Schemes and the Insurance Distribution Directive (IDD)
28 November 2018
We take the opportunity to look at the impact of IDD on scheme creation and distribution.
What is PROD 4?
Practical steps schemes brokers can take
- Check you comply with the customer best interest rule.
- Assess whether the product remains consistent with the needs of the identified target market and whether the intended distribution strategy remains appropriate, including taking account of any direct distribution.
- Review processes to make sure product design takes account of:
- the interests and characteristics of customers
- the customer, make sure it doesn’t adversely affect customers and prevents or mitigates consumer detriment.
Make sure you have the following covered
- general matters
- product approval process
- product testing
- oversight of distribution channels
- monitoring and review of products
- additional expectations.
- Draft a written agreement (as required by PROD 4.2.1R) defining the firm’s role in product manufacture and facilitate the agreeing of such role and responsibilities with product providers (this should already happen).
- Implement a system that ensures distributors have the necessary knowledge, experience or competence to understand the product and the target market (e.g. wholesaling or sub-broking). They must undertake to comply with other rules such as the new requirements of SYSC, general conduct and ICOBS, and show they have the knowledge required.
Eight areas to demonstrate knowledge
- minimum knowledge of terms and conditions of policies offered
- minimum knowledge of applicable laws
- minimum knowledge of claims handling
- minimum knowledge of assessing customer needs
- minimum knowledge of the insurance market
- minimum knowledge of business ethics standards
- minimum knowledge of financial competence
- minimum knowledge of complaints handling.