COMPLIANCE NEWSLETTER - FEBRUARY 2017

UK Government consults on adoption of the Insurance Distribution Directive

Ahead of the FCA’s Consultation Paper on the implementation of the Insurance Distribution Directive (IDD), which had been expected to be published on 24 February 2017, the Government has issued its own Consultation Paper on the transposition of the IDD into UK law from 23 February 2018. As with the existing Insurance Mediation Directive, the IDD is a minimum harmonising directive which allows EU member states to introduce additional provisions, or to bring additional activities into scope of regulation as appropriate for domestic markets. The FCA will still therefore consult separately on any proposed changes to its rules as a result of the adoption of the IDD in 2018. Responses to the Government’s consultation paper are requested by 22 May 2017.

For more information, click here.

FCA publishes GI value measures scorecards

The FCA has published the findings of its initial pilot of claims ‘scorecard’ data. These data are intended to provide consumer groups, firms and market commentators with additional indicators of product value for the insurers it regulates. Information published is made up of claims frequencies, claims acceptance rates and average claims pay-out by insurer for two primary products (home buildings/contents and home emergency) and two add-on products (personal accident and lost keys cover).

For more information, click here.

Firm found guilty of selling insurance of limited value

A mail order and on-line business has entered into an agreement with the FCA to provide redress totalling £12.5m to approximately 330,000 customers who were mis-sold insurance over a 10-year period. Customers were offered accidental damage and theft insurance across its product range, where premiums were calculated as a percentage of the customer account balance. The FCA considered that the insurance cover offered little or no value to the firm’s customers.

For more information, click here.

FSCS levy announced for 2017/18

The Financial Services Compensation Scheme (FSCS) is planning to raise its levy for insurance intermediaries to £13m for 2017/18, an increase from the £8m levy for 2016/17. According to the FSCS, this is to cover an expected overall increase in payment protection insurance (PPI) claims received during that year, on the assumption that the FCA will be announcing a cut-off date for submitting new PPI claims.

For more information, click here.

Firms have until 31 March 2017 an opportunity to respond to FCA consultation on the proposed reforms of FSCS funding, which were announced in December 2016.

To read FCA Consultation Paper CP16-42, click here.

CII produces report on dealing with vulnerable customers

The Chartered Insurance Institute (CII) has issued a report following an 18-month research project involving insurers, intermediaries, charities and NGOs which considered how vulnerable customers were being treated. The report makes seven key recommendations for insurers and brokers encompassing the whole customer journey from point of sale to claims handling and complaints.

One specific finding was that 52% of charities feel the people they represent are inherently vulnerable to unfair treatment from insurers and that, generally, charities think insurers do not always consider the needs of the people they represent.

To read the CII’s report, click here.

FCA to remove Initial Disclosure Document template from Handbook

On 27 March 2017 the Initial Disclosure Document template will be deleted from the FCA Handbook, as part of the FCA’s ‘Smarter Customer Communications’ initiative. The regulator considers that the document creates a ‘tick box’ approach to disclosure and may restrict firms from finding better ways to give customers regulatory-required information. Any firms which decide to continue using the document after this date will have to remove the ‘Keyfacts’ logo, as it will no longer be an FCA-approved template, although the regulator will allow existing stocks of printed documents to be used up.

For more information, click here.

Director disqualified for breach of competition law

In December 2016, the Competition and Markets Authority (CMA) disqualified an individual from acting as a director of any company for 5 years and fined him £163,371 for competition law breaches. This is the first time such a power has been used by the Authority. It deemed that the director broke the law by agreeing with one of its competing on-line sellers that they would not undercut each other’s prices. The agreement was implemented using automated re-pricing software and, although the case was not insurance-related, UK competition law applies equally to the sale of insurance products.

For more information, click here.

FCA and PRA make changes to enforcement decision-making processes

A joint FCA/PRA publication, Policy Statement PS17-01, has been issued in response to comments received by the two regulators on their joint Consultation Paper (CP 16/10 ‘Proposed Implementation of the Enforcement Review and the Green Report’). One of the main outcomes, to come into effect from 1 March 2017, is the abolition of stage 2 and 3 discounts to penalty in settlement.

For more information, click here.

ICO round-up

In January 2017, the Information Commissioner’s Office (ICO) fined RSA £150,000 for not taking appropriate technical and organisational measures to prevent devices containing personal data from being stolen by a member of staff or contractor. This stemmed from an incident in 2015 when a portable storage device was taken by someone who had access to the server room in RSA’s premises at Horsham. The device, which was password-protected but not encrypted, held nearly 60,000 customer names, addresses, bank account and sort code numbers and 20,000 customer names, addresses and credit card ‘Primary Account Numbers’. It has not been recovered to date.

For more information, click here.

In a recent speech, the Information Commissioner spoke about how the General Data Protection Regulation (GDPR), which takes effect in the UK on 25 May 2018, means that UK organisations must start taking data protection more seriously, suggesting that a lack of trust in organisations may have resulted in the GDPR’s more powerful legal requirements. The vulnerability of SMEs, which often process large amounts of personal data without the resources to employ compliance staff or data protection officers, was highlighted.

To read a transcript of the Information Commissioner’s speech, click here.

EIOPA publishes final statement on delegated acts

The European Insurance and Occupational Pensions Authority (EIOPA) has published its final report: Technical Advice on Possible Delegated Acts Concerning the Insurance Distribution Directive (IDD). This covers product oversight and governance, conflicts of interest, inducements and suitability or appropriateness of insurance-based investment products.

Under the IDD, the European Commission can adopt certain delegated acts, to supplement or amend certain non-essential elements of the IDD.

To read the publication, click here.

FCA Chairman’s speech on good conduct regulation

A recent speech delivered by the FCA Chairman, John Griffith Jones, presented good conduct regulation as being built upon government policy, clear objectives and perimeters, shared understanding of risk tolerance, operational excellence, and efficient measurement of outcomes. He explained that the FCA’s future success as a good conduct regulator is dependent upon continual improvement in these areas, so that they are individually sound and properly joined together.

For more information, click here.

FCA website – short feedback survey

The FCA is seeking feedback about its website via an on-line survey, including how easy it is to find information as well as new features users would like to see. There is also an opportunity to help improve the site in the future by signing-up for user testing. The survey is designed to take only a few minutes to complete.

To take part in the survey, click here.

The information provided in this Newsletter is based on the Managing General Agents’ Association’s knowledge and understanding of regulatory issues at the date of publication. However, it is generic in content, and matters in UK regulation change regularly. Members should take their own professional advice in connection with any issues which could affect their business. The Managing General Agents’ Association accepts no responsibility or liability for any actions taken based on the information contained within this Newsletter.