Aspects of particular interest include:
- confirmation of the new 'customer's best interest' rule requiring insurance distributors to act honestly, fairly and professionally in the best interests of their customers. This new rule will extend to all parties in the distribution chain, including wholesale brokers. On concern expressed about the level of contact wholesale brokers would have with customers, the FCA said it "appreciates wholesale intermediaries are not in direct contact with the customer during the sale process and that the application of the new rules to wholesale firms for the sale of individual policies will vary depending on the circumstances and the activities which the firm performs."
- a new rule in the Systems and Control Handbook (SYSC) which will prohibit remuneration and performance management practices that would conflict with the customer’s best interests rule and the FCA says that it will consider publishing guidance on this requirement, which it will announce later in the year, to ensure clarity and consistency across the market.
- confirmation that the Insurance Conduct of Business Sourcebook (ICOBS) be updated to reflect the IDD requirements for intermediaries to disclose the ‘nature and basis’ of remuneration they receive. The FCA has confirmed that firms do not need to make disclosures about the remuneration of other firms in the distribution chain.
- on non-advised sales of insurance products, confirmation that rules around demands and needs statements (which will be required for these types of sales) will apply to price comparison websites carrying on insurance distribution activities in the same way as to other insurance intermediaries. The FCA said: "Price comparison websites are well positioned to ask their customers questions and identify their needs through the answers given" and said that it believes the new rules are compatible with online selling, as long as the right questions are asked.
- on advised sales of insurance products, the regulator has clarified that firms may provide the 'personalised recommendation' to the customer "in any format consistent with the IDD, provided it clearly explains to the customer the recommendation being made and why the product best meets their needs".
- confirmation of new rules around ancillary insurance requiring that customers be able to purchase a good or service without any associated insurance i.e. the insurance product must not be compulsory as part of the purchase. The FCA has confirmed that "firms may continue to offer packages which include insurance, so long as it is possible to purchase the non-insurance elements of the package on the same terms without the insurance". In its consultation, it also confirmed that "insurance which is badged as being free to the customer is included within the new rules. The customer must be offered the ability to purchase the good or service separately to the insurance".
Although the regulator said it was appreciative that the timeline for implementing the new requirements for firms is “challenging”, it was not possible for it to grant any extension to the timeline for implementation. It has made it clear that firms should already have plans in place to ensure they comply with the requirements from 23 February 2018.