The EU’s IDD is part of swathe of new regulations hitting advisers’ desks while they wrestle with the unknown implications of Brexit on top of the daily demands of clients.
On 25 September 2017 the Financial Conduct Authority (FCA) launched its third and final consultation on the implementation of IDD in the UK.
Application of the IDD is far wider than its predecessor, the Insurance Mediation Directive, catching up insurers and other ancillary companies involved in insurance distribution in its net.
“The IDD is premised on levelling the playing field for insurance and investment products to prevent regulatory arbitrage and provide better protection for consumers, when buying insurance (and making sure those protections are equivalent to those provided by Mifid II for investment products,” Sarah Ouarbya, partner, told International Adviser.
“Generally, the provisions of the IDD are laudable in spirit but any benefit for the industry will depend on practical implementation and there is a risk bureaucracy and form filling will take over from the underlying intent of the rules.
“Transparency, no detrimental inducement, managing conflicts, product design/pricing and so on, all look good in principle but the practice and compliance issues may make it another burden for the industry.”
Old before it is born
The UK has already introduced many of the requirements covered by the IDD.
In some cases the UK continues to require a higher standard than that required by the IDD and has committed to maintain these rules post implementation under so called ‘gold plating’.
Ouarbya fears the regulation has been so long in gestation it will be old before it is born because IDD was been designed around traditional distribution methods – using brokers and insurers having face-to-face meetings with clients.
She believes new sales methods on smart phones, robo advisers and pay-as-you-go models could force the FCA to act to make wholesale changes to IDD sooner than they would like.
