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Are you ready for IDD training requirements?

4th October 2018

Are you ready for IDD training requirements?

The Insurance Distribution Directive (IDD) came into effect on 1 October 2018 replacing the Insurance Mediation Directive (IMD). 

The key aim of the new directive is to enhance consumer protection when buying insurance and to support competition between insurance distributors by creating a level playing field. This all makes sense and fits in with the direction both the FCA and Lloyd's have been taking the market. 

As with all such directives, it is reviewed by The Financial Conduct Authority (FCA) which then works out how to embed all the requirements into the rulebook. Other regulators within Europe are doing the same which means there may be a slightly different approach within some territories - some may even go further than the IDD expectations.

A lot of focus has been on the front line sales process and the information provided to customers. I am going to examine the another element being that insurance firms must ensure staff comply with continuing professional training and development requirements in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market.

The FCA has incorporated this training element into the rulebook by adding a new section (SYSC28) to the Senior managers and certification regime setting out the minimum knowledge, ability and good repute requirements for carrying out insurance distribution activities. This applies to all firms undertaking insurance distribution activities, including those where insurance is not their main activity.

I have examined the SYSC28 requirements.

Which employees does this apply to?

The training requirements apply to Relevant Employees being those who are involved in, or supervising, insurance distribution activities or responsible for insurance distribution activities, within the management structure.

So, it't not just staff dealing directly with customers - if you are an underwriter selling your product via a broker of coverholder you need to think about this too.

There is not limited to staff dealing with consumer products.

Another important issue to note is that this is not limited to employees working under a contract of employment. It also includes third parties providing insurance distribution services for an insurer (or syndicate), also appointed representatives and their employees.

What is required?

The essential requirements are that each Relevant Employee must:

  • Possess appropriate knowledge and ability to be able to do their job adequately
  • Undertake continued professional training and development to maintain an adequate level of performance.
  • Complete a minimum of 15 hours of professional training/development in each 12 month period.
  • The training/development should take into account the role of the Relevant Employee and the type of distribution/products sold.

The rules specifically state that the training should be relevant to the individuals specific role and the market they work in. In addition, it allows for the learning to be or various types, such as including courses, e-learning and mentoring. 

This means you can make the learning really useful for your staff. Most firms will already be creating individual training plans as part of the annual appraisal process - these rules help provide focus on what is needed. Staff themselves can think about what they need to do and plan/track their training in same way any professional person manages their CPD activity.

The FCA expects records of the training, including evidence of the annual 15 hours minimum, to be kept for at least 3 years.  Make sure your record-keeping allows you to demonstrate this to the FCA should you be asked. 

For those undertaking CII CPD activity and record-keeping it seems sensible to combine the two activities rather than add an additional 15 hours training.

What subjects should staff be trained in?

For general insurance the FCA expectation is that training should include:

  • Policy terms, conditions, benefits and ancillary risks.
  • Applicable insurance contract and social law, such as consumer protection, data protection and anti-money laundering law.
  • Claims Handling.
  • Complaints Handling.
  • Assessing Customer Needs.
  • Insurance Market.
  • Business Ethics.
  • Financial Competence.

All are areas it is reasonable to expect your staff to understand.

How can Conduct Matters help?

Conduct Matters can help by providing face to face training courses, workshops and briefing/presentations. In addition take a look at the new e-learning offering combining my knowledge of insurance, compliance and regulatory expectations. It is interesting, practical and good value. You pay only for the training you need and for the staff who need it.

I am very excited to announce the first of the e-learning courses(Vulnerable Consumers) has now been published and available to buy. I really enjoyed writing the course and hope you find it interesting. 

Contact me if you have any suggestions about e-learning courses or want to discuss me delivering some training or a presentation. 

Author: Sally Pearce, Conduct Matters Ltd

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