FCA publishes IDD papers

FCA has published its policy statement on its first consultation on IDD implementation, including near final rules, and has also published its third consultation with further proposals. The IDD must be implemented by 23 February 2018.

The near final rules cover changes to reflect:

  • application of the IDD: FCA has clarified how the rules apply to insurance undertakings, extended the application of ICOBS to large commercial risks in the EEA and to intermediaries when not in direct contact with the customer. It has also confirmed that ICOBS does not apply to reinsurance distribution and kept the current customer classification;
  • professional and organisational requirements: FCA is implementing the IDD minimum of 15 hours’ CPD and minimum knowledge areas into SYSC while maintaining the current TC requirements. It has also created a level playing field between (re)insurers and intermediaries by requiring them all to keep appropriate records to show compliance with the knowledge and ability requirements. FCA has amended the PII limits to meet IDD standards and will continue to maintain the requirements in MIPRU and IPRU-INV that go beyond this. It will also now require intermediaries, as well as insurers, to use only the mediation services of authorised or exempt intermediaries;
  • complaints handling and out of court redress:  FCA will rely on the procedures set out in DISP;
  • changes to ICOBS: the key changes affect chapters 2, 4, 5 and 6A and reflect the IDD’s general requirements, and its specific rules on customers’ best interests, marketing communications, pre-contract and other disclosures and sales standards for advised and non-advised sales, and new rules on cross-selling;  and
  • the regulatory regime for ancillary insurance intermediaries. This looks at the regulatory regimes for, respectively, “in scope”, CTI and “out-of-scope” AIIs. FCA is applying its rules to in scope AIIs (having clarified that these will not always be ARs), to extend the requirements that apply to CTI providers and to put in place rules to require authorised firms to ensure their out of scope AIIs meet applicable IDD requirements.

FCA’s third consultation paper proposes changes to FCA rules to cover the IDD delegated acts in respect of:

  • life insurance distribution: on inducements, suitability and appropriateness and disclosure requirements for IBIPs and disclosure requirements also for mandatory occupational pensions;
  • all distribution business, in respect of conflicts, product oversight and governance, regulatory processes and changes to PERG.

FCA notes that it is proposing to apply some IDD requirements more widely than the IDD requires, and has sought to apply a broadly consistent regime across products – particularly with MiFID 2 requirements.  FCA asks for comments by 25 November, and reminds firms that comments on its second CP (17/23) are due by 20 October.