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News & opinion

1 JUL 2018

New rules for the Designated Professional Body scheme

RICS has published new rules for the Designated Professional Body (DPB) scheme.

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.

The new rules will come into effect on 1 October 2018.

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.

Key changes

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.

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 is available from the insurance provider. The firm will be required to issue the IPID together with the Demands and Needs Statement to their clients before the placement of the insurance.

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

While DPB Licensed firms are not required to fulfil the 15-hour CPD requirement due to their status of Ancillary Insurance Intermediaries, firms nevertheless need to ensure that relevant staff undertake professional training and development relating to the undertaking of insurance distribution activities

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. 

Informing clients about commission received

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.