The IDD (Insurance Distribution Directive) regulates the way insurance products are sold. A fundamental principle of the Directive is always acting honestly, fairly and professionally in accordance with the best interests of customers.
Example? Prior to the conclusion of an insurance contract, the insurance distributor is not only obliged to identify the requirements and needs of the customer, but also provide the customer with clearly understandable and relevant information about an insurance product, so they can make an informed purchase decision.
What is more, insurance distributors are not to be remunerated in a way that conflicts with the best interest of their customers. This means recommending a particular insurance product for personal profit, not the product that's actually best suited to customer needs will be very much frowned upon.
Even though the European Commission has proposed pushing the application date of IDD to 1 October 2018, member states were required to transpose the Directive into their national laws by February this year.
But let's face it: the insurance industry is notorious for its ultra-slow processes. Back in January, research from UK-based Ecclesiastical Insurance found that two thirds of insurance brokers had little knowledge of IDD - or none whatsoever. Only 7% believed they knew everything they needed to. 61% welcomed the regulation changes, although a third were worried it would impact profits. Customer relationships were seen as being on the line too, with most brokers indicating hard to understand or troublesome paperwork as an issue.
The new tomorrow
The transition might be somewhat painful for both sides - but what awaits at the end of the road is a transparent, customer-first culture, and that benefits everyone in the long run. Greater transparency in the price and costs of insurance products, clearer information on the products, new business conduct to help customers avoid buying the products they don't actually need...or more options to opt in or out. If, e.g., a new car is sold together with motor insurance, customers will have the choice to pass up on the policy.
Tools of the trade
According to Deloitte, the highest impact of the IDD will be on the process and IT side of insurance distributors, as well as on their business strategy. This is where the right tools of the trade come into picture.
One of them is Comarch Digital Insurance (CDI). It constitutes the complete digital insurance ecosystem, as it comprehensively handles sales and service processes both on the distributor and the end-customer sides.
CDI not only helps agents or brokers advise on and sell insurance products but also allows individual customers to smoothly purchase a policy and manage their insurance product portfolio online.
When it comes to distributors, Comarch Digital Insurance provides them with efficient analysis of customer needs, access to their documentation and quick execution of quoting and policy-issuing processes. What makes the solution powerful is a precise needs analysis ensuring optimal offer tailoring.
For clients, there is one big advantage of using CDI: they can easily purchase a policy by themselves, and make any change to it as they please. A well-crafted set of questions the clients are asked beforehand allows them to choose the product that fits just right.
The basic questions, asked as part of the said analysis, may relate to family situation, already protected areas or potential risks. Only if the client confirms the initial assumptions the system makes, more detailed questions follow. The questionnaire, available on any device, is nowhere near to be headache-y, it’s actually a breeze to go through. And, all the information gathered, along with disclosures required by the IDD, can be displayed at any time to ensure transparency. That’s not it though: one can rest assured no stage of the needs analysis is left out as the system keeps a close watch on the process, making sure it’s thorough and complete.
Last year, for their investment and life products, AXA Luxembourg needed a new tool to support both the pre-sales activities of their distribution network, including needs analysis, simulations and quotation – and the sales processes, ranging from offer preparation through policy issuance to report generation. AXA also aimed at a comprehensive solution with enhanced user experience, allowing the insurer to stay on top of the upcoming laws such as PRIIPS or IDD.
More at comarch.com.