The Financial Conduct Authority and Continuing Professional Development

The Financial Conduct Authority (FCA) introduced Continuing Professional Development (CPD) that became a regulatory requirement for all insurance providers, intermediaries and professionals from 1st October 2018.

The new requirement arises from the Insurance Distribution Directive that has passed into EU legislation after 4 years of debate and consultation. It replaces the Insurance Mediation Directive (IMD). It aims to enhance consumer protection when buying insurance – including general insurance, life insurance and insurance-based investment products (IBIPs) – and to support competition between insurance distributors by creating a level playing field.

The Directive applies to all staff that sells, advise on, or transact insurance contracts for all types of insurance products and customers. As well as those that assist in administering or performing the contracts. It requires everyone in the industry from individuals to multi-national companies to ‘possess appropriate knowledge and ability in order to complete their tasks and perform their duties adequately’.

Firms are required to comply with the new requirements from 1 October 2018.

What is CPD?

Continuing Professional Development (CPD) is the term used to describe the learning activities professionals engage in to develop and enhance their abilities. In essence, it refers to the process of tracking and documenting the skills, knowledge and experience that you gain both formally and informally as you work, beyond any initial training. It’s a record of what you experience, learn and then apply and serves as a process of recording and reflecting on learning and development.

What is it for?

The CPD process helps you manage your own development on an ongoing basis. Its function is to help you record, review with your employer and reflect on what you learn.  CPD can combine a variety of learning methods, such as training workshops, conferences and events, e-learning programs, best practice techniques and ideas sharing.

Effective Professional Development

What is the importance of “Continuing Professional Development”?

Continuing Professional Development is important because it delivers benefits to the individual, their profession and the public and ensures your capabilities keep pace with the current standards of others in the same field.  A structured, practical and methodical approach to learning helps employers across industries to keep key staff and develop the skills & knowledge in their organisations to maintain a sustainable and competitive advantage.

The staff knowledge and competence requirements apply to insurers and intermediaries. The Directive requires firms to conduct a minimum of 15 hours annually of Continuing Professional Development (CPD) for every individual involved in the distribution process of General Insurance products.

Why do you need to do CPD?

The Insurance Distribution Directive is EU legislation, which sets regulatory requirements for firms designing and selling insurance products. The Insurance Distribution Directive (IDD) replaces the Insurance Mediation Directive (IMD). It aims to enhance consumer protection when buying insurance – including general insurance, life insurance and insurance-based investment products (IBIPs) – and to support competition between insurance distributors by creating a level playing field.

Minimum knowledge, ability and good repute requirements for carrying out insurance distribution activities – SYSC 28.1

  1. A firm must ensure that it and each relevant employee possesses appropriate knowledge and ability in order to complete their tasks and perform their duties adequately.
  2. A firm must ensure that it and each relevant employee comply with continued professional training and development requirements in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market.
  3. A firm must ensure that each relevant employee completes a minimum of 15 hours of professional training or development in each 12-month period.
  4. For the purposes of (3), a firm must take into account the: (a) role and activity carried out by the relevant employee within the firm; and (b) type of distribution and the nature of the products sold.

General Insurance Contracts

A firm must, including in relation to the relevant employee, demonstrate compliance with the following professional knowledge and competence requirements:

  • Minimum necessary knowledge of terms and conditions of policies offered, including ancillary risks covered by such policies;
  • Minimum necessary knowledge of applicable laws governing the distribution of insurance products, such as consumer protection law, relevant tax law and relevant social and labour law;
  • Minimum necessary knowledge of claims handling;
  • Minimum necessary knowledge of complaints handling;
  • Minimum necessary knowledge of assessing customer needs;
  • Minimum necessary knowledge of the insurance market;
  • Minimum necessary knowledge of business ethics standards; and
  • Minimum necessary financial competence;

Good Repute – SYSC 28.3

A firm must ensure that all the persons in its management structure and any staff directly involved in insurance distribution activities are of good repute In considering a person’s repute the firm must at a minimum ensure that the person:

  1. Has a clean criminal record or any other national equivalent in relation to serious criminal offences linked to crimes against property or other crimes related to financial activities; and
  2. Has not previously been declared bankrupt, unless they have been rehabilitated in accordance with national law.

Record Keeping Requirements – SYSC 28.4

A firm must:

  1. Establish, maintain and keep appropriate records to demonstrate compliance; and
  2. Be in a position to provide to the FCA, on request, the name of the person responsible for the record-keeping requirement in (1).

A firm must:

  1. Make an up-to-date record of the continued professional training or development completed by each relevant employee in each 12 month period;
  2. Retain that record for not less than 3 years after the relevant employee stops carrying on the activity; and
  3. Be in a position to provide any version of the record to the FCA on request.

A firm must not prevent a relevant employee from obtaining a copy of the records relating to that relevant employee, which are maintained by the firm.

It is essential that all staff complete their CPD programme in a timely fashion – as failure to do so could result FCA sanctions and suspension from involvement in insurance mediation activities.

CPD benefits for the learner

  • Refines your personal skills and intellect and helps to plug any knowledge gaps.
  • Keeps academic and practical qualifications up to date – keeping skills relevant is integral in today’s fast-moving world, where rapid progression can quickly lead to previous learning becoming obsolete.
  • Opens pathways to career progression or potential redirection, including achieving higher salaries and better job security.
  • Enhances your ability to regularly learn and improve – you’ll learn quicker as you become acquainted with the process and will become a better independent learner.
  • Demonstrates ambitiousness, aptitude, and a dedication to self-improvement to current and prospective employers and clients.
  • Provides valuable examples and scenarios for showcasing professional achievements and growth in CVs, cover letters, and interviews.
  • Reduces feelings of uncertainty or worries about change – CPD gives you a plan for future aspirations and the ability to readily adapt.
  • Promotes independence – self-directed CPD requires you to consciously engage in learning activities and follow your own plan, while some structured CPD activities can benefit from you engaging in further research and study.

Continuous professional development can also be an excellent self-motivation tool, as it reminds you of your achievements and progression. Plus, its flexibility and diversity – in terms of the different forms of CPD learning available – gives you an opportunity to find a learning approach that fits you best.

CPD benefits for the business

  • Ensures that standards throughout the company are consistently high.
  • Improves efficiency and productivity with highly skilled and motivated staff.
  • Enhances the business’s reputation among customers and clients as well as potential employees.
  • Promotes a healthy learning culture.
  • Improves employee retention as employees feel valued and loyal to the company.
  • Provides a useful benchmark for annual reviews and appraisals.
  • Enables the company to positively react and move with current trends and shifts in the industry.

To achieve these benefits, businesses should always support employees’ continuous personal development and allow equal access to learning opportunities. Keep in mind that there are at least a dozen different types of CPD, so there’s always one form or another that suits your schedule and needs.

The principles for business – FCA

Integrity
A firm must conduct its business with integrity.

Skill, care and diligence
A firm must conduct its business with due skill, care and diligence.

Management and control
A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

Financial prudence
A firm must maintain adequate financial resources.

Market conduct
A firm must observe proper standards of market conduct.

Customers’ interests
A firm must pay due regard to the interests of its customers and treat them fairly.

Communications with clients
A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

Conflicts of interest
A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

Customers: relationship of trust
A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

Clients’ assets
A firm must arrange adequate protection for clients’ assets when it is responsible for them.

Relations with regulators
A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

Treating Customers Fairly – FCA

TREATING CUSTOMERS FAIRLY- The aim of the FCA is to deliver six improved outcomes for retail customers.

The six TCF outcomes

  1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.
  2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
  3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
  4. Where customers receive advice, the advice is suitable and takes account of their circumstances.
  5. Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.
  6. Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

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