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Regulatory reform as an enabler – the Insurance Distribution Directive

Posted by Todd Davison on Feb 15, 2019 2:58:31 PM

This thematic blog is written in response to recent regulatory changes, specifically the Insurance Distribution Directive ("IDD"). In our view, these changes are welcomed.

Regulation, in a number of instances, can be seen as a barrier for business, commercial decisions and, sometimes, the consumer. However, regulation is a good thing; standards are raised, best practice is promoted, and, above all else, it demonstrates credibility and a commitment.

That said, in the past there have been a number of pieces of legislation that have made day to day transacting unduly onerous and not risk-focused.

Under IMD there were restrictions on how Insurance Companies accepted business and paid commissions to third party Introducers.

It is right that non-regulated Introducers should be limited on an introductory role only and not complete proposals, nor undertake fact finds or other advisory services; this is for the Insurance Mediator under the regulation of the FCA.

However, the restrictions of the Introducer under an Introducer Agreement (“IA”) or Introducer Appointed Representative (“IAR”) agreement meant that the Introducer often could not act in the best interests of their clients.

The main differentiation between an IA and IAR reflects the flow of information from an Introducer to their client and to the insurer. 

Under the IMD:

an Introducer regulated by the FCA (other than Insurance Mediation) had restrictions in earning commissions.

an Introducer not regulated by the FCA was able to enter into commission earning IA or IAR agreements.

This, therefore, hindered those Introducers who already had a relationship with the FCA (either directly or through Appointed Representative status).

Under the IDD, the mere provision of data and information on policyholders to insurers is now removed, meaning these arduous restrictions are no longer in place.

This effectively replaces the use of an IAR and enables enhanced flexibility for IAs.

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We work with a range of regulated and non-regulated introducers. These reforms will ultimately benefit clients of the Introducer and enable an enhanced dialogue and flexibility in accepting insurance business. 

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Topics: #pgi, #personalguarantee, #personalguaranteeinsurance, #commercial finance, #bankruptcy, #regulation

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