Product governance under IDD – collaboration is key

Bovill

From 1 October a new set of rules for product governance will affect everyone in the insurance business. The key to getting it right will be better communication between manufacturers and distributors. There’s still time to get ready if you start now.

New rules introduced by the Insurance Distribution Directive (IDD) are forcing firms to overhaul their product governance. IDD replaces the previous principle-based approach to product governance with a much more prescriptive one. It’s defined in updates to the FCA handbook specifically covering product oversight and governance, which come into force on 1 October 2018. This means that firms urgently need to implement a formal governance process if they haven’t already done so.

The main challenges the IDD product governance changes bring are:

  • the greater granularity required when identifying a target market, to make sure that products are sold to the right customers
  • ongoing product monitoring to ensure that products are working effectively for customers – which means new management information
  • formalisation of roles and responsibilities for firms across the distribution chain, with clearer boundaries between the roles of manufacturers and distributors
  • the need for manufacturers and distributors to have consistent distribution strategies for a given product.

Better communication is key to meeting IDD product governance

Manufacturers and distributors will need to communicate and share information as never before for each to have what they need to comply with the rules.

In particular, manufacturers need to pass on information about target markets to distributors so that they can sell correctly. In return distributors need to provide information about product performance and complaints so that manufacturers can monitor product quality and outcomes. Both parties need to share sufficient information so that they can identify factors that must trigger a product review.

Product governance structures can help manage the relationship challenges. For example management information request frameworks can help establish the necessary information flows.

Collaboration between manufacturers and distributors – understanding and meeting their respective information needs for new and existing products – will ultimately achieve effective product oversight and governance for both.

Product governance under IDD: four steps to compliance

1.     Manufacturing products: review approach against new rules and identify additional resource needs

2.     Existing products: review those that have been modified that will be in the market after October

3.     Distribution channels: make sure that the information is clear, complete and up to date.

4.     Product governance framework: is it effective? Are there mechanisms to trigger reviews, for example if claims ratio falls?


How we can help

We can provide help and advice on all elements of product governance. We can point you towards the structures that work best in a given context, and help you embed them so that they become part of your normal way of working. We’ll help you identify any additional information you need to comply with the new rules.

We can provide unbiased, pragmatic advice on managing relationship challenges and establishing the necessary information flows. In doing so, we’ll take into account both parties’ sensitivities – and we know what the industry considers to be fair and reasonable.

Finally, we’ll help you tackle those hard questions about product value, bringing a new pair of eyes to help you evaluate both established and new products. 

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