Finishing line in sight for the IPID

Branko Bjelobaba, founder of insurance compliance consultancy Branko, says: “While I was having dinner with one of the Brexit ministers, he made it clear that we will be complying with the equivalent of all relevant EU Directives so that anyone doing business with us will know they are dealing with at least equivalent standards.”

So, anyone who ignores the Insurance Distribution Directive, which has to be implemented by member states by February 2018, does so at their peril. An important part of this is the Insurance Product Information Document, or IPID, which aims to offer consumers a summary as a good basis for comparing different non-life products and making an informed purchasing decision. 

Fortunately, most of the noise surrounding the initial proposals for this put out for consultation by the European Insurance and Occupational Pensions Authority last year have subsided since the publication this February of its draft Implementing Technical Standards. The ITS provides a standardised presentation format for the IPID.

Input from Insurance Europe, the Association of British Insurers and other national trade associations has managed to secure significant amendments, such as a more user-friendly Q&A format, a more suitable template for online use and concessions with regard to use of font sizes. 

William Vidonja, head of conduct of business at Insurance Europe, says: “The initial work done by Eiopa presented several concerns. The document put forward at that stage was not suitable for the digital environment or for helping consumers easily understand the information being provided. However, the final draft ITS that Eiopa submitted to the European Commission included several significant changes to address these issues. The IPID document now being proposed would be much more suitable to read on smart devices, has a layered approach to information and uses questions as titles to better engage consumers.

“Nevertheless, despite these positive changes and a general move in the right direction, it is disappointing that the proposed IPID does not include all the pre-contractual information required under Solvency II for the same product, as it would have allowed all relevant information to be provided in a single document. It is also important that the EC adopts the ITS as swiftly as possible to ensure companies have sufficient time to implement the IPID before the IDD transposition deadline in February 2018.”

While there is a precedent for technical standards having been rejected, the consensus view is that the tight implementation deadline involved means that the EC is unlikely to make much change to the ITS template. Although, as always, there are some who still hope for a deadline extension.

“It’s fair to say that the current implementation timescale of February 2018 seems unrealistic, given that the agreed format will not be finalised until September/October 2017,” says Chris Dobson, broker distribution and development director at Ageas. “We’ve then got to create IPIDs for each cover type and software house implementation. For these reasons, it would be good to address our concerns at an industry level.”

But most commentators expect everything to go through within the currently prescribed timeframe, and so expend little energy on hypothesising about how the existing proposals could be amended. There are, however, still unresolved issues such as how optional extensions of cover should be reflected and, most importantly, whether the IPID should be applicable to commercial insurance customers.

Andrew Woolgar, policy adviser, conduct regulation at the ABI, says: “We don’t think the IPID document template is workable for commercial insurance. Eiopa was asked to conduct retail testing, which it understood to be for consumers, but commercial insurance was not clearly excluded. We consistently told Eiopa that if this is relevant to commercial customers, then it needed to test the template but it refused to do this.

“Eiopa’s interpretation is that the decision about commercial must be made at national level but it remains to be seen whether the EC agrees. Our own Financial Conduct Authority could decide not to require the IPID for commercial insurance at all.”      

David Coupe, partner at law firm EC3 Legal, expects the FCA to decide that UK SME commercial insurance business falls into the consumer space but that wider corporate insurance doesn’t: “The FCA has already suggested that SMEs are covered by the Financial Services Compensation Scheme and are, therefore, obviously considered in need of consumer protection. My view is that it will feel they need protecting across the piece, but we won’t really know what’s happening until October when it publishes the results of the CP17/7 consultation paper that it launched on 6 March.”

Come October it may also become clear whether the IPID will actually replace the current UK Key Facts Document requirements. But, even if it does and is considered to represent an improvement, it still won’t address the fundamental age-old problem that many consumers simply don’t read the documentation made available.

“The objective of the IPID is to significantly alter the level of information the customer receives to enable them to make a better decision,” notes Mathew Rutter, partner at international law firm DAC Beachcroft. “But if someone who wants to buy quickly online doesn’t read it, they can’t make a better decision.

“Customers assume that insurance products are pretty interchangeable or too complex to understand. So they will probably just use brand or price or basic title as a proxy. The regulators seem obsessed with this view that providing customers with information is the key thing when the problem is probably that this underlying assumption needs to be challenged.”