The impacts of the Insurance Distribution Directive on conveyancers arranging legal indemnity insurance

It is now well over two years since the Insurance Distribution Directive (IDD) came into force on 1 October 2018, bringing a number of fundamental changes for conveyancers who need to arrange insurance. Both the SRA and CLC introduced new rules for firms undertaking insurance activities, which can be reviewed here and here, respectively.

The IDD is designed to ensure a level playing field across all those providing, facilitating and arranging insurance products, and seeks to strengthen customer protection. The rules apply to all firms that sell, advise on or conclude insurance products, including legal indemnity policies, making them applicable to all firms undertaking conveyancing.

The new directive introduced:

  • Enhanced and reconfirmed general principles for insurance distributors, intermediaries and cover holders to act fairly and in their customer’s best interest
  • Requirements to communicate in a manner that is clear, fair and not misleading and to ensure that remuneration does not conflict with the duty to act in the customer’s best interest
  • The Insurance Product Information Document (IPID) – a simple, industry wide standardised insurance document, which aims to provide consumers with clear information about the product they are purchasing enabling them to make more informed decisions. Since the IDD was introduced, the single most asked question has been “Do we need to obtain a choice of quotes from different insurers?”

The answer is that any firm that relies upon a single insurer to provide insurance for its clients is limiting their clients’ options, which may potentially expose them to an allegation of breaching their obligations under IDD. The firm will need to demonstrate that it has reviewed the terms and products offered by a range of insurers, and are satisfied that one insurer is best suited to meet the demands and needs of its clients. That is a tall order given the large number of legal indemnity products now available, premium terms on offer and the product differences between insurers.

With a historically limited choice of providers in this area, it could be challenging and time consuming to obtain a sufficiently wide choice of comparison quotes/products but this is no longer the case. In recent years, the market has developed significantly with an ever-increasing number of insurers providing greater competition and a range of products relevant to the ever-changing needs of the marketplace.

Whilst insurance products must be ‘fit for purpose’ and acceptable to lenders, it would be unwise to think that price is not also a major consideration for clients, particularly if a similar insurance product is available elsewhere at terms that are more competitive.

From meetings and conversations with a wide range of conveyancers it would seem that, in spite of the introduction of IDD, there remains much uncertainty about how far firms have or should embrace the new regime. Whatever stance a firm adopts, it is clear that conveyancers are still under intense pressure to get transactions over the line, and arranging legal indemnity insurance need not be seen as an onerous and time-consuming part of the process. However, IDD clearly has the interest of clients at its core, and as such, conveyancers are duty bound to consider this when choosing any necessary insurance policies.

DUAL Asset’s online portal is one of the more recent innovations, making it very easy for property lawyers to obtain and compare a range of insurance products from competing A rated insurers. It gives them the ability to procure up to four quotes on a single portal, usually taking no more time than it takes to obtain a single quote elsewhere. Conveyancers save much needed time and their clients are offered a choice, helping to meet the requirements of the current IDD regulations.

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