COMPLIANCE NEWSLETTER - February 2018

 IDD round-up

As predicted in our November 2017 Newsletter, the European Commission (EC) has confirmed its proposal to delay the application date for the Insurance Distribution Directive (IDD) to 1 October 2018.

To see the EC announcement, click here.

The FCA has issued the second and third of its Policy Statements regarding the rule changes needed to implement the IDD. Most of the proposals in its consultation papers are being adopted. In its latest paper, the FCA acknowledges the delay to the application date but it states that firms can choose to comply with the IDD before 1 October 2018, if they wish to do so.

To see the FCA’s second IDD Policy Statement (PS17/27), click here and for the third Policy Statement (PS18/1), click here.

HM Treasury has also published a summary of the responses it received to its own (February 2017) consultation paper on the transposition of the IDD into UK law. The most notable changes will be the extension of the ‘connected contracts’ exemption to include products covering ‘non-use of services’ and an exclusion from regulation of firms which merely provide information in relation to insurance products or potential policyholders (i.e. pure introducers).

To see HM Treasury’s consultation response paper, click here.

FCA consults on widening access to FOS

The FCA has launched a consultation on plans to give more small businesses access to the Financial Ombudsman Service (FOS). This follows a review of the protections available to small and medium-sized enterprises (SMEs) as users of financial services.

The proposal, set out in consultation paper CP18/3, is to widen the definition of an Eligible Complainant to include businesses with fewer than 50 employees, an annual turnover below £6.5m and an annual balance sheet below £5m.

The FCA is asking for responses to its consultation by 22 April 2018 and intends to publish a Policy Statement, with final rules, in summer 2018.

For more information, click here.

SMCR – FCA consults on transitioning arrangements

The FCA has issued two further consultation papers (CP17/40 and CP17/42) on the new Senior Managers & Certification Regime (SMCR) which is due to apply to insurance intermediaries from a date to be announced in 2019.

CP17/40 explains that, for the majority of FCA-authorised firms, it is proposed to automatically convert individuals from the Approved Persons Regime to the SMCR. The paper also explains that the FCA does not have any powers to make changes to the regime in respect of Appointed Representatives, where Approved Person requirements will continue to apply. CP17/42 consults on extending the ‘Duty of Responsibility’ to insurers and FCA solo-regulated firms.

The consultation period for both papers ends on 21 February 2018 and final rules are expected to be published in summer 2018.

For more information, click here.

Whilst the SMCR for insurers (CP17/41) also remains under consultation until 21 February 2018, the FCA has confirmed that the new regime will apply to insurers from 10 December 2018. This follows a recent directive from HM Treasury.

For more information, click here.

Data Protection Bill – new basis for processing ‘sensitive’ personal data

An amendment to Schedule 1 of the Data Protection Bill has been passed by the House of Lords, bringing with it a new ground to process selected types of Special Category Personal Data, including health and criminal conviction data. This is subject to the processing being ‘necessary for an insurance purpose’. It is expected that the new ground will be included in the new Data Protection Act, which could receive royal assent in March 2018.

A link to the Data Protection Bill, as amended by the House of Lords, is available here.

Lloyd’s unveils new process for updating coverholder information

Following market consultation aimed at improving its ongoing oversight of coverholders, Lloyd’s has launched a new risk-based annual process for ensuring that core compliance information required from coverholders remains up to date on ATLAS.

The new process is designed to reduce duplicative requests for information from coverholders and to reduce pressure from due diligence requests at the renewal of binding authority contracts.

For more details, click here.

Enforcement round-up

The FCA has demonstrated the importance it places on firms’ compliance with CASS rules by fining One Call Insurance Services Ltd £684,000, and the director responsible for CASS compliance £468,600, for failing to ensure that it was complying with the risk transfer requirements of its TOBAs with insurers, and therefore also failing to protect clients’ premiums properly. As an additional punitive measure, the FCA has imposed a 121-day ban on the firm charging renewal fees to its customers, which it is estimated will cost it an additional £4.6 million.

For more information, click here.

The regulator has also levied a substantial fine (over £4m) on Bluefin Insurance Services Ltd for its failure to treat customers fairly. During the period 2011-2014 it was held that Bluefin misled some customers into believing it was providing an independent broking service when in reality it was focusing on increasing the business placed with its insurer parent, Axa. Bluefin was also found to have had inadequate systems and controls to manage the conflict and the FCA’s Final Notice clarifies the regulator’s expectations in circumstances where a broker is incentivised to place business with a particular insurer.

For more information, click here.

The Information Commissioner’s Office (ICO) has brought charges against loss adjusters Woodgate & Clark Ltd for breaching the Data Protection Act. The firm was found to have unlawfully disclosed personal data which had been obtained illegally by senior employees and private investigators. A fine of £50,000 plus £20,000 costs was levied on the firm, with the individuals involved being fined a combined total of £135,000 plus costs of £62,500.

For more information, click here.

FSCS round-up

The Financial Services Compensation Scheme (FSCS) has stated its intention to change the levy year for FSCS fees (which currently runs from 1 July) to align with the financial year. The FCA has issued a consultation paper (CP18/1) on this proposed change, for which responses are required by 5 February 2018.

To read the FCA consultation paper, click here.

The FCA has also issued a joint Consultation Paper (CP18/2) with the Prudential Regulation Authority (PRA) on the FSCS Management Expenses Levy Limit (MELL). The amount being consulted on for 2018/19 is £77.66m and the consultation closes on 16 February 2018.

For more details, click here.

UK Corporate Governance Code consultation

The Financial Reporting Council (FRC) has launched a consultation with the aim of reviewing the UK Corporate Governance Code, which has been providing a reference point for corporate governance since 1992. The consultation period ends on 28 February 2018.

For more information, click here.

PRA plans to let EU insurers operate in the UK after Brexit

The PRA is consulting on allowing European insurers currently operating in the UK to continue to do so after Brexit. The consultation period ends on 28 February 2018.

For more information, click here.

FCA announces new dates for general insurance ‘live and local’ events

The FCA has announced new dates and venues for the following ‘live and local’ events across the UK which are aimed specifically at general insurance firms:

A two hour interactive workshop: Working to prevent harm – a general insurance focus A 90-minute ‘Q&A roundtable’ with FCA and an industry panel

Online registration is required for each event. More regional dates and locations will be announced in the coming months.

For more information, click here.

FOS issues new case studies for travel insurance complaints

The latest issue of Ombudsman News features a number of case studies on complaints about travel insurance claims. These include issues arising from alcohol consumption, holiday cancellation conditions, hazardous activities exclusions and problems with recovering the full cost of hospital treatment. The publication also includes a summary of complaints data in general for the last quarter of 2017.

For more information, 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.