The Insurance Distribution Directive (IDD) came into effect on the 1st October 2018 and will apply to all firms carrying out life insurance and non-investment insurance business.

The IDD replaces the Insurance Mediation Directive (IMD). According to the FCA, the IDD aims to enhance consumer protection when buying insurance (including non-investment insurance, life insurance and IBIPs) and to support competition between insurance distributors by creating a level playing field.

The FCA has now issued its third and final policy statement with rules, this is available here. You can also view the first statement issued in September 2017 and the second policy statement issued in December 2017.

Who does the IDD apply to?
IDD applies to all firms who conduct ‘insurance distribution’ with clients.  This includes firms who sell, advise on, or conclude insurance contracts and those who assist in administering or performing insurance contracts. As such, firms who provide advice or services in relation to non-investment protection products (e.g. term assurance plans) and general insurance contracts (e.g. house insurance) will be captured by IDD.
It applies in respect of both retail and commercial customers.

What are the key requirements outlined in PS17/21?

  • The FCA handbook will be updated to replace the term “insurance mediation activities” with “insurance distribution activities”.

Knowledge and ability requirements

The FCA has set out the minimum knowledge requirements for conducting insurance distribution activities in its SYSC rule book.

A firm is required to;

  • ensure that it, and each relevant employee, possesses appropriate knowledge and ability in order to complete their tasks and perform their duties adequately.
  • ensure that it, and each relevant employee, complies with continued professional training and development requirements in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market.
  • ensure that each relevant employee completes a minimum of 15 hours of professional training or development (CPD) in each 12-month period, taking into account the role and activity carried out by the individual and the type of distribution and nature of the products sold.  

IDD introduces a number of new record keeping requirements whereby firms must;

  • establish, maintain and keep appropriate records to demonstrate compliance
  • be in a position to provide the FCA, upon request, the name of the person responsible for the record keeping requirements. For most firms, Paradigm believes that this will be the current in-house supervisor.
  • make an up-to-date record of the CPD completed by each relevant individual in each 12 month period
  • retain CPD records for a minimum of 3 years after the relevant individual stops conducting insurance distribution activity
  • be in a position to provide the records to the FCA upon request
  • NOT prevent a relevant individual from obtaining a copy of their CPD record

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