Chapter 6 - F Flashcards
What directive replaced the Insurance Mediation Directive (IMD) in the UK?
The Insurance Distribution Directive (IDD)
The IDD came into force on 1 October 2018.
What is the broader term used in the IDD compared to the IMD?
Insurance distributor
The IDD applies to a wider range of entities by using ‘insurance distributor’ instead of ‘insurance intermediary’.
Who does the IDD apply to?
- All sellers of insurance products
- Any person assisting with the administration and performance of insurance contracts
- Ancillary insurance intermediaries
Ancillary organizations are excluded from regulation if the insurance is complementary and the premium is less than €600.
What are the two carve-outs from the definition of ‘insurance distribution’?
- Mere provision of information on an incidental basis
- Management of claims as an insurer on a professional basis
- Provision of data and information on potential policyholders
These carve-outs were also present in the previous IMD.
What are the two general principles under the IDD?
- Distributors must act honestly, fairly, and professionally in customers’ best interests
- All information provided must be fair, clear, and not misleading
These principles guide the conduct of insurance distributors.
What must distributors disclose regarding their remuneration?
- The nature of the remuneration
- The basis for that remuneration (fee/brokerage, etc.)
The IDD has detailed requirements for this disclosure.
What was a key impact of the UK leaving the EU on insurers and intermediaries?
They had to consider setting up EU domiciled entities to service their EU client base
The cross-border permissions granted within the EU no longer apply to UK regulated entities.
What does the FCA’s three-pillar risk framework focus on?
- Assessment of the firm’s conduct
- Event-driven work for flexible responses
- Reviewing issues and products when required
This framework helps ensure consumer interests and market integrity.
What are the Client Assets rules (CASS) concerned with?
Protection of client assets for which brokers are responsible
Client assets could include premium funds or claims funds.
What is required when a broker handles client money?
The broker must keep the client’s money separate from the firm’s own money
This protects client funds in case the firm fails.
What is a statutory trust account?
An account where the broker must not fund payments out of client money
The trust exists only for client money actually received.
What is a non-statutory trust account?
An account where the broker may fund payments out of client money
The trust is declared by the broker and not established by law.
How quickly should client money generally be paid out according to CASS rules?
One business day after receipt by the broker
This includes payments made by wholesale brokers to retail brokers.
What is the term ‘Data protection legislation’ used to refer to?
UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018 (DPA 2018)
Both govern the processing of personal data in the UK.
What does the Data Protection Act 2018 (DPA 2018) do?
Mirrors much of the UK GDPR and makes some modifications
Parts of the UK GDPR do not apply to law enforcement processing.
Who does the data protection legislation apply to?
All persons in the UK who process personal data other than for domestic purposes
It gives data subjects rights and places obligations on data controllers and processors.
What type of data does the legislation apply to?
Personal data
Any information from which a living individual can be identified, either directly or indirectly.
What are examples of personal data?
Names, identification numbers, photographs, addresses, IP addresses, shoe sizes
Information may become personal data when combined with other information.
What is considered sensitive personal data?
Categories include:
* Race or ethnic origin
* Political opinions
* Religious or philosophical beliefs
* Trade union membership
* Genetic data
* Biometrics (for ID)
* Health information
* Information about sex life
* Sexual orientation
Provides additional safeguards for sensitive information.
What are the seven Data Protection Principles?
- Lawfulness, fairness and transparency
- Purpose limitation
- Data minimisation
- Accuracy
- Storage limitation
- Integrity and confidentiality
- Accountability
Each principle outlines requirements for processing personal data.
What is required for lawful processing of personal data?
One of the legal bases set out in the legislation must apply
Organizations must identify a legal basis for processing.
What are the legal bases for processing personal data?
- Consent
- Contract
- Legal obligation
- Vital interests
- Public task
- Legitimate interests
Each basis has specific requirements and limitations.
What rights do individuals have under the legislation?
- Right to be informed
- Right of access
- Right to rectification
- Right to erasure
- Right to restrict processing
- Right to data portability
- Right to object
- Rights in relation to automated decision making
Each right provides individuals with control over their personal data.
What is the Right to be informed?
Individuals have the right to be informed about the collection and use of their personal data
Information must include purposes, retention period, and sharing details.
What must organizations do in relation to subject access requests (SAR)?
Respond within one month, possibly extending to two months for complex requests
Individuals can submit SARs verbally or in writing.
What is the Right to rectification?
Individuals can have inaccurate personal data rectified or completed
Organizations must respond within one month.
What is the Right to erasure also known as?
‘The right to be forgotten’
This right is not absolute and applies under certain circumstances.
What does the Right to restrict processing allow individuals to do?
Request the restriction or suppression of their personal data
Organizations can store but not use the data.
What is the Right to data portability?
The right to transfer personal data from one organization to another securely
Example: Changing banks.
What is the Right to object?
Individuals can object to the processing of their personal data in certain circumstances
They have an absolute right against direct marketing.
What is required for accountability and governance?
Data controllers must demonstrate compliance with data protection legislation
This includes maintaining documentation and having security measures in place.
What must organizations do in case of a data breach?
Report data breaches to the Information Commissioner’s Office (ICO)
High-risk breaches must alert data subjects.
What is the Digital Operational Resilience Act (DORA)?
EU regulation aimed at strengthening ICT security of financial organizations
Applies from 17 January 2025.
Who does DORA apply to?
Brokers and insurers
Ensures resilience against operational digital disruptions.
