Ten Things to Know about The Insurance Distribution Regulations (IDR)
The Insurance Distribution Regulations (IDR) is the piece of legislation that transposed the EU’s Insurance Distribution Directive (IDD) in Ireland. It was signed into law on 27th June, 2018 by the Minister for Finance and became effective on October 1st. The IDD is a further step in ensuring an open and transparent insurance market.
The IDR replaces the Insurance Mediation Regulations (IMR) that had been in place since 2002 and, unlike the IMR which applied only to brokers and other insurance intermediaries, the IDR applies to all distributors of insurance including the insurance companies who sell directly to consumers.
The definition of Insurance Distribution is very broad, meaning that the IDR governs not only the sale and administration of insurance policies but also those who advise on insurance products when the purpose of the advice is to assist consumers in the conclusion an insurance contract. This means the IDR also takes in certain price comparison websites and apps – those that present the consumer with a range of selection criteria and then, directly or indirectly, allow them to conclude an insurance contract.
The scope of the IDR includes a class of insurance providers described as ‘ancillary’ insurance intermediaries. This surprisingly large group is made up of companies whose principal business activity is something other than insurance distribution and it includes retailers, solicitors, dentists, motor dealerships, banks and travel agencies, among others. These organisations are subject to the requirements of the IDR when certain conditions are met. Certain others must be imposed on them by the insurance company on whose behalf they are carrying out insurance distribution activities.
Under the IDR, insurance distributors must ensure that their personnel, including management, who are involved in or responsible for insurance distribution must carry out at least 15 hours of professional training or development each year that is tailored to their role and to the types of insurance products they work with.
IDR’s Regulation 20(3) sets out the Minimum Professional Knowledge and Competence Requirements for those involved in or responsible for the distribution of (i) Non-Life policies; (ii) Insurance-based investment products (IBIPs) and; (iii) Life Insurance.
The IDR aims to improve customer protection through measures that will allow consumers to make informed decisions about whether or not a policy suits their needs. Before entering into a non-life insurance contract (motor, home, travel, etc.), consumers must be given an Insurance Product Information Document (IPID) that tells them exactly what the policy does and does not cover, as well as any restrictions on the cover such as excesses or other limits. It must state where, geographically, the policy cover applies, and the policy holder’s obligations in relation to the insurance contract. The IPID must also state how and when consumers can pay for the policy, when cover begins and ends, and how they may cancel the contract.
Sometimes referred to as the MiFID of insurance, the IDD (and thereby the IDR) requirements include disclosures in relation to IPIDs and bundled products, with additional requirements around product oversight and guidance.
As well as disclosures about products, the IDR brought stricter disclosure requirements around conflicts of interest and remuneration. Insurance distributors must inform consumers about when in the business transaction they are acting on the consumer’s behalf and when they are acting for the insurance company. They must also give the consumer information on how the organisation is being remunerated or otherwise rewarded for selling insurance products.
The IDR calls for a minimum level of cover for an organisation’s Professional Indemnity insurance. Although originally set at €1,250,000 per claim and €1,850,000 in aggregate, following a technical review by EIOPA the levels were increased in line with changes in the European Consumer Price Index and now stand at €1,300,380 per claim and €1,924,560 in aggregate.