With the final rules only published in mid-January, intermediaries were understandably complaining that they had little time to prepare.
However, it seems that not much has changed since then, with research in January showing two thirds of intermediaries have little or no knowledge of the directive.
Despite the postponement, the new deadline for implementation is only six months away.
That still leaves little time for intermediaries to familiarise themselves with the rules and get systems and processes in place.
Many are going to need help.
Most intermediaries broadly welcome the new regulation’s drive for transparency and focus on adviser competency.
Strengthening consumer protection and levelling the playing field across sales channels in insurance distribution also has a fair amount of support.
But brokers obviously have other priorities, such as the looming implementation of the General Data Protection Regulation (GDPR) or the Senior Managers and Certification Regime (SMCR).
A long way to go
The problem, though, is that a lot still needs to be done to meet the obligations set out by the IDD. These new rules not only require changes to processes, documentation and training, but also introduce new disclosure requirements around conflicts of interest and remuneration (such as commissions from insurers).
Intermediaries must therefore offer customers a “fair evaluation of the market”, which means proactively telling them who’s on their panel.
They also need to obtain more specific information about customers’ insurance demands and needs, and there are new rules around professional indemnity cover, training and competency.
This includes a new requirement for intermediaries to complete 15 hours of continuing professional development (CPD) a year.
Overall, IDD requires distributors to “always act honestly, fairly and professionally in accordance with the best interests of their customers”.
That’s clearly a good aim, but it shouldn’t be left to intermediaries alone.
A joint effort
Insurance firms obviously have to provide the new documentation required under the directive.
All non-life insurance distributors must give customers a standardised Insurance Product Information Document, for instance, before concluding the contract.
This is to be drawn up by the product provider.
The IDD requirements have also been aligned to Mifid II, which means that insurers have to give distributors information about their target market assessments, for example.
In cases of regulatory change, it’s not just about drawing up the new documents, though; it’s also about how insurers support advisers to manage the transition.
It’s important to avoid any confusion here – not only to make sure customers get the right documents, but also so that the administrative burden on advisers is manageable.
Provide insight and guidance
If insurers are serious about safeguarding standards in their distribution network, they will also take an interest in ensuring that advisers have access to good CPD.
Legal & General’s training programmes are Chartered Insurance Institute accredited to help intermediaries meet the 15-hours requirement.
More generally, though, insurers should all be in a position to provide insight and guidance to their partners on the changes – for two important reasons.
First, time is short, and advisers already have a lot on their plate.
Second, they have an obligation to make sure that intermediaries can meet the new standards, because they have an obligation to the end buyers – who these standards are designed to protect.
