The Insurance Distribution Directive (IDD) has been in force in the UK since 1 October 2018, bringing with it certain professional knowledge and competence requirements. As such, we thought it would be useful to focus on the importance of continuing professional development (CPD) and look at what is required under the IDD and the upcoming Senior Managers and Certification Regime (SM&CR).
A minimum of 15 hours CPD is now a regulatory requirement for all staff involved in insurance distribution. But are firms achieving this, and what are the barriers they face in doing so?
CPD is a simple process. It is any learning activity which reinforces, assesses or improves competence, and is in addition to the day-to-day performance of your role. CPD is about continuously striving to improve how you carry out your job and developing the skills and knowledge to do so.
One of the most important aspects of recording CPD – but one that is sometimes forgotten about – is the reflection that goes with it. For a learning activity to be considered CPD, reflecting on what you have learned and achieved is essential.
Reflective statements do not need to be lengthy or onerous. Simply think about what you have learned and how it links to your professional development. Ask yourself: what did I gain from this activity? How will I use my new knowledge and skills in the future?
Don’t be put off by the reflection element of CPD. It can actually benefit your development. By reflecting on your learning, you may discover that you gain more from some activities than others. See reflection as a chance to find out what works best for you.
Time is likely to be a constraint for many. However, when you break it down, 15 hours is a very manageable baseline requirement. Divided up over the course of a year, an hour’s study here or there, will easily add up to the minimum 15 hours. If you consider that the average full-time employee works 7.5 hours per day, 37.5 hours a week, then allocating 15 hours over a 12-month period shouldn’t seem too demanding.
There are eight core knowledge requirements for insurance intermediaries under the IDD. Insurance intermediaries are expected to have:
- minimum necessary knowledge of terms and conditions of policies offered;
- minimum necessary knowledge of applicable laws;
- minimum necessary knowledge of claims handling;
- minimum necessary knowledge of complaints handling;
- minimum necessary knowledge of assessing customer needs;
- minimum necessary knowledge of the insurance market;
- minimum necessary knowledge of business ethics standards;
- minimum necessary financial competence.
Using these requirements as a framework may be useful when recording CPD. Firms could approach their training and development needs by thematically working through each of the above areas throughout the year. This will help them break down their CPD hours into manageable amounts, while also ensuring that their core knowledge requirements are covered off.
With the Senior Managers and Certification Regime (SM&CR) on the horizon, it is worth considering the training requirements this brings. SM&CR introduces two tiers of Conduct Rules: Individual Conduct Rules and Senior Manager Conduct Rules.
The Conduct Rules are “a new set of enforceable rules that set basic standards of good personal conduct.” What is significant about the Conduct Rules, is the increased personal accountability for staff. The aim is to improve standards of individual behaviour in financial services from the top down. The Conduct Rules represent a meaningful change in the standards of conduct expected by the regulator. By applying the Conduct Rules to a broad range of staff, the FCA aims to improve individual accountability and awareness of conduct issues across firms.
Firms are required to train the relevant staff on how the Conduct Rules apply to their role; a Senior Manager is required to be allocated the Prescribed Responsibility for this. Senior Managers and Certification Staff will need to have been trained, and abide by the Conduct Rules from the start of the new regime on 9 December 2019. Firms will then have 12 months to put in place processes to comply with the training and reporting requirements, and train their other staff on the Conduct Rules.
The Conduct Rules will apply to majority of staff within a firm - aside from ancillary staff - because of their potential to cause harm to the firm, its customers or the market.
As you can see, the requirement for firms to record CPD is a key focus for the regulator. Being able to evidence that employees are completing meaningful CPD is essential for firms being able to demonstrate compliance with regulatory requirements.
Firms that have a healthy, proactive attitude to CPD will find themselves in the best possible position for complying with the training requirements under the IDD and SM&CR.