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News & opinion

28 AUG 2018

New DPB scheme rules become applicable on 1 October 2018 – are you ready?

We would like to remind all DPB Licensed firms that the new rules and accompanying guidance for the Designated Professional Body (DPB) scheme, published on 1 July 2018, will apply as from 1 October 2018.

Explore the new DPB rules and accompanying guidance

All professionals engaged in insurance distribution activities are strongly encouraged to read these rules and their accompanying guidance carefully. It is important to understand and have thorough, detailed knowledge of both documents.

The scheme enables us to regulate our firms for general insurance distribution activities, on behalf of the UK Financial Conduct Authority (FCA).

These new rules are necessary to ensure our scheme complies with new requirements set out in the EU’s Insurance Distribution Directive (IDD) and the Markets in Financial Instruments Directive. These Directives are being implemented by the FCA. Only by amending our rules accordingly, are we able to keep offering our regulatory services to firms undertaking general insurance distribution activities.

Please note that we have recently further clarified requirements in relation to the Insurance Product Information Document (IPID) for requirements for DPB firms. This is to clarify that commercial clients do not require an IPID. This clarification is made to better reflect the FCA requirements, however it does not mean that there should be a lower standard of information to commercial customers. The changes are made to provide greater flexibility to target and customise information for commercial clients. Commercial clients will still be required to receive appropriate product information.

What are the key changes?

Some important changes that DPB Licensed firms should note include:

Increase in Professional Indemnity Insurance (PII) cover

The minimal PII cover for DPB Licensed firms is to be increased to €1.25M for single cases and €1.85M for the annual aggregate. This applies when the policy is taken out, renewed or extended.

New Insurance Product Information Document (IPID) requirements

DPB Licensed firms will also be required to obtain and provide their customer clients with an IPID. An IPID must be produced by the manufacturer of the insurance product. The firm will be required to issue the IPID together with the demands and needs statement (DNS) which must be presented to the client before the placement of the insurance. Whatever the proposed contract, under the IDD this must be consistent with the demands and needs indicated by the customer in its DNS.

Firms dealing with a commercial customer:

  • may choose to provide some of or all of the appropriate information in an IPID, a policy summary or a similar summary if it considers this to be a comprehensible form in which to provide that information; and
  • should include the IPID information (regardless of whether an IPID itself is provided).

Professional training and development requirement

Whilst DPB Licensed firms are not required to fulfill the 15-hour CPD requirement due to their status of Ancillary Insurance Intermediaries, in line with Rule 6 of the RICS Rules of Conduct for firms, you will nevertheless need to ensure that relevant staff undertake professional training and development every year relating to the undertaking of insurance distribution activities. DPB Licensed Firms are required to confirm their compliance with these requirements annually, and can be asked to provide evidence, if needed.

Cross-selling requirement

The new DPB scheme rules also provide that when an insurance product is complementing another good or service which is not insurance, as part of a package or as part of the same agreement to the same Client, a DPB Licensed firm must inform the Client about the possibility of buying the different components separately.

Furthermore, the obligation to inform Clients about commission received still holds. While this is not a new requirement in the rules, it is imperative that firms continue to account to Clients for all fees, commission and other benefits obtained through general insurance distribution activity. The Client must be informed in writing about the commission, which must be remitted to the Client, and only if the Client gives informed consent, in writing, allowing the firm to retain that amount of commission, can the firm keep the commission received.

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For more information

If you have any questions, please contact Jonathan Gorvin, Head of Regulatory Policy and Development.