Insurance Distribution Directive Webinar September 2018 04 - - PowerPoint PPT Presentation

1

Insurance Distribution Directive

04 September 2018

Webinar September 2018

Contents

Introduction CoB Overview Product Governance and Distribution Selling Knowledge and Competence Next Steps

04 September 2018 2

IDD expectations

• IDD requirements,
• EU Regulations/Guidelines, and
• GFSC issued documents.

Familiar with:

• Reviewed Corporate Governance arrangements
• Reviewed distribution / selling processes
• Good customer outcomes

Working to full IDD compliance

04 September 2018 3

Key messages

04 September 2018 4

Corporate Governance Host state regulator rules Compliance by 1st October

Conduct of Business

04 September 2018

A Revised approach to Conduct of Business Supervision

5

What is Conduct ?

04 September 2018 6

Conduct is how people behave. Good conduct is not just about compliance and mitigating risks and/or a tick box approach Consistently good customer outcomes require effective systems and controls, meeting compliance obligations and good disclosure All underpinned by a good conduct culture

Revised Conduct of Business Approach

Why

• Increased focus internationally and domestically
• GFSC’s publication on Approach to Insurance Regulation Paper
• Much more than revised TCF requirements

How

• Industry seminar - overview of categories
• Setting expectations and guidance - phased approach
• Self-assessment
• Sample selection of self-assessments
• Feedback
• Ongoing reviews

04 September 2018 7

Product Governance and Distribution channels

04 September 2018 8

What is required?

The regulations require manufactures to maintain,

• perate and review a product approval process for

newly developed insurance products and for significant adaptations of existing products.

04 September 2018 9

How can this requirement be met by insurers?

Product oversight committee in place Clear governance structure and reporting lines Good oversight and upwards reporting Good Management information

04 September 2018 10

How can this requirement be met by distributors

• f the products?

Provide the manufacturer with the data required for the review

• f the insurance product

Sense check that the products being sold meet the needs of the target market Provide management information to insurers in a timely manner Appropriate product selection process Robust training for staff

04 September 2018 11

What are co-manufacturers?

When an insurance product is designed and developed by an insurance intermediary and an insurance company acting together with both parties having a decision making role this is known as co- manufacturing

04 September 2018 12

Governance for co-manufacturers

We would expect to see the following in place when firms are acting as co-manufacturers of an insurance product:

• Written agreement in place

setting out responsibilities

• f each party
• Joint teams working

together to ensure consistency and alignment when designing or adapting products

• Products and relevant

documentation approved all both parties

04 September 2018 13

Identifying the target market

Defining the target market enables the manufacturer to adapt the features of the product to the needs, characteristics and

• bjectives of the group of customers targeted

The granularity of the target market and determination of the appropriate distribution channel should be commensurate with the complexity of the product being offered

04 September 2018 14

Distribution

Manufacturers should select distributors that have the necessary knowledge, expertise and competence to understand the features of the product and identified target market Manufactures need to monitor and examine whether their products are being distributed in conformity with their objectives Manufacturers need to provide all the appropriate information on the insurance products, details of approval process, identified target market and suggested distribution strategy to enable the distributor to fully understand the product they intend to distribute

04 September 2018 15

Distribution – selecting the distribution channel

Have an approach for assessing the distributors knowledge and understanding

• f the type of product

Does the distributor have all the necessary training and product material? Have the risks of the product being communicated to the distributor If the distributor is producing the promotional material, the manufacturer should verify the accuracy before it is used

04 September 2018 16

Distribution – oversight of the distribution channel

Complaints – to understand the root cause Cancellations – for trends – is the product being mis-sold? Through interaction with the distributor is it clear that the product is understood? Onsite visits to larger more significant distributors Internal audits

04 September 2018 17

Insurance Intermediaries - Selling

04 September 2018 18

Protecting the consumer – a risk based approach

04 September 2018 19

IBIPs investing in Complex Financial Instruments (MiFID 2) Insurance Based Investment Products All insurance products

RISK PRESCRIPTION HONESTY, FAIRNESS, PROFESSIONALISM, CUSTOMER INTERESTS

Protecting the consumer – avoidance of mis-selling

04 September 2018 20

Non – advised sales All Insurance Products IBIPs IBIPs investing in Complex Financial Instruments (MiFID 2)

• General principle - Reg. 38S
• General information provision - Reg. 38T
• Conflict of interest & transparency - Reg. 38U
• Demands, needs and information - Reg.38V(1),(5) &

(8) to (11)

• Advice – Reg. 38V(2) to (4)
• Information to customers e.g. costs &

charges, risk warnings– Reg. 38ZE

• Assessment of suitability &

appropriateness - advised – Reg. 38ZF (1) to (2) and (7) to (13) Assessment of suitability & appropriateness – 38ZF (3) to (6) Must be advised – Reg. 38ZF (6)(b)(i)

Protecting the consumer – avoidance of mis-selling

• The demands and needs test
• Standardised insurance product information document
• IBIPs – suitability and appropriateness
• Information gathering

https://eiopa.europa.eu/Publications/Consultations/EIOPA%20Techni cal%20Advice%20on%20the%20IDD.pdf in particular 7.1

• Assessment of appropriateness and suitability statements – including

KIDs (PRIIPS)

04 September 2018 21

Knowledge and Competence

04 September 2018 22

New knowledge and competence requirements

Sets high standard – based on a benchmark Appropriate in relation to the products offered Continuing Professional and development requirements Onus on Firms to ensure staff meet standards and support staff

Establishing a benchmark

Establish a high standard Qualifications; examples from industry Firms need to assess all individuals currently selling or in relevant management position Firms need to establish if staff meet this benchmark

Firm’s assessment of Individuals

Meet benchmark? Qualifications and training previously held? Any gaps? Training going forward?

Examples

Someone who qualified 20 years ago A new employee qualified in France An information provider versus an advisor of complex life products

Examples of support for new employees

Listening in on discussions with clients Peer review of advice Providing support and time for studies Providing a robust induction and training programme

Compliance responsibilities

Assess and review compliance with training and competence

• requirements. This

review should be included in the report to the management body.

Ongoing training

15 hours minimum CPD Structured training covering areas in Annex I Covers products offered by firm Understand firm’s internal policies Keep up to date with market and industry developments Firm’s need to document staff CPD and ensure compliance

What does it mean for you?

We do not expect firms to be fully compliant day 1 Expect firms to have a plan in place to ensure compliance We rely on firms to assess individuals SICR will collate some information to help us understand this (in due course) We can ask firms for evidence Look at having good customer outcomes

Next Steps

05 September 2018 31

What you need to do

Ensure you have mapped your processes against the EU Directives, Regulations and Technical Standards and work to ensure compliance Familiarise yourself with information issued by GFSC Focus on Corporate Governance Ensure compliant with host regulator rules Focus on good customer outcomes

04 September 2018 32

Useful information

Dedicated email address:

IDD@gfsc.gi

Dedicated website page:

http://www.fsc.gi/firms/idd

04 September 2018 33

04 September 2018 34

Questions Comments