IDD impacts firms selling insurance alongside their products and services

19 June 2017

In the first of two consultations scheduled for 2017, the FCA has outlined its proposals for implementing the Insurance Distribution Directive (IDD) (CP17/7). The IDD applies to any person or firm which distributes insurance and reinsurance products.

This means those who sell, advise on, or conclude insurance contracts as well as those who assist in administering or performing insurance contracts including insurers, insurance brokers and firms that sell insurance alongside their primary business such as banks and retailers. Firms need to comply by 23 February 2018.

In certain areas, the current FCA rules already meet IDD minimum requirements so the impact on firms may be limited. However, in some areas the minimum requirements of the IDD go beyond the FCA’s existing rules. The scope of the regime has been extended to include Ancillary Insurance Intermediaries (AII). These are firms whose principal professional activity is not insurance distribution but who distribute insurance products, which are complementary to the goods and services they provide in their primary professional activity.

The IDD will affect AII differently depending on the type and nature of the cover they sell and the amount of the annual premium for the cover. The FCA’s proposals will affect these firms according to which of the following categories applies to them:

In-scope AIIs” – Firms who meet the definition of being an AII and are within the UK’s regulatory perimeter. This includes firms within scope of the Directive and firms such as motor vehicle dealers whose insurance distribution activities may be outside of the IDD but who are within the UK regulatory perimeter.

Connected travel insurance (CTI) providers” – Firms whose primary business is to make travel arrangements but who distribute insurance that is complementary to these services (e.g. travel agents, tour operators and airlines).

Out-of-scope AII” – Firms who are outside the UK regulatory perimeter because of the Connected Contract Exclusion (CCE) (e.g. electronic goods and furniture retailers etc.).

Firms will need to understand which category of AII applies to them. A gap analysis is a useful way for firms to understand what changes they will need to make to comply.
The FCA will publish a second consultation focusing on standardised Insurance Product Information Document requirements and potential changes to CASS rules later in 2017.

To find out more read the  IDD impacts firms selling insurance alongside their products and services.

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