Luxembourg: Are You Ready To Provide Training Sessions Under IDD?

Last Updated: 4 October 2017
Article by Filip Oller

Most Read Contributor in Luxembourg, September 2017

The Insurance Distribution Directive (IDD), often called "the MiFID of the insurance business," must be transposed into national legislation by 23 February 2018. The law amendment transposing the Directive is expected to be published in Luxembourg at the end of 2017. It is therefore time, now, to make sure you're prepared, because the IDD, which repeals the directive on insurance mediation, imposes strict new professional requirements: in this article we will provide an overview of what these are.

What kind of professional requirements?

The IDD's general principle requires insurance and reinsurance distributors—i.e. employees of insurance and reinsurance undertakings that carry out distribution activities—to possess the knowledge and ability needed to perform their duties adequately. The level of each employee's professional knowledge needs to match the level of complexity of the distribution activity.

The IDD introduces a minimum of 15 hours of professional training and development per year in order to reach this goal. Member States are allowed to adjust the required conditions with regard to knowledge and ability in line with the particular activity of insurance or reinsurance distributors and the products distributed. Ancillary insurance intermediaries, for example, would have different conditions to (re)insurance undertakings.

Additionally, the content of the 15 hours' training must vary from year to year in order to reflect progress. Learning opportunities could include courses, e-learning, and mentoring, and will differ according to the nature of the products offered, the type of distributor, and the role and activities performed by the employees.

Member States are not obliged to apply this requirement to all natural persons employed by insurance and reinsurance undertakings that carry out distribution activities, but it will be mandatory for all the relevant persons within the management structure who are responsible for distribution and all those directly involved in distribution.

What should the training include?

Annex I of the Directive gives an indication of the content of the training and development; namely, it introduces requirements for the minimum professional knowledge and competence needed. These requirements revolve around different types of insurance products, i.e. life and non-life insurance products, as well as insurance-based investment products (IBIPs).

For non-life insurance products, the IDD requires competency in the following:

  • the terms and conditions of policies offered, and the ancillary risks
  • the applicable laws governing the distribution of insurance products (consumer protection tax, social, and labour laws)
  • claims handling
  • complaints handling
  • consumer needs assessment
  • insurance market knowledge
  • business ethics standards
  • finance knowledge

For life insurance products, the IDD requires competency in the following:

  • the policies, terms, conditions, guaranteed benefits, and ancillary risks of the policies
  • the organisation and benefits guaranteed by the pension system of the Member State
  • the applicable insurance law (contract, consumer protection, data protection, anti-money laundering, tax, social, and labour laws)
  • knowledge of the insurance market and other relevant financial services markets
  • complaints handling
  • consumer needs assessment
  • conflicts of interest management
  • business ethics standards
  • financial knowledge

For IBIDs, the IDD requires competency in the following:

  • specific product information including terms and conditions, net premiums, and guaranteed and non-guaranteed benefits
  • the advantages and disadvantages of different investment options
  • the financial risks of the products
  • the policies covering life risks and other savings products
  • the organisation and benefits guaranteed by the pension system
  • the applicable laws governing the product distribution (consumer protection and tax laws)
  • knowledge of the insurance market and the saving products market
  • complaints handling
  • consumer needs assessment
  • conflicts of interest management
  • business ethics standards
  • financial knowledge

Training sessions are a key part of the IDD, considering the extensive list of topics that must be covered and that they must vary from year to year. Internally planning and deploying a training programme may require significant time, which, when the daily business needs running and other regulations implemented too, could be challenging. In this context, entities may need to seek the services of third-party training providers, so as to concentrate on business needs while meeting the new requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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