One of the more significant changes introduced by the IDD is the removal of requirements to regulate certain activities which are required under the Insurance Mediation Directive (IMD).
The IDD removes the requirement for firms to be authorised where they only pass on the contact information of potential customers to insurance brokers for advice/information on insurance products and the IAR is not involved in any further steps of the advice/sales process. A restriction on IARs with which we are all familiar.
This restricted introducing will become an exempt activity under the new article 33B of the Regulated Activities Order (RAO).
The impact of this change is that in many circumstances, firms that may have needed to be registered as IARs under IMD will no longer need to do so under the IDD. Instead, these firms can become 'ordinary' introducers excluded from regulation by virtue of the new article 33B.
However, any firms that currently have IARs or are considering taking on introducers for insurance business will need to be mindful that they do no more than pass on contact information otherwise their activities may fall back within the scope of regulation.
Examples of activities that would go beyond un-authorised introducing for insurance contracts under the newly introduced exemption would include:-
- Actively persuading customers to refer to another firm that can provide insurance advice/arranging services
- Providing more than just basic name and contact details to the firm being introduced to including:-
- If an introducing firm gathers further information on the customer on behalf of the firm being introduced to - particularly evaluative information that could help the authorised firm with their fact-finding – then this will go beyond the exemption e.g. pre-purchase questioning that identifies particular insurance needs, so that would include risk details or renewal information.
- Helping a customer complete a proposal form that it sends on to an insurance provider
- Helping a customer make a claim
It should be noted that the FCA's existing guidance to determine whether a firm is conducting insurance distribution activities under 'The By Way Of Business Test' will still apply and therefore could be a deciding factor when considering if a firm is conducting authorised activities. This can be found in the Perimeter Guidance Manual -PERG 5.4.
If an introducing firm is dependent on insurance distribution activity for its existence this will increase the case for requiring authorisation (or exemption as an AR / IAR) taking into consideration the activities they undertake.
So, for firms whose main business activity is to source insurance leads for intermediaries, they would unlikely be able to claim the exemption under article 33B.
This does not mean an introducing firm cannot be paid for introductions. Introducing firms can receive payment for introductions and qualify for the exemption under article 33B. However, such firms will need to consider all of the tests relating to exemption from authorisation.
The above is a summary of the requirements; firms considering whether an introducer’s insurance activities may or may not fall within scope of a regulated activity should consider chapter 5 of the FCA's Perimeter Guidance in full and should discuss this with their RWA Business Manager if they have any questions.
At this stage, it is not clear if firms who have existing IARs need to take any action to remove these from the Financial Services Register; FCA guidance is awaited.
Finally, a reminder, the changes above DO NOT apply until 1 October 2018.
Any firm looking at appointing an IAR must still do so via the usual FCA application process after appropriate due diligence.