Key Information for General Insurance

On 12 August, implementing technical standards were published in the EU official Journal for the new Insurance Product Information Document (IPID) for general insurance to be introduced under the Insurance Distribution Directive (IDD) which takes effect next year. The standards specify a common design, structure and format to be used by firms when presenting the information required at Article 20(8) of the IDD to allow customers to easily understand and compare product features. The IPID is to be drawn up by the “manufacturer” of a non-life insurance product and provided to customers by distributors.

The IDD is part of a series of measures including MiFID II, the PRIIPS Regulation and UCITS V that aim to improve consumer protection. The IDD may be seen as the equivalent of MiFID for insurance based investments. Appropriately, it takes effect on 23 February 2018, not quite three weeks after MiFID II. The IDD replaces the Insurance Mediation Directive, putting in place new and improved rules on insurance distribution. In contrast to its predecessor, it applies to all distribution channels, including price comparison websites and direct insurers and, on a proportionate basis, to those who sell insurance products on an ancillary basis.

To help consumers compare products, for non-life products, the IDD requires the provision of pre-contractual product information in an insurance product information document, known as the IPID. This will contain the prescribed information in a standardised template, as specified by the standards. The IPID is to be distinguished from the key information document for life insurance and investment-based insurance products under the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs).

While the IDD introduces additional requirements, changes in UK regulation are likely to be modest. Compliance requires in many instances a review of existing business models, a gap analysis against the new rules, followed by appropriate and timely adjustments to sales processes and the repapering of standard documentation, including terms and conditions.

In the UK, the FCA’s Consultation paper CP17/7 discusses some of the issues in relation to implementing the IPID. One of the options discussed is the IPID’s application to commercial customers and the extent to which changes should be made to current product information rules. Now that the Commission’s technical standards are available it is likely that the FCA will consult further on the IPID. Timewise, the FCA expects to publish UK rules transposing the IDD in a Policy Statement this December.

Richard Powell is a professional support lawyer within Baker McKenzie's global financial services group where he is responsible for supporting the group's legal and technical knowledge.