Since the Insurance Distribution Directive came into effect in October 2018, it has been necessary to provide retail customers with a snappily titled ‘Insurance Product Information Document’ or ‘IPID’.
This was a fairly benign regulatory decree and one that passed into being without too much comment, other than how to pronounce ‘IPID’ – is it like ‘iPod’, or does the first syllable rhyme with hip? I favour the former over the latter.
The IPID is a standardised document that is intended to allow consumers to make reliable at-a-glance comparisons between different products.
However, this standardisation is what undermines the usefulness of the IPID for menu-based products.
On one insurer’s IPID for example, the ‘What is insured’ column states that out-patient consultations are covered (without qualification), and it is only 24 lines down that mention is made of reduced out-patient options also being available.
When you consider that this product can be purchased without any cover for out-patient consultations, the problem starts to become apparent.
As a result, it is not a good idea to use the IPID as the primary means of communicating the benefits of a plan to a consumer, as one might have done with an old-style policy summary.
It is therefore necessary for the broker to produce their own summary, or to use another piece of insurer literature that isn’t constrained by the rigid IPID format.
The IPID still needs to be provided as a regulatory requirement though, so it becomes yet another document for the client to receive, and one that is ultimately redundant when accompanied by a clearer explanation of the scheme benefits.
Clients being crushed
The amount of literature that now needs to be provided in order to make a compliant sale should be of concern to the regulator, because it is unreasonable to expect consumers to digest so much information.
Worse still, both the insurer and the intermediary are required to provide the IPID, so the redundancy is duplicated.
The IPID may be well-suited to home and motor insurance, but its unsuitedness to the menu-based products that predominate in the private medical insurance market further demonstrates that the regulatory practice of grouping disparate general insurance products is flawed.
It remains to be seen whether the FCA will take the opportunity post-Brexit to deviate from the EU rules that it has hitherto been obliged to incorporate into its rulebook, although this is perhaps wishful thinking.
One change that could be made is that the IPID only needs to be provided by the insurer, leaving the intermediary to provide more illuminating reading material.
As things stand, the IPID seems only to serve the purpose of ticking a regulatory box and adds to the weight of literature under which our customers are being crushed.