Posted: 14th November 2018

The deadline for implementation of the Insurance Distribution Directive (IDD) has come and gone with some fanfare, but questions remain around some of the requirements within the regulation.

The onus is now on insurance firms and their professionals to prove they have the necessary knowledge, skills and attitude to work toward the best interest of their customers. Central to all of this is a requirement for those working in insurance distribution to undertake at least 15 hours of Continuing Professional Development (CPD) per year.

The intention is positive, of course. Ensuring that those responsible for the delivery and distribution of insurance products are appropriately upskilled to handle the complex demands of today’s markets certainly makes sense. The exact requirements of this, however, can be confusing on the surface level. Let’s take a look at the requirements, break them down, and discover what is really involved.

What are the requirements?

The IDD cover all General Insurance, protection and insurance-based investment products. 

While each of these insurer categories has its owns list of competency requirements, for general insurance products, firms should expect to develop their staff on:

  • The products being sold
  • Customer needs
  • Complaints and claims handling
  • The state of the market
  • Applicable laws and regulation
  • Business ethics standards
  • Financial competence

It should be noted that the 15 hours required by IDD will be counted as part of the 35 hours of CPD required from ‘Cert or Above’ qualified members of the Chartered Insurance Institute and comply with the rules and guidance in the FCA Training and Competence sourcebook (TC).

Who is under the scope of the requirement?

The impact is bound to be wide and far-reaching, covering insurers, insurance brokers, price comparison websites and some firms where distribution of insurance products is not their primary professional activity, for example, motor vehicle dealers.

The CPD requirement covers employees that are:

  1. Directly involved in the carrying on of the firm’s insurance distribution activities,
  2. Within the management structure responsible for the firm’s insurance distribution activities, or
  3. Responsible for the supervision of a relevant employee acting in the capacity as set out in (1).

It also covers contractors and appointed representatives. Firms, therefore, have a responsibility for the appropriate knowledge and ability of these types of employees as well as their permanent staff. They need to ensure that they are able to complete their tasks and perform their duties adequately.

Questions remain

While the FCA has attempted to make the requirements for CPD within IDD as clear as possible, it is likely that firms will still have a number of burning questions and issues to resolve.

For example, how will responsibility and accountability for this be shared, and how does this align with the responsibilities under the Senior Managers and Certification Regime? Who is responsible if a member of a team fails to complete their 15 hours?

Furthermore, those in ‘grey areas’ – such as ‘introducers’ who direct people to sales teams or distribute marketing collateral – need a fair bit more clarity on just whether or not they will be subject to the requirement.

How to support and manage CPD

CPD undertaken as part of IDD should not be designed with a ‘one-size fits all’ approach. We’ve already noted the wide variety of roles and responsibilities covered by the requirement, so it will be vital to provide bespoke development relevant to job role and experience and enable learners to own their individual development plan. Luckily, there is a vast variety of material out in the world already through which insurance professionals can undertake their CPD.

The 15 hours don’t necessarily need to be taken up entirely by structured learning. Time spent reading and researching the various regulatory topics outline in IDD could count towards the CPD minimum. Other unstructured development activities, such as attending events, lectures and mentoring sessions also count as CPD, but it is up to the firm to determine how they will track, approve and evidence this should the regulator come knocking.

Management information needs to be accessible for evidencing purposes, preferably through some form of digital management dashboard that tracks achievement of CPD hours. Learning management systems (LMS) exist that allow for this, and utilising one could be a great way of managing, monitoring and reporting development activities to the regulator.

Smaller firms (brokers, for example) may not have the in-house learning and development capabilities or learning systems to manage the development requirement appropriately. A sudden rush to reach the requirements before the end of the firm-designated 12-month period, or mismanaged reporting of CPD could lead to a blow-out in costs for the unprepared firm.

Some firms may find it beneficial to contract learning experts to manage the development, monitoring and reporting aspects of the IDD. The very best learning and development programme will be delivered through modern and engaging methods – such as video, simulation and real-life scenario roleplay – that these experts specialise in.

The benefits of CPD

This new regulation offers firms a way to look at employee development in a new light. It shouldn’t be seen as an added burden but, instead, a chance to make high-performing teams even better. The requirement will ensure that staff are continuously upskilling, with the aim of providing better outcomes for their customers and a safer, more effective market in general. Communicating the benefits of CPD internally in this way will also build energy and positivity in the learners themselves.

Firms that find creative ways to enable learners to own their development journey, while making it easy and painless to track and monitor this journey, will be well placed to turn the CPD requirement into a critical element of their success.

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