What does the new Insurance Distribution Directive mean for NHBC’s Buildmark Cover?
The Insurance Distribution Directive (the “IDD”) came into force on 1 October 2018. For many people, whether in the housebuilding sector or not, this particular piece of legislation probably hasn’t grabbed their attention. However, given the wide scope of its application it does have the potential to affect developers and other key people involved in the sales process.
One of the aims of the IDD was to focus on ensuring that customers were better informed about insurance products in order to minimise the risk of customers purchasing cover that does not meet their needs. In practice, the most significant change to the regime was to require that insurance providers or intermediaries supplied their customers with all of the necessary information prior to the cover being put in place.
These requirements don’t seem like they should have any effect on the housebuilding sector until it becomes clear that section 1 cover under NHBC’s Buildmark cover is essentially deposit protection insurance. Buildmark cover therefore falls within the scope of the IDD as NHBC are acting as a regulated insurer. NHBC are now under an obligation to ensure that purchasers receive the details of their warranty and insurance policy prior to conclusion of missives.
The nature of Buildmark cover (and the various parties involved) gives NHBC a difficult task when it comes to compliance with the IDD. They need help from developers and solicitors to help them comply. There are two ways in which developers and solicitors can contribute to NHBC’s efforts to comply:
- For developers, NHBC have two methods to allow the information they need to be sent to them after a reservation has been taken:
a. For developers with a smaller volume of reservations, the NHBC Portal can be used to enter information on a plot by plot basis.
b. For developers with a higher volume of reservations, the NHBC Portal is unlikely to be an efficient method of providing information. NHBC will therefore allow a bulk upload of details which would allow a developer to extract information they already hold and send on to NHBC on a regular basis.
- Solicitors can also help to ensure that the information is provided before conclusion:
a. For developers’ solicitors, they can try to ensure that the policy numbers and activation codes are requested in time to allow these to be included in the titles packs (or to be sent out with the offer).
b. For purchasers’ solicitors, they should ensure that they register their client’s details on the NHBC conveyancing portal as soon as received which will allow NHBC to issue documentation prior to conclusion.
At the moment, NHBC are only asking for assistance - there is no suggestion that failing to provide the necessary information will result in any sort of enforcement action. However, if in future NHBC are finding that the current approach is not resulting in compliance with the IDD, they may seek to include the requirement for provision of information through the NHBC rules.
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