Insurance distribution directive - impact analysis - Italy - Norton Rose Fulbright - 7 July 2016
Insurance Distribution Directive - GFSC presentation.pdf · Insurance Distribution Directive...
Transcript of Insurance Distribution Directive - GFSC presentation.pdf · Insurance Distribution Directive...
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Insurance Distribution Directive
January 2018
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Introduction
• Insurance supervisory approach includes the implementation of IDD
• Importance of Senior Management being involved
• Changes brought about by IDD are very important for this industry
given its reliance on cross border activity
• IDD is a large Directive in terms of impact
• Delay in implementation means that firms have no excuse not to be
fully compliant by 1st October 2018
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Agenda
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Key Features of the IDD
Conduct of Business
Product oversight and governance
Knowledge and Competence
Enforcement powers
Passporting
Supervisory strategy
Next Steps
Questions?
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IDD key Features from a consumer perspective
Greater transparency
(price and costs)
Better and more comprehensible
information (IPID)Cross-selling
Transparency & business conduct
All distribution channels caught
Stronger safeguards
(investment products
suitability)
Fair competition
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Who does it apply to?
Insurance Intermediaries
Insurance Companies
Insurance Distributors
Ancillary Insurance Intermediaries
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What is distribution?
Advising Proposing
Carrying out
preparatory work
to contracts
Concluding such
contracts
Assisting in
administration and
performance of
such contracts
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IDD – Areas for you to consider
Corporate
Governance
Host state
regulator rules
Compliance by
1st October
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Conduct of Business
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Objectives
In terms of Conduct of Business requirements, IDD seeks to:
Improve regulation in the retail insurance market
Strengthen consumer protection, in particular with regard to the
distribution of insurance-based investment products.
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General Principles
The new regime will introduce two general principles:
Insurance distributers must "always act honestly, fairly and professionally in
accordance with the best interests of customers
All information must be "fair, clear and not misleading."
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Requirements
COB
Requirements
Product
Oversight &
Governance
Advice
Cross
SellingInsurance
Product
Information
Document (IPID)
Conflicts of
interest & Transparency
Enhanced
Requirements
for IBIPs
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What does this mean for you
Introduce conflicts of interest processes
Disclose nature of remuneration
Update information you provide clients on yourselves
Update approach to suitability and assessment and reporting to clients
Update approach to execution only sales
Update personalised recommendation
Review complaints procedure
Review tied agent network
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Product Oversight and Governance
Requirements
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Product Manufacturer
Recital 55
• “In order to ensure that insurance products meet the needs of the target market, insurance undertakings, and in the
Member States where insurance intermediaries manufacture insurance products for sale to customers, insurance
intermediaries should maintain, operate and review a process for the approval of each insurance product”
Article 25
• “Insurance undertakings, as well as intermediaries which manufacture any insurance product for sale to customers,
shall maintain, operate and review a process for the approval of each insurance product, or significant adaptations of
an existing insurance product, before it is marketed or distributed to customers.”
Regulations
• “Insurance intermediaries shall be considered manufacturers where an overall analysis of their activity shows that
they have a decision-making role in designing and developing an insurance product for the market.”
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Co manufacturers
• Where insurance intermediaries are also product manufacturers, the
insurer and the intermediary can act as co-manufacturers:
‒ Separate out responsibility between each party
‒ Contractual arrangements
‒ Knowledge sharing
• Where you are not a manufacturer, but are involved in the
distribution, you need to have controls in place to ensure you
understand the product and its target market.
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Requirements – Article 25
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Product Testing Product Approval
Process
Management
Involvement
Appropriateness
of Distribution
channels
Product
monitoring and
review
Target Market
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What do these requirements mean for you?
New processes
Updating internal policies and processes
Training within the organisation
Embedding of the processes
Training of distributors
New contractual arrangements
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Knowledge and Competence
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New knowledge and competence requirements
Sets high standard – based on a benchmark
Appropriate in relation to the products offered
Continuing Professional and development requirements
Onus on Firms to ensure staff meet standards and support staff
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Establishing a benchmark
Establish a high standard
Qualifications; examples from industry
Firms need to assess all individuals currently selling or in relevant management
position
Firms need to establish if other qualifications meet this benchmark
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Firm’s assessment of Individuals
Meet benchmark?
Qualifications and training previously held?
Any gaps?
Training going forward?
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Examples of support for new employees
Listening in on discussions with clients
Peer review of advice
Providing support and time for studies
Providing a robust induction and training programme
Usually 6 months to be competent dependent on products
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Ongoing training
15 hours minimum CPD
Structured training covering areas in Annex I
Covers products offered by firm
Understand firm’s internal policies
Keep up to date with market and industry developments
Firms need to document staff CPD and ensure compliance
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Enforcement Powers
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Enforcement powers
Administrative sanctions and other measures shall be effective, proportionate and dissuasive
Order the entity or individual to cease any conduct which constitutes a breach and desist
from any repetition of the conductPower to revoke the licence
For investment based insurance products there are further powers:
•Publish statement on nature of breach
•Financial penalties – Up to €5m / 5% of annual turnover / 2x profits gained from non-compliant activity
The directive requires us to take all measures necessary to ensure that the provisions are implemented
Administrative sanctions may be imposed for all infringements of the provisions within the directive and local regulations
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Passporting
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Passporting
Firms can passport across the EU to carry out the activity of insurance distribution
Insurance companies need to ensure that firms distributing their products are
registered to carry out the activities of insurance distribution in the member state
in which they operate
There is an obligation for firms and individuals to comply not only with the local
requirements, but also with the host state requirements which can differ from
jurisdiction to jurisdiction
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Host state – New powers
If breach occurs –GFSC Obligation to consider any action
or measures we may want to take to remediate situation
If host member state considers that despite any
action taken by GFSC consumers are
detrimentally impacted or our actions are in
their view insufficient – it can take separate
action to prevent further irregularities
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Next Steps
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Supervisory Strategy
• Collaborative
‒ With industry
‒ Within the GFSC
‒ With host state regulators
• Focused on higher risk areas
‒ Implementation plans by firms
‒ Product oversight and governance
‒ Transparency
• Tailored to the firm being reviewed
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Next steps
Currently
• Working with highest impact firms around IDD implementation preparedness
IDD Workshops
• Provide focus for firms to ensure compliance with requirements by implementation date
31 March 2018
• Follow up with high impact firms to ensure on track to be IDD compliant by 1 October 2018
30 June 2018
• FSC to consider all the implementation plans to be satisfied that all firms are on route to meeting the implementation deadline of 1 October 2018
September 2018
• Ensure that we are confident that compliant on key areas: Corporate Governance and Product governance, training and Competency, Conduct and passporting (general
good) requirements or have action plans in place.
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Key messages
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Corporate
Governance
Host state
regulator rules
Compliance by
1st October
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Useful information
Dedicated email address:
[email protected] website page:
http://www.fsc.gi/firms/idd
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Questions
Comments