20 Things an Insurance Broker Needs to Think About

As we near the end of 2018 – a year that has brought change through GDPR and the IDD - I thought it might be an idea to collate a list of all the rules, regulations and legislation an insurance broker has to think about at the moment.

  1. Criminal Finances Act – Brokers need to be vigilant about tax evasion from staff and clients, so training and financial crime process reviews are needed.
  1. GDPR – New audits of data, privacy statements, review of all processes where data is involved, HR issues when dealing with staff data, training in the new regime, how to handle subject access requests and rights to be forgotten. New policies and procedures.
  1. IDD – Came into force 1 October 2018, resulting in the need for additional training, complete review of all policies and procedures, new Product Oversight where schemes are involved, new disclosure et al… The European Insurance and Occupational Pensions Authority (EIOPA) has to produce a report in 2020 to set out the effectiveness of IDD, so expect some FCA work around this area with insurance brokers.
  1. Financial Ombudsman Service (FOS) changes – From 1 April 2019, the ombudsman’s services are being extended to small and medium enterprises (SMEs). The limit for compensation awards will also be increasing. These changes will result in the need to alter complaints processes, TOBAs and website information as well as training for all staff.
  1. Brexit – This will have a potential impact on clients overseas (passporting) with a knock-on effect for broker clients where trade may be affected, reducing buying power for insurance and reduced t/o and limits. This may affect the broker’s income. Another consideration is the potential requirement for Green Cards when driving in the EU.
  1. SMCR (December 2019) – New procedures for Approved Persons, new codes, for all staff, deciding who is to be certified, new HR/Recruitment processes, increased training needs, new documents for responsibilities.
  1. Fair Pricing Review – This could have a substantial impact on those firms which are involved in pricing, plus knock-on effect of Product Governance requirements.
  1. Wholesale Markets Review (Q1 2019) – This could have an impact on how firms approach wholesale activity with possible new regulatory requirements.
  1. Driverless cars – Will there be an impact soon? How near are these for general release? The result might be a significant change in insurance practice and pricing, which will bring new risks.
  1. Overseas/unrated/weaker insurers – Insurance brokers need to ensure that they have ‘upped their game’ on due diligence and client information. PI insurers, as well as the FCA, are being very inquisitive about their use and what insurance brokers are telling clients in terms of warnings and explanations.
  1. Management of ARs – Firms need to have a full review to ensure that ARs are managed robustly, so there needs to be a full review of processes and management.
  1. Business and Succession Planning – Many firms are still woefully unprepared and they need to devote much more time and effort to ensure that they have a sustainable and viable business model (Threshold Condition 5)
  1. Creditworthiness – Whilst not a direct requirement, it sits with vulnerable customers and firms will be expected to be aware of any issues when taking into account premium finance arrangements or insurer direct debits. The matter of vulnerable customers should see more  FCA focus in 2019.
  1. Renewal Transparency – There has been recent FCA focus on firms that are not following renewal transparency rules, suggesting that this has not been fully bought into by some and could bring extra FCA scrutiny.
  1. Cyber – There are still a significant number of firms who have not fully thought this through and, given FCA focus, it may lead to more work for them. Cybersecurity is not just about hacking and external threats - how safe are your internal controls?
  1. Training and Supervision – Whilst always a key area, the IDD and the requirements of the SM&CR put added emphasis and pressure on insurance brokers to step up training, recording and competence.
  1. Due Diligence – A subject which sometimes seems to catch insurance brokers by surprise. It’s not just about M&A activity but looking at their markets - not just overseas or weaker partners - but wholesalers and also introducers (including AR/IAR relationships). Still much work to be done.
  1. Whistleblowing – Whilst all firms should maintain comprehensive processes and regular training, doing so will become increasingly important. The FCA has announced that they are taking a tough stance against sexual misconduct and have stated that their ‘rules are clear that so called 'gagging orders' do not affect an individual's ability to 'blow the whistle' by making a disclosure to the FCA.’ Given the current climate around this topic, this may be a significant development and reinforces the need for strong HR cultures and processes.
  1. Client Money – The sector is starting to see more robust work from accountants when doing CASS audits following FRS changes in guidelines in 2016. This may mean more interaction from accountants which means more work and higher costs with more questioning for money procedures, so it is more important than ever to ensure all is in order.
  1. Guaranteed Asset Protection (GAP) Insurance rules are to be reviewed in 2019, which may mean some thematic work by the regulator.

And a few more Acts which may not have been mentioned:

  • The Money Laundering, Terrorist Financing and Transfer of Funds Regulation 2017
  • The Money Laundering Regulations 2017
  • 5th and 6th AML Directives to be published this quarter
  • Crime and Courts Act 2013
  • The Serious Crime Act 2015
  • Anti-Terrorism Crime and Security Act 2001
  • Terrorism Act 2006
  • Terrorism Act 2000
  • Proceeds of Crime Act 2002 (Amendment) Regulations 2007
  • Northern Ireland (Emergency Provisions) Act
  • Terrorist Asset-Freezing Etc. Act 2010
  • Small Business, Enterprise and Employment Act 2015
  • Computer Misuse Act 1990

This article is not an exhaustive list of all issues on the regulatory landscape, but it does serve as an overview of current issues and what we can reasonably expect to see more focus on as we move into 2019.

About the author

Robin Wood founded RWA in 1992. He is an acknowledged Expert on insurance broker's duties and Conduct Standards and Risk Management and has been an Expert to the courts on a number of reported cases including ​Environcom v Miles Smith, The Café De Lecq case and Eurokey v Giles.

Robin is happy to advise anyone who wants to know how to meet good and reasonable standards of conduct and behaviour whether that be a sole trader or a regulator. Robin has written a number of important guide books on topics such as Training & Competence, The Duty of an Insurance Broker, The Insurance Act and Professional Standards of Insurance Brokers. A regular speaker at industry conference events and Masterclasses, Robin is an engaging presenter who is known for filling a room and providing a challenging and effective delivery. He is a Member of the Expert Witness Institute.

Robin Wood

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