The first phase of the Isle of Man Insurance (Conduct of Business) (Long Term Business) Code came into effect on 1 January 2019, raising the bar for how international life business is conducted from the Isle of Man. The second phase comes into effect on 1 July 2019, introducing important new requirements that will promote better customer outcomes across the industry.
The following questions and answers look at what is changing with effect from 1 July 2019 and what it means for authorised insurers, advisers and customers.
Q. Why has the Isle of Man Financial Services Authority (FSA) introduced new rules?
The FSA continually refines its regulatory standards to ensure they maintain a robust regime for the regulation and supervision of insurance business. The new rules reflect developments in international standards, particularly in relation to providing transparency to customers and ensuring products are suitable for customers’ needs.
Q. What was introduced on 1 January 2019?
From the beginning of January Isle of Man authorised insurers have been required to adhere to the following set of new regulatory requirements:
- Embed the fair treatment of customers into their policies and procedures.
- Allow customers to only access assets in life and redemption policies that are suitable for them (for example, limiting the ability of ‘retail’ customers investing in ‘professional investor’ type assets).
- Provide 30-day cancellation rights on initial premiums, top-ups, and increments on regular premiums.
- Introduce and issue new terms of business for advisers ensuring that they maintain the necessary licences, authorisations and registrations.
- Plus a whole host of other new requirements – for example, illustrations, policy valuation statements and managing conflicts of interest.
Q. What new regulatory requirements come into effect on 1 July 2019?
From the beginning of July, Isle of Man authorised insurers will now need to adhere to the following set of new regulatory requirements:
- Subject to exemptions in certain jurisdictions, customers are to be provided with a Key Information Document (KID) describing the nature and main features of the product they’re investing in, including:
- the product characteristics;
- the potential risks;
- the product charges; and
- details of remuneration arrangements with intermediaries.
Importantly, the product charges and remuneration arrangements will be policy specific.
- All intermediaries (with existing terms of business) need to be deemed appropriate by the authorised insurer, and maintain all necessary licences, authorisations and registrations for the jurisdictions in which they operate and give advice in.
Q. What if a certain jurisdiction has similar or the same requirements?
The FSA’s requirement to provide a KID is not necessary in the situation where business has been derived from certain jurisdictions where the FSA has determined that there are similar or equivalent regulatory regimes requiring customer disclosure, for example, the United Kingdom, Hong Kong, Singapore and the European Union. The exemption also applies in the United Arab Emirates, provided the adviser is regulated in the UAE. In this case, alternative regulatory wording is to be provided.
Q. How will advisers be impacted by the new regulations coming into effect from 1 July 2019?
We see advisers being impacted in the following ways:
- Remuneration arrangements will be disclosed in the KID, which will be provided to the client by the adviser. Ultimately, there will be a greater need for advisers, by the increased transparency, to demonstrate the value they bring to their clients.
- They will have to meet heightened vetting requirements, including the requirement that they maintain all necessary licences, authorisations and registrations in the jurisdictions in which they operate and give advice in.
Q. What has Old Mutual International’s response been to the regulations coming into effect on 1 January 2019 and1 July 2019?
Old Mutual International has been fully supportive of the FSA’s new regulations. Old Mutual International believes that in the long term, the changes will help strengthen and grow the international life industry by promoting greater transparency and improved quality of advice. This is good news for consumers and will support those advisers who focus on delivering good customer outcomes.
The new regulations complement the work Old Mutual International is doing to support advisers through its Future Fit adviser programme. The advisers who demonstrate the value they bring to their clients will ultimately thrive and fuel the growth of the industry.