Insurance Distribution Directive implementation delay – UK Government announcement

Insurance Distribution Directive implementation delay – UK Government announcement
The European Commission has proposed to delay the application date of the Insurance Distribution Directive to 01 October 2018. This proposal is currently under consideration by the European Parliament and European Council. In order to provide certainty for industry, government will delay making the “The Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order 2018” until the outcome of this proposal has been confirmed. This is expected to be after 23 February 2018, the original application date of the directive.
When the Order comes into force, the Financial Conduct Authority (FCA) will be able to finalise their rules. Firms will then be required to comply with those rules from whatever date is ultimately agreed as the application date of the directive. Under the current proposal from the Commission this date would be 1 October 2018.

New accountability rules for insurers to start in December
The Treasury has announced that the Senior Managers and Certification Regime, first introduced for banks and building societies in 2016, will be extended to include insurance firms from 10 December 2018. The FCA is also consulting on how the Regime will apply when it is extended to include smaller firms regulated only by the FCA. The announcement said; “The new rules will give consumers peace of mind that those at the top of the big insurers will be held personally responsible for any wrongdoing. The rules will also ensure that a code of conduct is set out for all staff, and that employees who do a job where they could do significant harm to consumers, or to the UK’s financial stability, are approved annually by their firm.” The regime for solo regulated firms (including insurance brokers) is now due to commence from mid-to-late 2019.

FCA consults on widening access to the Financial Ombudsman Service
The FCA has launched a consultation on plans to give more small businesses access to the Financial Ombudsman Service. This follows a review of the protections available to small and medium sized enterprises (SMEs) as users of financial services. At the moment only individual consumers and around 5.5 million micro-enterprises (the smallest type of business) can access the Ombudsman if they have a dispute with a financial services firm. Businesses that cannot access the Ombudsman would need to take the firm to court. However, the FCA believes that many smaller businesses within this group struggle to do so in practice. Under the changes proposed by the FCA, approximately 160,000 additional SMEs, charities and trusts would be able to refer complaints to the Ombudsman. The FCA also proposes to extend eligibility to personal guarantors of corporate loans, provided the borrowing business also meets the eligibility criteria.

Compensation scheme to levy financial services firms £336m in 2018/19
The Financial Services Compensation Scheme (FSCS) has issued its Plan and Budget for 2018/19. In order to align the levy with its financial year, the forecasts for next year cover the nine months from 1 July 2018 to 31 March 2019. A new single outsource partner will be appointed to handle the majority of FSCS claims in its 2018/19 plans. The new single partner will be announced shortly. The indicated overall levy is £336m, for the nine months, up from £320m in 2017/18 (which covered 12 months). The proportion due from the general insurance mediation class is £23m for 2018/19 compared to last year’s £18m for a twelve month period. Management expenses for the nine months are budgeted at £72.7m, up from £69.2m for the previous whole year.

FCA 2018 survey of regulated firms
A random sample of 12,000 firms is being invited to take part in the 2018 joint FCA and Practitioner Panel survey. Firms may receive an email from Kantar Public inviting them to take part. Kantar Public is an independent social research organisation, carrying out the survey on behalf of the regulator. The views expressed will be valuable in helping to shape the FCA’s approach. The results are presented to the Practitioner Panel and the FCA Board and will be published in the third quarter of 2018. They give the FCA Board and Executive valuable feedback on how the organisation is performing and how it can improve. Last year’s survey highlighted several key areas for improvement and the FCA is committed to addressing all these areas.