Insurance: New rules
A new compliance role for many law firms goes live today, with an insurance distribution officer required for those that advise clients on insurance policies.
The Solicitors Regulation Authority (SRA) has today published rules [1] and guidance [2] for dealing with the new Insurance Distribution Directive (IDD) – on the day they come into force.
It affects those who sell, advise on or conclude insurance contracts.
The regulator said firms working in personal injury, conveyancing or probate were most likely to be affected, because they might arrange an after-the-event or defective title insurance for clients, for example.
The SRA has had to make these changes as the IDD replaces the Insurance Mediation Directive and deals with issues such as conflicts of interest and commissions.
As the SRA is a designated professional body, those it regulates are able to carry out a limited range of financial services activities without needing to be regulated by the Financial Conduct Authority (FCA) as well, subject to specific rules.
But the SRA guidance suggests using the FCA’s requirements as a starting point for firms to make sure that all staff involved in insurance distribution activities have the appropriate knowledge and competence.
The FCA says firms should have the necessary knowledge of, for example, the terms and conditions of policies offered, laws covering the distribution of insurance products, claims and complaints handling requirements, and how to assess a customer’s needs.
The IDD requires considerable transparency to clients, including the nature and basis of any remuneration the firm receives in relation to the insurance contract.
The SRA guidance says: “You should carefully consider how information is made meaningful to your clients and at which point in the process of arranging insurance the information will be most useful to the client. This is so that they can make an informed decision.
“When providing information to your client to you will need to make sure that it is in a durable medium and in a way that is fair, clear and not misleading.”
Chief executive Paul Philip said: “Our changes meet the requirements of the new directive without putting unnecessary burdens on firms. For example, in many areas, our code of conduct already covers what is needed.
“It’s important that firms make sure they are up to date with the revised requirements so that they can provide a proper service to their clients.”