Wednesday, December 11, 2019

Adapting to the Insurance Distribution Directive

Now a few months have passed since the implementation of the Insurance Distribution Directive (IDD) the FCA has stated that they will be “taking a keen interest in the way firms are applying the rules”

With that in mind we’ve reflected on the steps taken here at Coplus to ensure compliance with the IDD and how this has had a positive impact on our business and for our partners too.

The Insurance Distribution Directive (IDD) was introduced across the EU in 2018 to ensure a level playing field between all participants in the selling of insurance products. It replaced the Insurance Mediation Directive (IMD) which came into force in 2005, however the development of the industry and the growth of other methods of selling insurance, such as direct insurers, meant that the IMD had become outdated. The IDD was designed to strengthen policyholder protection, create a fairer environment to all those involved in selling insurance and critically, introduced the requirement for firm’s to always act in the customer’s best interest, now known as the Customer’s Best Interest Rule.

The Customer’s Best Interest rule particularly appeals to us at Coplus. ‘Putting our Customers First’ is one of our 5 core values, and as a company we ensure that we put the customer at the forefront of everything we do. Although we manage complex supplier relationships, we never lose sight of the individual and we strive to achieve the best outcome for the customer in every situation.

The IDD also asks that firms which manufacture policies, such as ourselves, have a Product Oversight and Governance Policy. Our Policy is freely available to distributors, and ensures that the products we are selling to distributors are right for their target market. Before a product is bought to market, we go through a strict product approval process which our Commercial Team undertakes. It is imperative that the target market is identified and the objectives and characteristics of the customer are taken into account. Consistent communication between the Commercial Team and the distributor is required to ensure that the policy will meet the needs of their target market. A product will then be put through testing phases before it is brought to market for distributors to sell to their customers.

In line with our Product Oversight and Governance Policy we also undertake annual governance checks to review the product and ensure that it is providing the protection that was promised to the customer at the point of sale. Extensive reviews take place on all of our MI, including reviewing claims statistics such as number of claims received, any rejections of claims and the reasons for these, how many customers have renewed their policies and how many complaints we have received relating to the product. We analyse MI on all product schemes to ascertain if there is a pattern of customer detriment and if the product is not performing well, or if there are any worrying trends such as a low ratio of claims or a high rate of rejections and complaints. If we feel the product itself is not performing in the target market’s best interest we will establish the reasons why this is occurring and correct these to put things right. Thankfully, we have not been wide of the mark so far, with our products providing great value for our customers.

In addition, all policy wordings are reviewed and amended if necessary to ensure clarity and fairness and that nothing is misleading. If necessary additional training can be provided to our distributors so that there are no concerns over their understanding of the policy. . We operate openly and transparently and share our learnings with our distributors to ensure that we are meeting the needs of their target market, discussing with them their customers’ needs and always taking into consideration the Customer’s Best Interest rule.

Another change that came in with the IDD was the need for an Insurance Product Information Document (IPID) to be created for each product. Whilst we already had Key Facts documentation with full details of key features and important details for each product, this was replaced by the IPID. The content and format of the IPID are prescribed and the responsibility of the product manufacturer.. The initial development of the IPIDs as well as the ongoing creation and updating of these documents sits with our Commercial Team who liaise with distributors to ensure that the IPID’s are suitable for their customers before publishing, and ensure the most important features, inclusions and exclusions are highlighted.

When considering the level of information that is available to customers, we take into account the financial literacy that each customer will have. Different customers will have different informational requirements and we always ensure that we meet these when creating IPIDs and policy wording documents. For example, a new driver who has just passed their test and is insuring their first car will most likely have a different comprehension compared to a fleet manager who is purchasing fleet insurance for their taxi company. We offer further support to those who need it and work with distributors to ensure it meets the financial literacy of their customers.

We analyse customer and distributor feedback to continuously improve our service and the claims journey for our distributor’s customers. For vulnerable customers we ascertain the level of assistance they need and ensure our information is accessible with help readily available for those who need it. We can assist completing information gathering and all of our staff have received training on the Financial Conduct Authority’s (FCA) Treating Customers Fairly outcomes.

Also in line with the requirements of the IDD we have reviewed our training and development process and monitor and record regular training in line with the new CPD (continuing professional development) requirement of 15 hours per year. Our new agile training approach was introduced in January 2018 to ensure claims agents develop a deep expertise in their field which in turn further reduces the risk of customer detriment. Since the CPD requirement came into force on 1 October 2018 we can track an average of 8.8 hours’ worth of CPD per person so we are well on course for October 2019.

With the IDD only a few months in, the industry as a whole is already noticing the positive impact it has had. By encouraging insurance distribution relationships to be more transparent and financial literature clearer, it has created an environment of trust. We welcome the changes introduced by the IDD and advocate sharing information with distributors to ensure we are meeting the needs of their customers.

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