Insurance Distribution Directive now transposed into UK law

The Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order is now in force, and its requirements will apply to firms from 1 October 2018. The Financial Conduct Authority (FCA) has also made changes to its handbook (10-page / 185KB PDF) to account for the new regime, which will come fully into force on the same date.

The EU's Insurance Distribution Directive (IDD) revises and updates the EU's framework for regulating insurance brokers, agents and other intermediaries, which is currently contained in the 2002 Insurance Mediation Directive. Member states have until 1 July 2018 to make the necessary changes to their own national laws, postponed from 23 February 2018 to reflect a delay to the entry into force of the news regime.

Among the main changes to be introduced by the IDD are the extension of distribution rules to direct sales by insurers and reinsurers; the introduction of new product oversight and governance rules; and the enhancement of product rules for insurance-based investment products (IBIPs), such as insurance bonds and endowment policies.

The extent to which the new rules will apply to a particular firm will depend on the nature of the product sold and whether they are "distributing" the product by marketing, selling or advising to customers; or whether they are simply performing the role of "manufacturer" by designing the product and establishing the distribution channels. Although some rules apply to both manufacturers and distributors, many apply only to insurance distributors.

The FCA's handbook changes include transitional provisions on early compliance with the IDD requirements, which came into force immediately. These provisions "recognise that firms may be in a position to comply with the IDD early" due to its delayed introduction, and confirms that firms may adopt some, or all, of the new requirements early if they choose to do so.