TOPICAL MISCELLANY 2018

1. TOPICAL MISCELLANY 2018 Trevor Hellawell ExL Practice Development 07850 56 26 99 trevorhellawell@outlook.com

2. Agenda • Insurance Distribution Directive • MishconUpdate • New SRA Handbook and Price transparency

3. Insurance Distribution Directive IDD

4. What is the IDD? • Insurance Distribution Directive • Replaces the “Insurance Mediation Directive” of 2005 which massively revamped the sales and recommendations of insurance policies (of all kinds)

5. The NEW position • As from 1 October 2018 • New Insurance Distribution Directive takes over • New requirements are • 15 hours annual CPD for those involved “directly” • Minimum level of PII cover • Have a policy on complaints • Have a conflicts policy (to ensure remuneration does not conflict with clients interests) • Obligation to disclose more information prior to inception in an Insurance Product Information Document

6. What is the old IMD? • Life policies, investments like pension contracts, endowment policies, investment insurance bonds • BUT ALSO • indemnity policies, defective title, after-the-event litigation insurance, contaminated land, chancel repair policies etc etc

7. IMD (2005) • Provided that ALL such policies were “regulated investments” under the FSMA 2000, such that • Solicitors could NOT DO ANYTHING with such policies EXCEPT • provide information (in a leaflet) about insurances • UNLESS • they were exempt from the operation of the FSMA but/by observing the Solicitors Financial Services (Scope) Rules 2001

8. Scope Rules 2001 • Solicitors Financial Services (Scope) Rules 2001 • Para 4 • Incidental to a particular professional service delivered to a particular client • Subordinate to that service • No commission is received that is not accounted for to the client • Etc

9. Scope Rules 2001 • Solicitors Financial Services (Scope) Rules 2001 • Para 5(6) • Provided • the firm is registered with the FCA and • has an Insurance Mediation Officer in post • firm can recommend and sell insurances to clients (provided they are not restricted by other rules eg. life policies etc) • Indemnity policies are FINE………..BUT

10. BUT – Conduct of Business Rules • Solicitors Financial Services (Conduct of Business) Rules 2001 • Para 9 • If you are carrying out IMA (where you can) you must also comply with Appendix 1 of the Rules

11. SRA Proposals • IDD proposes 3 categories of ‘broker’ • Insurance intermediaries • Reinsurance intermediaries • Ancillary insurance intermediaries • Proposing new Scope and CoB Rules 2001 that change as little as justifiably possible

12. SRA proposals • Ostensibly delete ‘mediation’ and replace with ‘distribution’ • Alter the wording of client care correspondence to read • “We are not authorised by the Financial Conduct Authority. However, we are an insurance distributor and included on the register maintained by the FCA so that we can carry on insurance distribution activity which is broadly, advising on and selling and administration of insurance contracts…[…]”

13. SRA proposals • Main alteration is to Appendix 1 • Provides • Information provided must be clear fair and not misleading • ‘In good time’ before inception of a contract, firms must disclose • Whether it gives any recommendation • Information about who to complain to • Whether the firm represents the client – or the insurer • Whether the firm has a shareholding of more than 10% in the insurer, or vice versa

14. SRA proposals • Where the firm gives a recommendation for a contract of insurance, firm must ‘in good time’ beforehand state • Whether the recommendation is based on a fair and personal analysis, whether (or not) it has official links with specified insurers and if so, which ones • Whether the recommendation is based on a sufficiently large number of contracts and is given in accordance with professional criteria regarding which product would be adequate to meets the clients needs

15. SRA proposals • Prior to conclusion of a contract, firm must • specify (on the basis of information provided by the client) the clients demands and needs.. • ..adapted according to the complexity of the contract of insurance, and the individual circumstances of the client • Give a demands and needs statement to the client • Ensure that the contract is consistent with those demands and needs, and give an personalised explanation of why the recommendation best meets the clients needs

16. SRA proposals • Other requirements • Use only registered insurance intermediaries • Ensure prompt and fair treatment of complaints from those who are not clients • No remuneration that would conflict with the best interests of the client • No incentives or sales targets • Explain any remuneration arrangements • If client is to pay a fee, explain how the fee is calculated • Information must be provided on paper (with some limited exceptions)

17. SRA proposals • Other requirements • If insurance is offered as a package, client must be able to buy products separately if they wish • Firm must ensure that all staff are duly competent (possess all knowledge and ability to perform tasks) and all management staff are of good repute • Firm must also give client objective and relevant information in good time to enable the client to make an informed decision (‘Insurance Product Information Document’) (possibly available from the insurer if it includes details of the policy and indicates its target market)

18. What this means • Ensure that you are registered with the FCA via the SRA or equivalent • Ensure you have appointed an Insurance Distribution Officer (IDO) • Ensure paperwork is modified (do a wordsearch at the very least) • Ensure all staff using indemnity, ATE or similar insurances are COMPETENT • Modify/understand/correct any financial arrangements with insurers and reveal

19. What this means • Have you read the terms of the policies you are using/recommending? • Do you know how they operate, and when they don’t? • Do you know the conditions for making claims, and the limitations and excesses applicable? • Are you aware of the current state of the insurance market? Are the other/better alternatives out there? • What other considerations should the client bear in mind - timing?

20. What this means • Give the client the full information and choice, consistent with our professional obligation to act in their best interests – would you recommend this to your mother? • Consider some refresher training (for the IDO at least) • Insurance can be regarded as ‘legalised theft’, or as a key reassurance against real risks

21. Dreamvar v Mishcon de Reya Update

22. Mishcon - where are we NOW? Innocent Buyer (B) / Lender Bsols (CDD/OM on B) Ssols (CDD/OM on S) [Fraudulent] Seller (S)

23. Dreamvar v Mishcon de Reya • Appeal heard late-Feb / early March • Result early May at earliest • Law Society intervened • What will the answer be?

24. New SRA Handbook 2018

25. New SRA Handbook • Published in ‘final’ form in June 2017 • In force (not before) Autumn 2018 • New • Accounts Rules • Codes of Conduct • Practice Framework Rules • Also: CMA & LSB pressure to publish fees and quality data

26. New SRA Rules • All aimed at making access to legal services easier, costs to be transparent and quality data to be accessible • 90% of individuals with a legal problem do not consult a lawyer • 73% of SME clients with a legal problem do not consult a lawyer

27. New SRA Rules • No reason to change • Can stay as an SRA-authorised law firm, conducting LSA-reserved business (as now) • BUT • How do you respond/interact with clients?

28. New SRA Rules • Who has teenagers? • How do they interact with lawyers or professionals? • How do we inculcate our professionalism onto them? • What about other professionals – will they employ solicitors in the future?

29. New SRA Rules • Should we contemplate change? • Redistributing work to a less or non-regulated subsidiary? • Engaging with external legal service providers • Legally qualified • Giving initial advice only • Triage function • AML/GDPR/client care/T&C work in event of referral

30. TOPICAL MISCELLANY 2018 Trevor Hellawell ExL Practice Development 07850 56 26 99 trevorhellawell@outlook.com