IDD delay good news for industry as majority of brokers underprepared

The decision to delay the application of the Insurance Distribution Directive (IDD) is good news for brokers as research from Ecclesiastical Insurance reveals that two thirds (66%) have very little or no knowledge of the impending changes.

Despite 69% of brokers saying they were aware of the new legislation, which replaces and updates the Insurance Mediation Directive and the General Insurance Directive, only 27% felt well informed and just 7% confirmed they knew everything they needed to.

The survey also revealed a difference between smaller provincial brokers and national brokers. Over a third (35%) of smaller provisional brokers said they felt well informed or knew everything they needed to compared to just 25% of national brokers. This is perhaps unsurprising as half (52%) of smaller brokers said they had already received training to prepare for IDD while just 35% of national brokers had received any training.

The majority (61%) of brokers broadly welcomed the new compliance requirements, however others raised concerns regarding the impact the IDD will have on their businesses. Around a third (30%) of brokers were concerned that the IDD will have a negative impact on profitability, while the impact on growth and customer relationships were also highlighted as potential negative impacts.

In most instances the amount of time needed to implement the changes and the cost were the main reasons brokers felt IDD would have a negative impact. However, of the 15% that felt there would be a negative impact on customer relationships, 60% believed that the paperwork would be the biggest issue, with customers either not understanding it or not wanting to complete it.

The new legislation will be written into law in February 2018, but, following a proposal from the European Commission, the application date will be delayed until 1 October 2018, giving brokers six months to prepare for the changes.

Chris Withers, broker distribution director at Ecclesiastical said: “With such a significant number of brokers saying that they don’t feel ready for the IDD, the delay to the application of the new regulation will give them more time to get better prepared.”

Key facts: Insurance Distribution Directive (Source: PwC)

The Insurance Distribution Directive (IDD) will replace the Insurance Mediation Directive (IMD) in February 2018. The IDD is a new EU wide directive aimed at ensuring minimum harmonisation of insurance regulation across the EU, creating a 'level playing field' for insurance intermediaries and insurance distribution, regardless of the channel customers use to purchase their products. The aim is to ensure consistent prudential standards for intermediaries as well as significantly raising conduct standards, improving consumer protection and effective competition. The IDD applies to insurers, insurance intermediaries, price comparison websites/aggregators and ancillary insurance intermediaries. The conduct requirements applying to distributors (which includes insurers) vary according to the nature of the business and customer (including commercial clients).

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