Chapter 10

Question 1

What does IDD stand for?

Answer 1

Insurance distribution directive

Question 2

What does the IDD set out and who does it apply to?

Answer 2

How consumers who buy insurance are to be protected.
This applies to firms that sell, advise on or conclude insurance contracts and those who help to administer and perform them.

Question 3

What are the 2 key provisions of the IDD?

Answer 3

• Professionalism all firms engaged in any of the activites covered by the directive must have the appropriate knowledge and ability to complete their tasks and perform their duties adequatley.
• Commission disclosure pre contractual disclosure of the intermediary and the nature (not amount) of their remuneration (whether commission, fee or other type of arrangement)

Question 4

What are some of the general principles of the IDD?

Which principle differs to the FCAs ICOBS rule?

Answer 4

• Distributors must act honestly, fairly and professionally in the best interest of their customers (this one slightly differs to the FCA handbook)
• Distributors must communicate in a way that is clear, fair and not misleading. This includes marketing materials.
• Remuneration of a distributor or its employees must not conflict with the duty to act in the customers best interest

Question 5

What is an AII

Answer 5

Ancillary insurance intermediary
* Their main profession is not insurance distribution
* Firms only distribute insurance products that are complimentary to the good and services that they do provide as their main profession

Not all AIIs come into the scope of the IDD but those that do are regulated as insurance intermediaries

Question 6

Why is it important to understand the difference between an advised sale and a non advised sale?

Answer 6

Bceause under the FCA rules, there are different regulatory requirements for each

Question 7

What is the difference between an advised sale and a non advised sale?

Answer 7

Advised = personal recommendation made to the customer
Non advised = no personal recommendation made to the customer

Question 8

Rules require any contract suggested to be consistent with the customer’s insurance needs and demands. This means that firms must only offer contracts that meet these needs and demands. What 2 steps are taken to comply with this?

Answer 8

1) Identify the customer’s demands and needs and match them to available products
2) State the customer’s demands and needs to help them make an informed decision whilst highlighting any gaps

Question 9

Why is it important for a customer to understand the difference between an advised sale and a non advised sale?

Answer 9

So that the customer understands the basis of which they are receiving information and it fulfils the FCA requirement to show the cosnistent fair treatment of all customers

Question 10

The pre contract disclosure rules in ICOBS require what disclosures?

5

Answer 10

1) Whether the firm is an insurer or an intermediary
2) Whether or not it provides advice
3) If the firm is an intermediary:
- Whether it acts for the customer or insurer (and whether this changes over time e/g delegated authorities)
- Shareholding links between the intermediary and any insurers
- Names of insurers with which they place business if advice is not based on a fair and personal analysis of the market
- Names of insurers that could have been approached if advice is not provided

4) Insurers must disclose the kind of remuneration (cash or benefits paid to employees)
5) All organisations must disclose fees payable by the customer in cash terms

Question 11

What are 2 examples of non advised sales?

Answer 11

• Customer decides or knows the specific product that they want
• Firm offers information on a range of products for the customer to make their own informed decision

Question 12

What are the key points in a non advised sale?

Answer 12

• Provides factual information, without exaggeration
• Must not lead the customer
• Options and correct information must be given and clearly explained
• All charges must be clearly outlined at the point of sale

Question 13

What does ‘fair analysis’ of the market mean?

Answer 13

ICOBS: intermediary must consider a sufficiently large number of insurance contracts on offer in the market

They should then use their professional knowledge and skill to establish which be adequate to meet the customers needs

Question 14

What is an IPID?

Answer 14

Insurance product information document:
must be provided to all customers at new business and renewal. It provides objective and relevant information on the product before the contract is concluded and aims to allow the customer to make an informed decision.

Question 15

When producing and providing product information, the FCA asks organisations to consider what?

5

Answer 15

• Product information is clear and easy for the consumer to understand
• The information needs of its customes and to consider when in the sales process the information would be most useful
• Co-operating with others in the distribution to ensure that the information needs of the customer are met
• Providing information in a targeted and balanced way to ensure it is relevnant
• Ensuring information is honest and fair about the limitations

Question 16

What does the FCA say about commercial customers about the requirement of an IPID?

Answer 16

The information in an IPID is required but does not have to be in the form of an IPID.

Question 17

What are the possible consequences for an organisation if a customer consultant uses statements that are inconsistent with either their ‘advised’ or ‘non-advised’ roles?

Answer 17

• Breach of FCA regulations which leads to discipplinary action such as fines (and damage to reputation)
• Provision of poor customer service as the customer consultant has failed to fulfil their role appropriatley and may give the incorrect information or advice

Question 18

The nature of selling falls into which 2 models?

Answer 18

Transactional selling
Focuses on finding potential customers, the customers are likely to need a standard product or service and are looking for an organisation that can offer it at the right price and quality

Consultative selling
The customer consultant gains a deeper understanding of the challanges facing the customer and tailors a solution to them. Questioning and listening become more important than positioning statements. The purchase decision is often managed through a process.

Question 19

How do the volumes and values in the type of sales differ between transactional and consultative?

Answer 19

Transactional = high volume, low value
Consultative = low volume, high value and often complex in nature

Question 20

How do the sales methods used tend to vary between transactional and consultative sales?

Answer 20

Transactional = Over the phone, online, sometimes face to face
Consultative = Face to face

Question 21

How does the sales cycles (length of time) differ between transactional and consultative sales?

Answer 21

Transactional = quicker, usually in one call
Consultative = longer and can be across multiple meetings

Question 22

How does the focus differ between transactional and consultative sales?

Answer 22

Transactional = standard products, features and benefits
Consultative = matching needs with a bespoke solution

Question 23

How does the pricing tend to differ between transactional and consultative sales?

Answer 23

Transactional = critical to the purchase
Consultative = collaborative and often negotiated

Question 24

How does the relationship with the buyer tend to vary between transactional and consultative sales?

Answer 24

Transactional = short term
Consultative = long term

Question 25

How do the types of insurances tend to differ between transactional and consultative sales?

Answer 25

Transactional = Home, travel, motor insurance Consultative = products with bespoke wordings such as risks placed in lloyds

Question 26

What factors tend to differ between transactional and consultative sales? ## Footnote 7

Answer 26

* Type of sales * Sales method * Sales cycle (length of time) * Focus * Pricing * Relationship with buyer * Types of products

Question 27

What is the processing of orders and what could it include?

Answer 27

What happens after a sale has been made - it is the devliery of the promise. This could include: * policy documents * mid term adjustments * the completion of a survey * relationship meetings with the customer * setting up a service level agreement with the customer * renewals, including issuing documents and negotiating terms

Question 28

What are the key aspects of processing orders?

Answer 28

* **Accuracy** such as spelling of name or address. Bespoke wording should also be correct. * **Service delivery** should achieve the standards set out by an organisation -Time taken to prepare documents -Keeping promises -Ensuring complaints are handled effectivley * **Ongoing management of the customer/ account** needs and demands should continue to be reviewed, mid term adjustment requests are an opportunity to identify if an adjustment is best to if a new/ differet policy should be issued instead. With commercial customers the following may be discussed in quarterly meetings: - outstanding claims - achievement of service level agreements - the changing needs of the business e.g additional properties - future developments of the business

Question 29

How does the growth of the internet/ e channels influence the sales of policies?

Answer 29

The amount of contact that a customer has with the staff is reduced which places more responsibility of the customer to read and interpret policy features, covers and exclusions. Referrals to contact centres then become mainly for complex queries and the standard policies can be completed online. This means that organisations must ensure thair their website wordings and documents are clear and consider additional training to contact centre staff. ICOBS includes rules about distance communication to protect consumers who have entered into a contract through a distance sale.

Question 30

How does the growth of e channels influence the servicing of policies?

Answer 30

E channels are being used to complete policy admin functions such as: - updating risk improvements - making change requests - updating policies which gives customers greater control

Question 31

What are the stages that lead to a sale?

Answer 31

1) Lead generation 2) Pre-call activity (not available in a contact centre as incoming caller is unknown) 3) Initial introductions 4) Fact find completion 5) Analysis of needs 6) Presentation of recommendations

Question 32

# Stages that lead to a sale What sources may a lead be generated from?

Answer 32

* Web enquiries * Dedicated sales team who identify customers for the consultants to contact * Referrals from other orgnaisations e.g banks, solicitors

Question 33

# Stages that lead to a sale What preparation should be included in pre call activity? ## Footnote Can differ between consumers and commercial clients

Answer 33

* Ensuring you know the products/ services, their features, benefits and exclusions that may be relevant to them * Establishing what their current insurance arrangements are * Knowing what other competitors are likely to offer * For a commercial client, understanding the clients corporate culture i.e. who the key decision makers are * Thinking about opening statements if there is no call guide * Researching commercial clients i.e the nature of their business, it's size and geographical spread.

Question 34

# Stages of a sale What happens in the initial introductions for incoming and outgoing calls?

Answer 34

**Incoming** * Hello * thank you for calling *organisation/ brand* * *name* speaking, how can i help * DPA (for regulatory compliance) **Outgoing** * Hello * im *name* * im calling from *organisation/ brand* * i understand you are interested in *purpose of the call* * i must tell you that this call is recorded for training purposes * how can i help you

Question 35

# Stages of a sale What details tend to be captured in a demands and needs statement?

Answer 35

* Type of trade (if commercial customer) * Nature of risk (e.g if home insurance, how many besrooms, address, type of property) * Nature of work (use of chemicals, heights) * Full disclousre of all relevant information such as previous claims, convictions, bankrutcy, refusal of insurace * Any current insurance contracts * Details of previous insurance * Approach to risk (cautious or risk taking) * Customer's requirements (optional extras, excesses) ## Footnote the duty of disclosure is subjet to the insurance act or CIDRA depending on if commercial or not

Question 36

# Stages of a sale The statement of demands and needs are regulated in the FCAs ICOBS. What are the regulations? ## Footnote 5

Answer 36

* prior to the conclusion of a contract, a firm must specify the demands and needs of a customer based off of the information the customer has provided. * the details must be modulated according to complexlity of the contract * a statement of the demands and needs must be communicated to the customer prior to the conclusion of the contract * a firm may obtain information from the customer in multiple ways such as asking questions or by a questionnaire * when proposing a contract, a firm must ensure it is consistent with the customers insurance demands and needs and this applies whether it is an advised sale or not

Question 37

# stages of a sale (statement of demands and needs) What are the ICOBS 2 requirements when communicating to customers?

Answer 37

1) A firm must communicated to a customer by - paper - a durable meadium other than paper or - a website 2) The firm must communicate the information - in a clear, accurate and comprehensible manner - in an official language of the state of the risk or in a languge agreed by the parties - free of charge

Question 38

How may hard and soft facts assist in the analysis of needs

Answer 38

Hard facts = can be quantified Soft facts = anecdotal / said in passing conversation there may be more than one possible solution for a customer so all facts must be considered and soft thats may differentiate this client from others.

Question 39

in an advised sale, the recommendation is documented on a *what*?

Answer 39

A suitability report

Question 40

What should a suitability report cover? ## Footnote 8

Answer 40

* a summary of the clients circumsrances * the clients aims and objectives * possible disadvantages of the transaction for the client * explanations of all areas of the recommendations (term, waiver of premium, costs, risks) * links of each recommendation to the clients circumstances * reference to alternative products discussed or rejected by the client * be personalised with technical terms explained * reference to areas highlighted by the consultant that were not taken forward and the reasons why ## Footnote The customer must then be provided with a key features document (outlined on another card)

Question 41

Following a suitability report, the customer is provided with a key features document, what is included on this document? What must be outlined by a customer consultant in a non advised sale? ## Footnote 7

Answer 41

* aims, commitments and risk factors * outline of cover provided and its exclusions * any additional benefits * limits and conditions * claims handling * cancellation rights * complaints ## Footnote for a non advised sale, the consultant must list all of the same except the first bullet point

Question 42

Objections in the sales process can fall into what 4 categories? ## Footnote clue - they all begin with P

Answer 42

Product or service Postponement Price Personal reasons

Question 43

# Process of sales What will be covered in the completion of a meeting?

Answer 43

* Documents need to be completed - if done so by the customer consultant then the customer should check and sign. * UW if applicable * Explanation of cancellation rights * Explaining the process of accessing medical records if UW * Reminder of data protection issues * Signing declarations * Collecting ID * Explaining the process to get the policy on risk * Asking the client if they have understood everything that has been explained to them * Provide a summary

Question 44

What are the 7 key skills that apply to a sales meeting or telephone call

Answer 44

1) **Rapport building** 2) **Empathy** 3) **Questioning skills** 4) **Listening skills** 5) **Good preparation** about the customer AND the products to be discussed 6) **Committment** 7) **Follow through** diary management can assist here. only 15% of sales people make more than 3 contacts. Bonus: Handling objections as the customer will feel reassured by the consultants knowledge and have their concerns addressed

Question 45

How can telephone sales differ to other methods?

Answer 45

**No call guides** Can lead to inconsistency as the consultant has more freedom on how the conversation is managed whereas phone calls are guided on questions asked and regulatory statements **Lack of F2F contact** This can be an advantage or disadvantage for some as it can be harder to build a rapport without body language or visual contact but others may find this easier when any negative barriers arent as obvious **Observations when gathering information** Such as the types of car in a car park or how health and safety is implements **Less personal** Consultant needs to work harder to make the discussion personal