IPID and its impact on the UK insurance industry

23rd November 2017

With Brexit on the cards you may not want to pay close attention with what happens in or comes out of the European Union. However, there is regulation coming into force next year that you would need to implement (or take note of), depending of course on your position within the insurance industry.

I’m referring specifically to the Insurance Distribution Directive (IDD) and the rules for the Insurance Product Information Document (IPID), which stems from the IDD. The IDD will come into force in early 2018 and is designed to ensure a level playing field for all insurance product providers in the EU – that includes the UK.

Meanwhile, the IPID has been introduced to standardize information about non-life insurance products, such as motor, travel or home contents insurance. It means that customers will have the ability to compare apples with apples as they peruse a (at most) two to three-page summary about the product, which has to be laid out in a concise and simple Q&A (questions and answer) format.

It will enable consumers to compare products and familiarise themselves with the product’s main benefits and pitfalls before they make any decisions. However, the IPID will not replace contractual documentation that is provided with an insurance policy – that customers will still be able to scour through. That’s if they want to – but unfortunately many don’t.

Essentially, IPID is the answer for those who’ve always struggled with insurance industry jargon or who have found comparing products to be a nightmare. Overall, it should be good for the industry as well as the retail customer. As Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (EIOPA) pointed out earlier this year: “Consumers who typically might not read lengthy pre-contractual information, will now be empowered to compare different non-life insurance products and to make informed decisions.”

While it’s the manufacturer of the non-life product who has to concern themselves with drawing up the IPID if you’re a broker it will still pay to keep abreast of the changes that will come into force in February next year. The British Insurance Brokers’ Association have told SchemeServe that they will be issuing some guidance on the whole of the IDD early in the new year – so look out for it.

The IDD and the IPID are not the only pieces of legislation that the industry needs to prepare for. There’s the EU’s Packaged Retail and Insurance-based Investment Products (Priips) regulation and the Markets in Financial Instruments Directive (Mifid II) to contend with as well.

If you find you’re falling behind with IPID the British Insurance Broker’s Association (BIBA) points to the European Commission which published its Implementing Regulation in August 2017 – which provides the layout, headings and icons that must be used within IPIDS. “Firms could not do better than to use the content of the Implementing regulation as their guide,” says David Sparks, head of compliance at BIBA.

While we may grumble about new regulation that will affect the way in which we transact with our customers, these rules (while cumbersome) are generally there to improve our industry, get rid of the rot and protect consumers. If the insurance industry didn’t evolve or improve its standards we stand the chance of undermining our own worth and offerings and lose the respect of customers in the process.

Why wouldn’t we want a better informed customer who asks the right questions? It will go a long way in preventing some of the more common mistakes or chances of mis-selling. It’s a pity that something like this wasn’t in place before the collapse of Monarch, for instance. Perhaps we would’ve had fewer stranded British holiday makers!



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