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The Isle of Man’s new Conduct of Business Code, and what it means to you (and your clients)

The publication, by the Isle of Man Financial Services Authority (FSA), of its long-awaited Guidance Notes for implementing its new Conduct of Business (CoB) regulations has at last given all of us the blueprint we’ve been waiting for, to plan for 2019 and beyond.

Like us, you must be glad to at last know what the parameters are to be, and what we will, and won’t, have to do from the start of 2019.


As you no doubt will have seen, the IoM has decided to break up the implementation period into two parts, with the first – affecting a number of key aspects of the way companies like RL360 do business – coming into force on 1 January 2019.


The second phase of the implementation period will begin six months later, on 1 July 2019, and will establish a requirement that a “Key Information Document”, or KID, be supplied to prospective clients at the point of sale of all “long term insurance products with an investment element”.


Also at this time, new regulations having to do with how adviser remuneration is disclosed to customers will come into force (unless there are specific exemptions in place).


For now, we are going to focus on what we need to do to be ready for 1 January.


We will also explain our plans to retire our two regular savings products, Quantum and Paragon, at the end of March 2019, and introduce in January what we’re calling simply our new Regular Savings Plan.


Another change we’re introducing on 1 January is that we will no longer be offering critical illness cover on any LifePlan policies sold from 2019, due to business changes unrelated to the CoB Code. We will have updated LifePlan literature available before the New Year.


No changes are planned to our single-premium offerings, PIMS and Oracle, for January, though we will of course be updating them in readiness for the CoB Code changes that kick in on 1 July 2019.



CoB Code ‘response to global changes'

In case you’ve forgotten, the CoB Code was first floated by the Isle of Man regulator some years back, as part of what was then seen as a need to enhance customer protection and transparency.


This was seen as crucial if the IoM was to remain in step with global standards, which were in the process of being raised by many of the world’s leading financial services jurisdictions, in response to efforts by such organisations as the International Association of Insurance Supervisors (IAIS), the Organisation for Economic Cooperation and Development (OECD) and the European Union.


In the UK – that large, G20 neighbour of ours to the east – the response took the form of the Retail Distribution Review (RDR); the European Union, meanwhile, replaced its Insurance Mediation Directive with what it called the “Insurance Distribution Directive” (IDD), and updated its Markets in Financial Instruments Directive as MiFID 2.


(For more background on the global move towards greater regulation and transparency, as well as some intriguing data suggesting that it’s actually boosted the performance and number of intermediary firms operating in the UK, click here)



Key CoB Code facts you need to know, for 1/1/2019:

From 1 January, 2019, a number of changes in the way IoM product providers (like us) monitor the advisers who recommend their products (like you) will come into force. This means revised terms of business terms and conditions, which we will be sending to advisers before the end of the year.


In particular, the new CoB Code spells out in some detail our obligation going forward to oversee “distributors” – to ensure that those distributors have governance and processes in place so that they can ensure their employees who sell our products “have the appropriate skills, knowledge and experience” to do so “properly”; and that they are also able to provide “appropriate advice to policyholders” when this is needed.


We will be required to make sure that adviser companies who distribute our products hold an appropriate regulatory authorisation or licence.


(Of course, we’ve been in touch with Advisers on these issues some time ago so we don’t expect this will come as any surprise.)


Also under the new CoB Code rules, IoM companies like RL360 must adhere to a new list of “general principles” governing the way “policyholders” – your customers, and through you, ours – are treated, to ensure they are better informed. This list includes such elements as the way products are developed, marketed, promoted and distributed, as well as how policyholder complaints and disputes are handled.


One of the measures to help improve the customer outcome is introducing a mandatory 30 day “cooling-off period”, during which time the customer can cancel their policy without penalty (minus any negative performance on single premium investments). RL360 has actually had cooling-off periods built into their products for many years, so those of you used to working with RL360 won’t experience any change.



Changes to the RL360 product range:

From 1 July 2019, the RL360 Quantum and Paragon savings plans are being replaced.


In January we will be bringing out our new Regular Savings Plan (RSP).


This will be the first of a new style of more flexible products than we have offered in the past, accompanied by the introduction of a new online illustration system that offers the ability to personalise each plan to fit the profile and wishes of each individual client, or the financial model of your company.


RL360 will accompany the roll-out of RSP with a revamped suite of literature, including a product guide, that replaces the product brochure and product profile that we provided in the past.


In addition to the simplicity of a single guide, we think you and your clients will love the new guide’s more user-friendly style. What’s more, we’ve designed it to work alongside our new online, personalise-able illustration system.


This new plan will be sold with a Key Information Document that must be signed by the client (though percentage commission disclosure will not be introduced to the KID until 1 July 2019).



The Key Information Document:

Key Information Documents will begin to be required for all “long term insurance products with an investment element” that are sold by Isle of Man life companies by 1 July 2019.


These KIDs must conform with a range of very specific requirements, including that they are “concise” – “generally no longer than 3 sides of A4-sized paper when printed” – and inform the reader of the “nature and main features” of the product they are describing, “a description of the policyholder type” whom the product is intended to be sold to, any risks that might be associated with the product, and a disclosure of the fees and charges relating to its sale.


These KIDs also mandate that clients be provided with “full details of the cooling off or cancellation period” for the product in question; any “required minimum holding period”, if there is one, and everything they might need to know “about the potential consequences of cashing in” or surrendering their policy, in full or in part.


The signature of the customer is required, which is an acknowledgement of their having “received and understood the information provided” elsewhere in the KID. Without this, the sale is not considered to have taken place.



In conclusion

Change is never easy. And as you may have heard, the Isle of Man’s new Conduct of Business Code has received its share of grumbles from some quarters. This is understandable.


But we also understand that anything that leads to better outcomes on the part of those who purchase our products can only be good, in the long run, for them, for you and for us.


It is this goal that is driving the global move towards greater transparency and accountability, and this is why regulation in jurisdictions around the world is moving in the same direction.


Our chief executive, David Kneeshaw, summed it up, in an interview with a trade publication immediately after the Isle of Man regulator announced the publication of its CoB Code Guidance Notes.


Said Mr Kneeshaw: “Today’s announcement is welcome news.


“The new guidelines will benefit the stronger and better advisers, encourage investment in better-quality retail funds, and provide more transparency and protection to consumers.


“The Isle of Man has set the benchmark for all other ‘offshore’ jurisdictions to follow.”



If you have any questions about Conduct of Business, please get in touch with your RL360 Regional Sales Manager.


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