cash terms (or explain how
they will be calculated)
There are a number of ways you can do this. For
instance in your terms of business you can say “Insurers
pay us a commission which is a percentage of your
premium  and in addition  we charge a policy set up fee
of £30 and mid term adjustment fee of £25. We also
charge £25 if you cancel your policy.
 
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You must disclose whether you are acting for the Insurer
or for the Customer
You must disclose whether you are a Broker or an
Insurer
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You must disclose whether or not you provide advice or
just information
 
 
 
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The Customer must be given a clear choice to receive all
documents on paper (and free of charge) or by
electronic means (email, PDF etc.)
 
 
 
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All firms must maintain records to demonstrate that those
directly involved in Insurance Distribution or its Management:
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Are not undischarged Bankrupts
One Senior Member of Staff must take responsibility
for maintaining these records (are they going to undertake
searches?)
Note firms will now have to include this in all recruitment
procedures as well as doing on going checks for existing staff.
 
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All Insurance Staff must be of good repute (see previous
slide)
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The 15 hours is a bare minimum and should of course
be exceeded if a firm wishes to be professional
Records must be kept for 3 years
Employees are entitled to a copy
 
 
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This will require employees to have a minimum
necessary knowledge of eight core subjects
1. Terms and conditions of policies offered
2. Applicable laws governing the distribution of insurance
products
3. Claims handling (note claims handlers must be trained on
the product not just handling procedures)
4. Complaints handling
 
 
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And also:
5.  Assessing customer needs
6. The Insurance Market
7. Business Ethics (like unacceptable business practices)
8. Financial Competence (can you explain percentages can
you explain has the parts of the premium fit together)
Whilst there is no specific reference to testing the FCA T&C
requirements state you must test and define competence
 
 
Recruitment checks must now start including
CPD progress from previous employment
 
Firms should create a nominated individual or
individuals who are responsible for the firms
CPD record-keeping (for FCA enquiries)
 
AR’s have to be included
 
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Firms must have a written Conflicts of Interest Policy
which contains:
Identification of conflicts from remuneration or other
sources
Identification of conflicts from other parties (like brokers
receiving hospitality from insurers), related companies or
members of the same group (a broker using their own
MGA)
 
 
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Firms must have a written Conflicts of Interest Policy
which contains:
Details of procedures to be followed in the event of a COI
A gifts and benefits policy setting out the circumstances
that gifts can be offered or accepted
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Obligation on Member States to ensure that, when
carrying out distribution, Insurance Intermediaries,
Insurance and Reinsurance undertakings always act
honestly, fairly and professionally in accordance with the
best interests of their Customers (consumer or
commercial)
 
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Rules ensuring that brokers, and insurers do not either
pay or assess the performance of employees in a way
that conflicts with their duty to act in the best interests of
customers
 
 
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The new requirements require the Customer to be given
a standardised insurance product information document
(IPID), summarising the main features of the proposed
contract
The responsibility is on the Insurer or product
designer(s) to produce this document
 
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The IPID is a template document
There are very strict rules about how it is presented,
which can be followed ( fonts, logos etc)
 
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The same product information still needs to be given to
Commercial Customers, but there is no requirement to
do so in the format of an IPID
It may be more convenient to use an IPID for some
Commercial risks
 
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Currently a Policy Summary is used for most Insurance
Products to provide this information, so in effect, this will
be replaced by the IPID
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Firms should have complaints procedures for all
customers (not just eligible complainants) .
The complaints procedures and FSCS details should be
disclosed separately from the IPID.
 
 
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New rules covering the design, approval, marketing and
management of Insurance products including:
Setting up and maintaining a product approval process so that
new products are tested before launch
Ensuring that a target market is identified (also identifying groups
of customers for whom the product is generally not compatible)
The distribution (Intermediary) channels are selected
appropriately (e.g. it may be certain complex products should only
be sold  via a broker not online)
These rules include redesign
 
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Staff involved in producing new products must
demonstrate that they have the necessary expertise for
this role
New products (policies) come with appropriate
information and details of how they were approved
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Intermediaries (if used in the sales process) must have
sufficient information about the product, the approval
process, and who the product is suitable for
In some cases (for example where an Intermediary
negotiates features to be included in a policy), they will
share some of the governance responsibility as if they
were the Insurer
 
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There are new requirements when Insurance is sold
alongside a non-Insurance Product
There are two circumstances to consider:
Where Insurance is the main Product, or
Where a Non-Insurance Product is the main Product
 
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Where Insurance is the main Product:
The Customer must know if the Non-Insurance product(s)
can be bought separately
A description of the Non-Insurance Product(s) must be
given, including any interactions with the Insurance Product
Information on the costs and charges of the Non-Insurance
Product(s) must be explained
Examples: Telematics, Fitness Devices
 
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Where a Non-Insurance Product is the main Product:
The Customer must be able to purchase the primary
product or service without the Insurance product (if it is
given free the customer can technically refuse the
insurance but there would be little point!)
Examples: Insurance with a Car or Mobile Phone
 
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Introducing is exempt from regulation if all the Introducer
does is pass on information to a Broker, where that
information is already held on the introducers own
records (for example customers Name & Address)
This area is complex, and you may need advice
 
Understand the background and why IDD is being
implemented and when?
Who is applies to?
Describe what the changes are
Explain what the impact is on general insurance firms,
the impact on customers
Describe what firms should be doing in preparation for
the changes
 
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Create Solutions Ltd
The specialist training and compliance company for the
general insurance industry
Tel 0161 870 6637
www.createsolutions.co.uk
 
 
 
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The Insurance Distribution Directive (IDD) is a key regulatory change impacting insurance firms and customers across Europe. Implemented on 1st October 2018, the IDD aims to harmonize regulations, improve professional standards, enhance competition, and boost customer protection in the insurance market. Despite challenges and delays in some countries, firms must align with the IDD requirements to ensure compliance and maintain high standards of conduct and service.


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  1. I have trained more than 2,000 individuals to become ACII qualified I have trained over 50% of the individuals in the last 8 years that have gone onto achieve the highest ACII pass in the whole of the UK. I train to a pass rate of more than 96% in all CII qualification levels. Certificate , Diploma and Advanced Diploma. I deliver the Allianz scholarship and academy programmes in both the UK and Ireland and I have been a Cii examiner. I have trained students who have won national prizes in almost all ACII subjects including Insurance Law (MO5), Liability (M96), Commercial Property and BI (M93), Personal Lines Insurance (P86), Business and Finance (M92), Underwriting Practice (M80), Advanced Underwriting (960), Claims Practice (M85), Advanced Claims (820), Marketing (945), Advanced Broking (930) and Advanced Risk Management (992).

  2. Understand the background and why IDD is being implemented Who it applies to Describe what the changes are Explain the impact on insurance firms and the impact on customers Describe what firms should be doing following the changes

  3. The Insurance Distribution Directive (IDD) is one of the most significant changes in Insurance regulations in 10 years Firms need to understand the changes and have plans in place to implement the changes It came into force on 1 October 2018

  4. Many countries still not prepared and asked for delay New date of 1stJuly for each country to publish their rules New date of 1stOctober 2018 for implementation was agreed and it is now up and running

  5. It replaces the Insurance Mediation Directive Mediation becomes Distribution Its aim is to: Create a level playing field for insurance intermediaries and the distribution of insurance Harmonise regulation across the EU Aim is to improve professional standards in the insurance market across Europe Raise standards of conduct Improve competition Improve customer protection

  6. The Insurance Mediation Directive mainly applied at point of sale, and didn t cover product design and distribution Didn t directly cover Price Comparison Sites (though we did in the UK) More firms involved in the insurance process rather than just broker/client or policyholder dealing direct with the Insurer

  7. Policyholder Policyholder Insurer Insurer Aggregator Aggregator Managing general agent Managing general agent Intermediary Intermediary

  8. Applies to Consumer and Commercial Customers Applies to Insurers Applies to Wholesalers Applies to Garages and Shops that sell Insurance as an ancillary to their main business rather than just pass on leads

  9. There is a lot for firms to do

  10. Changes to disclosure Terms of Business and scripts for Commercial AND Consumer Customers You must disclose the source(s) of your income You must disclose the type of remuneration

  11. Changes to disclosure Terms of Business and scripts for Commercial AND Consumer Customers For example you must disclose that any commission you receive from an insurer is taken from the customers Premium You must disclose all other sources of income (Profit Share, Premium Finance, etc.)

  12. Changes to disclosure Terms of Business and scripts for Commercial AND Consumer Customers Fees must be disclosed in cash terms Fees of up to are not allowed (FCA rule) Other Fees, for example Mid-Term Adjustments and Cancellation must be disclosed in cash terms (or explain how they will be calculated) There are a number of ways you can do this. For instance in your terms of business you can say Insurers pay us a commission which is a percentage of your premium and in addition we charge a policy set up fee of 30 and mid term adjustment fee of 25. We also charge 25 if you cancel your policy.

  13. Changes to disclosure Terms of Business and scripts for Commercial AND Consumer Customers You must disclose whether you are acting for the Insurer or for the Customer You must disclose whether you are a Broker or an Insurer In both cases you must act in the customers best interest

  14. Changes to disclosure Terms of Business and scripts for Commercial AND Consumer Customers You must disclose whether or not you provide advice or just information

  15. Additional requirements The Customer must be given a clear choice to receive all documents on paper (and free of charge) or by electronic means (email, PDF etc.)

  16. Changes applying to Staff All firms must maintain records to demonstrate that those directly involved in Insurance Distribution or its Management: Have no serious Criminal Convictions relating to property or financial crimes (this of course does not include spent convictions). Are not undischarged Bankrupts One Senior Member of Staff must take responsibility for maintaining these records (are they going to undertake searches?) Note firms will now have to include this in all recruitment procedures as well as doing on going checks for existing staff.

  17. Changes applying to Staff All Insurance Staff must be of good repute (see previous slide) All Insurance Staff will need 15 hours of CPD, covering specified areas of training and knowledge. The 15 hours applies to part time as well as full time employees. The 15 hours is a bare minimum and should of course be exceeded if a firm wishes to be professional Records must be kept for 3 years Employees are entitled to a copy

  18. Changes applying to Staff This will require employees to have a minimum necessary knowledge of eight core subjects 1. Terms and conditions of policies offered 2. Applicable laws governing the distribution of insurance products 3. Claims handling (note claims handlers must be trained on the product not just handling procedures) 4. Complaints handling

  19. Changes applying to Staff And also: 5. Assessing customer needs 6. The Insurance Market 7. Business Ethics (like unacceptable business practices) 8. Financial Competence (can you explain percentages can you explain has the parts of the premium fit together) Whilst there is no specific reference to testing the FCA T&C requirements state you must test and define competence

  20. Recruitment checks must now start including CPD progress from previous employment Firms should create a nominated individual or individuals who are responsible for the firms CPD record-keeping (for FCA enquiries) AR s have to be included

  21. Conflicts of Interest Firms must have a written Conflicts of Interest Policy which contains: Identification of conflicts from remuneration or other sources Identification of conflicts from other parties (like brokers receiving hospitality from insurers), related companies or members of the same group (a broker using their own MGA)

  22. Conflicts of Interest Firms must have a written Conflicts of Interest Policy which contains: Details of procedures to be followed in the event of a COI A gifts and benefits policy setting out the circumstances that gifts can be offered or accepted There must also be an annual report to the board

  23. Customers Best Interests Obligation on Member States to ensure that, when carrying out distribution, Insurance Intermediaries, Insurance and Reinsurance undertakings always act honestly, fairly and professionally in accordance with the best interests of their Customers (consumer or commercial)

  24. Customers Best Interests Rules ensuring that brokers, and insurers do not either pay or assess the performance of employees in a way that conflicts with their duty to act in the best interests of customers

  25. Product Information The new requirements require the Customer to be given a standardised insurance product information document (IPID), summarising the main features of the proposed contract The responsibility is on the Insurer or product designer(s) to produce this document

  26. Product Information The IPID is a template document There are very strict rules about how it is presented, which can be followed ( fonts, logos etc)

  27. Product Information The IPID is only required where the Customer is a Consumer The same product information still needs to be given to Commercial Customers, but there is no requirement to do so in the format of an IPID It may be more convenient to use an IPID for some Commercial risks

  28. Product Information Currently a Policy Summary is used for most Insurance Products to provide this information, so in effect, this will be replaced by the IPID Pure Protection Products will still require a Policy Summary (and no IPID) A pure protection policy is one which provides cover in the event of death or incapacity due to illness, sickness or infirmity.

  29. Complaints Firms should have complaints procedures for all customers (not just eligible complainants) . The complaints procedures and FSCS details should be disclosed separately from the IPID.

  30. Product Oversight and Governance New rules covering the design, approval, marketing and management of Insurance products including: Setting up and maintaining a product approval process so that new products are tested before launch Ensuring that a target market is identified (also identifying groups of customers for whom the product is generally not compatible) The distribution (Intermediary) channels are selected appropriately (e.g. it may be certain complex products should only be sold via a broker not online) These rules include redesign

  31. Product Oversight and Governance Staff involved in producing new products must demonstrate that they have the necessary expertise for this role New products (policies) come with appropriate information and details of how they were approved There must be ongoing Management Information on product performance including for example claims ratio s

  32. Product Oversight and Governance Intermediaries (if used in the sales process) must have sufficient information about the product, the approval process, and who the product is suitable for In some cases (for example where an Intermediary negotiates features to be included in a policy), they will share some of the governance responsibility as if they were the Insurer

  33. Sales Practices There are new requirements when Insurance is sold alongside a non-Insurance Product There are two circumstances to consider: Where Insurance is the main Product, or Where a Non-Insurance Product is the main Product

  34. Sales Practices Where Insurance is the main Product: The Customer must know if the Non-Insurance product(s) can be bought separately A description of the Non-Insurance Product(s) must be given, including any interactions with the Insurance Product Information on the costs and charges of the Non-Insurance Product(s) must be explained Examples: Telematics, Fitness Devices

  35. Sales Practices Where a Non-Insurance Product is the main Product: The Customer must be able to purchase the primary product or service without the Insurance product (if it is given free the customer can technically refuse the insurance but there would be little point!) Examples: Insurance with a Car or Mobile Phone

  36. Introducer Appointed Representatives Introducing is exempt from regulation if all the Introducer does is pass on information to a Broker, where that information is already held on the introducers own records (for example customers Name & Address) This area is complex, and you may need advice

  37. Understand the background and why IDD is being implemented and when? Who is applies to? Describe what the changes are Explain what the impact is on general insurance firms, the impact on customers Describe what firms should be doing in preparation for the changes

  38. Create Solutions Ltd The specialist training and compliance company for the general insurance industry Tel 0161 870 6637 www.createsolutions.co.uk Create Solutions Ltd www.createsolutions.co.uk

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