Round Up Autumn 2018

11 features If you haven’t already, make sure you watch our IDD webinar recording which discusses the above key issues in more detail and answers some of the most common questions posed to our helpdesks in the lead up to its implementation. In addition, to help you prepare, there’s a huge amount of supporting information on our website, including a project plan, guidance and template documents. 10 7 9 8 Client Disclosure For non-investment insurance contracts the nature and basis of the remuneration received for advising on and/or arranging the contract must be disclosed. This means the type (such as fee or commission) and the source (fee direct from client or commission from insurer). For IBIPs, aggregated costs and charges must be disclosed. The IDD doesn’t mandate an illustration to show a client the cumulative effects of costs on return, either initially or on an on-going basis. Remuneration Remuneration rules will apply to all firms who undertake insurance distribution activities in relation to non-investment insurance contracts. You shouldn’t be remunerated, remunerate or assess the performance of your employees in a way that conflicts with your duty to act in a client’s best interests. For example, sales targets shouldn’t be designed to incentivise advisers to recommend a particular insurance contract where they could offer a different one which would better meet the client’s needs. Conflicts of interest The FCA is updating its conflicts of interest rules to refer to insurance distribution activities. It will also include the text of the directly applicable IDD regulation which applies to the distribution of insurance based investment products (IBIPs). Examples of the changes that will apply specifically for insurance distribution activities are: -- You must establish, implement and maintain a written conflicts of interest policy. -- Your senior management team must be provided, on at least an annual basis, with a written report on all instances where a conflict of interest entailing a material risk of damage to the interests of one or more clients has or may arise. -- Records must be kept, and regularly updated, of the kinds of service or activity carried out in which a conflict of interest entailing a material risk of damage to the interests of its clients has arisen or may arise. -- Disclosure of conflicts. You’ll be required to make enhanced disclosures to your clients where you can’t prevent or manage a conflict of interest from arising. Inducements The IDD introduces requirements in relation to inducements for IBIPs. These requirements are closely aligned to the requirements introduced by MiFID II in relation to other investment business. There’s a small difference between IDD and MiFID II requirements in relation to the potential impact of any fee, commission or non-monetary benefit on the service to the client. For example: - - MiFID II: the test is that any inducement must ‘enhance the quality of the service’. - - IDD: the test is that an inducement ‘must not have a detrimental impact on the quality of the service’. For other insurance business the existing requirements will continue to apply. Jon Roberts Policy consultant threesixty services