Insurance Distribution Directive (2) - Disclosure amendments

YOUR COMPLIANCE MATTERS:   Insurance Distribution Directive (2)

                                                                  – Disclosure amendments.

Relevance:                   All firms.

Action required:           Update client letters and reports to comply with revised rules

Earlier this year, we forewarned firms that the Insurance Distribution Directive would be implemented on 23 February 2018, and this is still the date to be working towards. There will be more guidance, issued in due course, but the FCA has now published revised rules which change some of the words surrounding recommendations, dependent on the basis of advice. You need to act now to update client letters or reports to include the revised information required before February:

1. Capacity

All clients should be provided with information about who you act for and your role. The following statement will cover most circumstances:

‘For your information, we would advise you that we act on your behalf in sourcing an appropriate policy, arranging cover and in assisting you with claims issues. We act as an intermediary in arranging cover with your insurer.’’

If you act for the insurer, for example under a binding authority, this statement will need to be modified.

1. Recommendations and Product range

We need to explain to the client how we have broked their business when we make a recommendation: The statements to be used will vary and will replace the current recommendation statements:

1. If we have approached a range of insurers for quotes (e.g., run a quote through a quote system)

    

   We have provided our recommendation based on a fair and personal analysis of the market and can confirm that the cover offered is recommended as it provides, in our view, cover which matches your requirements at a competitive premium.

    

2. If we have completed a more limited quote process

    

   We have not carried out a fair and personal analysis of the market but provided our recommendation based on quotations from a limited number of insurers. We are happy to recommend the cover offered as we believe it meets your requirements at a competitive premium.

    

3. If we have approached a single insurer (or the holding insurer only, on a renewal)

    

   We have not carried out a fair and personal analysis of the market but provided our recommendation based on a single insurers product OR terms offered by your current insurer. We are happy to recommend the cover offered as we believe it meets your requirements.

    

   NOTE: If you are contractually obliged to place covers with certain insurers these statements will need to be revised so please get in touch and we will review the situation

    

1. Add on products

Do not forget that these should also receive appropriate attention, and disclosure. The following example covers Legal Expenses. Let us know if you need wordings for other products:

Legal Expenses

We understand that you wish to be able to pursue uninsured losses following a non-fault accident. We would therefore recommend that you take out optional Uninsured Loss Recovery Insurance, for which we place all covers with Insurer name, The premium is £XX including Insurance Premium Tax and an Insurance Product Information Document for the Policy is attached.

1. Income information

Revised rules require “In good time before the conclusion of the initial contract of insurance and if necessary, on its amendment or renewal, an insurance intermediary must provide the customer with information on the nature of the remuneration received in relation to the contract of insurance.”

At present, basic details of how a firm is remunerated are contained within the Terms of Business document. Other than some slight tweaking of that wording, we feel that in the “spirit of disclosure”, this is sufficient in conjunction with the indication that anyone can ask for those individual details.

We will continue to assess this position in the light of ongoing experience and consultations and where necessary, we will issue further information.

1. Consumer disclosures

The encouragement to shop around and Protected NCD information requirements are unchanged from previous rules so these will need to be provided to Consumers

Further help

If you want any assistance in updating letters or reports, please get in touch. We will be updating your Terms of Business document before the end of the year.

If you need to discuss any aspect of this newsletter, please contact us.