ICOBS Insurance: Conduct of Business sourcebook

Export part as

ICOBS 1

Application

ICOBS 1.1

The general application rule

The general application rule

ICOBS 1.1.1

See Notes

handbook-rule

This sourcebook applies to a firm with respect to the following activities carried on in relation to a non-investment insurance contract from an establishment maintained by it, or its appointed representative, in the United Kingdom:

Modifications to the general application rule

ICOBS 1.1.2

See Notes

handbook-rule
The general application rule is modified in ICOBS 1 Annex 1 according to the type of firm (Part 1), its activities (Part 2), and its location (Part 3).

ICOBS 1.1.3

See Notes

handbook-rule
The general application rule is also modified in the chapters of this sourcebook for particular purposes, including those relating to the type of firm, its activities or location, and for purposes relating to connected activities.

Guidance

ICOBS 1.1.4

See Notes

handbook-guidance
Guidance on the application provisions is in ICOBS 1 Annex 1 (Part 4).

ICOBS 1 Annex 1

Application (see ICOBS 1.1.2 R)

ICOBS 2

General matters

ICOBS 2.1

Client categorisation

Introduction

ICOBS 2.1.1

See Notes

handbook-guidance

Different provisions in this sourcebook may apply depending on the type of person with whom a firm is dealing:

  1. (1) A policyholder includes anyone who, upon the occurrence of the contingency insured against, is entitled to make a claim directly to the insurance undertaking.
  2. (2) Only a policyholder or a prospective policyholder who makes the arrangements preparatory to him concluding a contract of insurance (directly or through an agent) is a customer. In this sourcebook, customers are either consumers or commercial customers.
  3. (3) A consumer is any natural person who is acting for purposes which are outside his trade or profession.
  4. (4) A commercial customer is a customer who is not a consumer.

Customer to be treated as consumer when status uncertain

ICOBS 2.1.2

See Notes

handbook-rule
If it is not clear in a particular case whether a customer is a consumer or a commercial customer, a firm must treat the customer as a consumer.

Customer covered in both a private and business capacity

ICOBS 2.1.3

See Notes

handbook-guidance
If a customer is acting in the capacity of both a consumer and a commercial customer in relation to a particular contract of insurance, the customer is a commercial customer.

Customer classification examples

ICOBS 2.1.4

See Notes

handbook-guidance
In practice, private individuals may act in a number of capacities. The following table sets out a number of examples of how an individual acting in certain capacities should, in the FSA's view, be categorised.

ICOBS 2.2

Communications to clients and financial promotions

Application

ICOBS 2.2.1

See Notes

handbook-rule
In addition to the general application rule for this sourcebook, this section applies to the communication, or approval for communication, to a person in the United Kingdom of a financial promotion of a non-investment insurance contract unless it can lawfully be communicated by an unauthorised communicator without approval.

Clear, fair and not misleading rule

ICOBS 2.2.2

See Notes

handbook-rule
When a firm communicates information, including a financial promotion, to a customer or other policyholder, it must take reasonable steps to communicate it in a way that is clear, fair and not misleading.

Approving financial promotions

ICOBS 2.2.3

See Notes

handbook-rule
  1. (1) Before a firm approves a financial promotion it must take reasonable steps to ensure that the financial promotion is clear, fair and not misleading.
  2. (2) If, subsequently, a firm becomes aware that a financial promotion is not clear, fair and not misleading, it must withdraw its approval and notify any person that it knows to be relying on its approval as soon as reasonably practicable.

Pricing claims: guidance on the clear, fair and not misleading rule

ICOBS 2.2.4

See Notes

handbook-guidance
  1. (1) This guidance applies in relation to a financial promotion that makes pricing claims, including financial promotions that indicate or imply that a firm can reduce the premium, provide the cheapest premium or reduce a customer's costs.
  2. (2) Such a financial promotion should:
    1. (a) be consistent with the result reasonably expected to be achieved by the majority of customers who respond, unless the proportion of those customers who are likely to achieve the pricing claims is stated prominently;
    2. (b) state prominently the basis for any claimed benefits and any significant limitations; and
    3. (c) comply with other relevant legislative requirements, including The Control of Misleading Advertisements Regulations 1988.

ICOBS 2.3

Inducements

ICOBS 2.3.1

See Notes

handbook-guidance
  1. (1) Principle 8 requires a firm to manage conflicts of interest fairly, both between itself and its customers and between a customer and another client. This principle extends to soliciting or accepting inducements where this would conflict with a firm's duties to its customers. A firm that offers such inducements should consider whether doing so conflicts with its obligations under Principles 1 and 6 to act with integrity and treat customers fairly.
  2. (2) An inducement is a benefit offered to a firm, or any person acting on its behalf, with a view to that firm, or that person, adopting a particular course of action. This can include, but is not limited to, cash, cash equivalents, commission, goods, hospitality or training programmes.

ICOBS 2.4

Record-keeping

ICOBS 2.4.1

See Notes

handbook-guidance
  1. (1) The Senior Management Arrangements, Systems and Controls sourcebook contains high-level record-keeping requirements (see SYSC 3.2.20 R). These require firms to take reasonable care to make and retain adequate records of matters and dealings which are the subject of requirements and standards under the regulatory system, which includes this sourcebook.
  2. (2) This sourcebook does not generally have detailed record-keeping requirements: firms will need to decide what records they need to keep in line with the high-level record-keeping requirements and their own business needs.
  3. (3) Firms should bear in mind the need to deal with requests for information from the FSA as well as queries and complaints from customers which may require evidence of matters such as:
    1. (a) the reasons for personal recommendations;
    2. (b) what documentation has been provided to a customer; and
    3. (c) how claims have been settled and why.

ICOBS 2.5

Exclusion of liability and reliance on others

Exclusion of liability

ICOBS 2.5.1

See Notes

handbook-rule
A firm must not seek to exclude or restrict, or rely on any exclusion or restriction of, any duty or liability it may have to a customer or other policyholder unless it is reasonable for it to do so and the duty or liability arises other than under the regulatory system.

ICOBS 2.5.2

See Notes

handbook-guidance
The general law, including the Unfair Terms Regulations, also limits the scope for a firm to exclude or restrict any duty or liability to a consumer.

Reliance on others

ICOBS 2.5.3

See Notes

handbook-guidance
  1. (1) Where it is compatible with the nature of the obligation imposed by a particular rule and with the Principles, in particular Principles 1 (Integrity), 2 (Skill, care and diligence) and 3 (Management and control), firms may rely on third parties in order to comply with the rules in this sourcebook.
  2. (2) For example, where a rule requires a firm to take reasonable steps to achieve an outcome, it will generally be reasonable for a firm to rely on information provided to it in writing by an unconnected authorised person or a professional firm, unless it is aware or ought reasonably to be aware of any fact that would give reasonable grounds to question the accuracy of that information. However, a firm cannot delegate its responsibility under the regulatory system. For example, where a rule imposes an absolute obligation (such as the requirement for an insurer to handle claims promptly and fairly) although a firm could use outsourcing arrangements to fulfil its obligation, it retains regulatory responsibility for achieving the outcome required.

ICOBS 3

Distance communications

ICOBS 3.1

Distance marketing

Application

ICOBS 3.1.1

See Notes

handbook-rule
This section applies to a firm that carries on any distance marketing activity from an establishment in the United Kingdom, with or for a consumer in the United Kingdom or another EEA State.

Guidance on the Distance Marketing Directive

ICOBS 3.1.2

See Notes

handbook-guidance
Guidance on expressions derived from the Distance Marketing Directive and on the Directive's application in the context of insurance mediation activity can be found in ICOBS 3 Annex 1 G.

The distance marketing disclosure rules

ICOBS 3.1.3

See Notes

handbook-rule

A firm must provide a consumer with the distance marketing information (ICOBS 3 Annex 2 R) in good time before conclusion of a distance contract.

[Note: article 3(1) of the Distance Marketing Directive]

ICOBS 3.1.4

See Notes

handbook-guidance
The rules setting out the responsibilities of insurers and insurance intermediaries for producing and providing information apply to requirements in this section to provide information (see ICOBS 6.1.1 R).

ICOBS 3.1.5

See Notes

handbook-rule

A firm must ensure that the distance marketing information, the commercial purpose of which must be made clear, is provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the legal principles governing the protection of those who are unable to give their consent, such as minors.

[Note: article 3(2) of the Distance Marketing Directive]

ICOBS 3.1.6

See Notes

handbook-rule

When a firm makes a voice telephony communication to a consumer, it must make its identity and the purpose of its call explicitly clear at the beginning of the conversation.

[Note: article 3(3)(a) of the Distance Marketing Directive]

ICOBS 3.1.7

See Notes

handbook-rule

A firm must ensure that the information on contractual obligations to be communicated to a consumer during the pre-contractual phase is in conformity with the contractual obligations which would result from the law presumed to be applicable to the distance contract if that contract is concluded.

[Note: article 3(4) of the Distance Marketing Directive]

Terms and conditions, and form

ICOBS 3.1.8

See Notes

handbook-rule

A firm must communicate to the consumer all the contractual terms and conditions and the information referred to in the distance marketing disclosure rules in writing or another durable medium available and accessible to the consumer in good time before conclusion of any distance contract.

[Note: article 5(1) of the Distance Marketing Directive]

ICOBS 3.1.9

See Notes

handbook-guidance
A firm will provide or communicate information or contractual terms and conditions to a consumer if another person provides or communicates it to the consumer on its behalf.

Commencing performance of the distance contract

ICOBS 3.1.10

See Notes

handbook-rule

The performance of the distance contract may only begin after the consumer has given his approval.

[Note: article 7(1) of the Distance Marketing Directive]

Exception: distance contract as a stage in the provision of another service

ICOBS 3.1.11

See Notes

handbook-rule

This section does not apply to a distance contract to act as insurance intermediary, if the distance contract is concluded merely as a stage in the provision of another service by the firm or another person.

[Note: recital 19 to the Distance Marketing Directive]

Exception: successive operations

ICOBS 3.1.12

See Notes

handbook-rule

In the case of a distance contract comprising an initial service agreement, followed by successive operations or a series of separate operations of the same nature performed over time, the rules in this section only apply to the initial agreement.

[Note: article 1(2) of the Distance Marketing Directive]

ICOBS 3.1.13

See Notes

handbook-rule

If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the distance marketing disclosure rules will only apply:

  1. (1) when the first operation is performed; and
  2. (2) if no operation of the same nature is performed for more than a year, when the next operation is performed (the next operation being deemed to be the first in a new series of operations).

[Note: recital 16 and article 1(2) of the Distance Marketing Directive]

Exception: voice telephony communications

ICOBS 3.1.14

See Notes

handbook-rule
  1. (1) In the case of a voice telephony communication, and subject to the explicit consent of the consumer, only the abbreviated distance marketing information (ICOBS 3 Annex 3 R) needs to be provided during that communication.
  2. (2) However, unless another exemption applies (such as the exemption for means of distance communication not enabling disclosure) a firm must still provide the distance marketing information (ICOBS 3 Annex 2 R) in writing or another durable medium available and accessible to the consumer in good time before conclusion of any distance contract.

[Note: articles 3(3)(b) and 5(1) of the Distance Marketing Directive]

Exception: Means of distance communication not enabling disclosure

ICOBS 3.1.15

See Notes

handbook-rule

A firm may provide the distance marketing information (ICOBS 3 Annex 2 R) and the contractual terms and conditions in writing or another durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a consumer's request using a means of distance communication that does not enable the provision of that information in that form in good time before conclusion of any distance contract.

[Note: article 5(2) of the Distance Marketing Directive]

Consumer's right to request paper copies and change the means of communication

ICOBS 3.1.16

See Notes

handbook-rule

At any time during the contractual relationship the consumer is entitled, at his request, to receive the contractual terms and conditions on paper. The consumer is also entitled to change the means of distance communication used unless this is incompatible with the contract concluded or the nature of the service provided.

[Note: article 5(3) of the Distance Marketing Directive]

Unsolicited services

ICOBS 3.1.17

See Notes

handbook-rule
  1. (1) A firm must not enforce, or seek to enforce, any obligations under a distance contract against a consumer, in the event of an unsolicited supply of services, the absence of reply not constituting consent.
  2. (2) This rule does not apply to the tacit renewal of a distance contract.

[Note: article 9 of the Distance Marketing Directive]

Mandatory nature of consumer's rights

ICOBS 3.1.18

See Notes

handbook-rule

If a consumer purports to waive any of the consumer's rights created or implied by the rules in this section, a firm must not accept that waiver, nor seek to rely on or enforce it against the consumer.

[Note: article 12 of the Distance Marketing Directive]

ICOBS 3.1.19

See Notes

handbook-rule

If a firm proposes to enter into a distance contract with a consumer that will be governed by the law of a country outside the EEA, the firm must ensure that the consumer will not lose the protection created by the rules in this section if the distance contract has a close link with the territory of one or more EEA States.

[Note: articles 12 and 16 of the Distance Marketing Directive]

ICOBS 3.2

E-Commerce

Application

ICOBS 3.2.1

See Notes

handbook-rule
This section applies to a firm carrying on an electronic commerce activity from an establishment in the United Kingdom, with or for a person in the United Kingdom or another EEA State.

Information about the firm and its products or services

ICOBS 3.2.2

See Notes

handbook-rule

A firm must make at least the following information easily, directly and permanently accessible to the recipients of the information society services it provides:

  1. (1) its name;
  2. (2) the geographic address at which it is established;
  3. (3) the details of the firm, including its e-mail address, which allow it to be contacted and communicated with in a direct and effective manner;
  4. (4) an appropriate statutory status disclosure statement (GEN 4 Annex 1 R), together with a statement which explains that it is on the FSA register and includes its FSA register number;
  5. (5) if it is a professional firm, or a person regulated by the equivalent of a designated professional body in another EEA State:
    1. (a) the name of the professional body (including any designated professional body) or similar institution with which it is registered;
    2. (b) the professional title and the EEA State where it was granted;
    3. (c) a reference to the applicable professional rules in the EEA State of establishment and the means to access them; and
  6. (6) where the firm undertakes an activity that is subject to VAT, its VAT number.

[Note: article 5(1) of the E-Commerce Directive]

ICOBS 3.2.3

See Notes

handbook-rule

If a firm refers to price, it must do so clearly and unambiguously, indicating whether the price is inclusive of tax and delivery costs.

[Note: article 5(2) of the E-Commerce Directive]

ICOBS 3.2.4

See Notes

handbook-rule

A firm must ensure that commercial communications which are part of, or constitute, an information society service, comply with the following conditions:

  1. (1) the commercial communication must be clearly identifiable as such;
  2. (2) the person on whose behalf the commercial communication is made must be clearly identifiable;
  3. (3) promotional offers must be clearly identifiable as such, and the conditions that must be met to qualify for them must be easily accessible and presented clearly and unambiguously; and
  4. (4) promotional competitions or games must be clearly identifiable as such, and the conditions for participation must be easily accessible and presented clearly and unambiguously.

[Note: article 6 of the E-Commerce Directive]

ICOBS 3.2.5

See Notes

handbook-rule

An unsolicited commercial communication sent by e-mail by a firm established in the United Kingdom must be identifiable clearly and unambiguously as an unsolicited commercial communication as soon as it is received by the recipient.

[Note: article 7(1) of the E-Commerce Directive]

Requirements relating to the placing and receipt of orders

ICOBS 3.2.6

See Notes

handbook-rule

A firm must (except when otherwise agreed by parties who are not consumers):

  1. (1) give an ECA recipient the following information, clearly, comprehensibly and unambiguously, and prior to the order being placed by the recipient of the service:
    1. (a) the different technical steps to follow to conclude the contract;
    2. (b) whether or not the concluded contract will be filed by the firm and whether it will be accessible;
    3. (c) the technical means for identifying and correcting input errors prior to the placing of the order; and
    4. (d) the languages offered for the conclusion of the contract;
  2. (2) indicate any relevant codes of conduct to which it subscribes and provide information on how those codes can be consulted electronically;
  3. (3) (when an ECA recipient places an order through technological means), acknowledge the receipt of the recipient's order without undue delay and by electronic means (an order and an acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them); and
  4. (4) make available to an ECA recipient appropriate, effective and accessible technical means allowing the recipient to identify and correct input errors prior to the placing of an order.

[Note: articles 10(1) and (2) and 11(1) and (2) of the E-Commerce Directive]

ICOBS 3.2.7

See Notes

handbook-rule

Contractual terms and conditions provided by a firm to an ECA recipient must be made available in a way that allows the recipient to store and reproduce them.

[Note: article 10(3) of the E-Commerce Directive]

Exception: contract concluded by e-mail

ICOBS 3.2.8

See Notes

handbook-rule

The requirements relating to the placing and receipt of orders do not apply to contracts concluded exclusively by exchange of e-mail or by equivalent individual communications.

[Note: article 10(4) and 11(3) of the E-Commerce Directive]

ICOBS 3 Annex 1

Guidance on the Distance Marketing Directive

See Notes

handbook-guidance
This Annex belongs to ICOBS 3.1.2 G

ICOBS 3 Annex 2

Distance marketing information

See Notes

handbook-rule
This Annex belongs to ICOBS 3.1.3 R
[Note: Recitals 21 and 23 to, and article 3(1) of, the Distance Marketing Directive]

ICOBS 3 Annex 3

Abbreviated distance marketing information

See Notes

handbook-rule

This Annex belongs to ICOBS 3.1.14 R

[Note: article 3(3)(b) of the Distance Marketing Directive]

ICOBS 4

Information about the firm, its services and remuneration

ICOBS 4.1

General requirements for insurance intermediaries

Application: who?

ICOBS 4.1.1

See Notes

handbook-rule
This section applies to an insurance intermediary.

Status disclosure: general

ICOBS 4.1.2

See Notes

handbook-rule

Prior to the conclusion of an initial contract of insurance and, if necessary, on its amendment or renewal, a firm must provide the customer with at least:

  1. (1) its name and address;
  2. (2) the fact that it is included in the FSA Register and the means for verifying this;
  3. (3) whether it has a direct or indirect holding representing more than 10% of the voting rights or capital in a given insurance undertaking (that is not a pure reinsurer);
  4. (4) whether a given insurance undertaking (that is not a pure reinsurer) or its parent undertaking has a direct or indirect holding representing more than 10% of the voting rights or capital in the firm; and
  5. (5) the procedures allowing customers and other interested parties to register complaints about the firm with the firm and the Financial Ombudsman Service or, if the Financial Ombudsman Service does not apply, information about the out-of-court complaint and redress procedures available for the settlement of disputes between the firm and its customers.

[Note: article 12(1) of the Insurance Mediation Directive]

Status disclosure exemption: introducers

ICOBS 4.1.3

See Notes

handbook-rule
A firm whose contact with a customer is limited to effecting introductions (see PERG 5.6) need only provide its name and address and whether it is a member of the same group as the firm to which it makes the introduction.

ICOBS 4.1.4

See Notes

handbook-guidance
If a firm goes further than putting a customer in contact with another person (for example, by advising him on a particular policy available from the firm) the full status disclosure requirements will apply.

Status disclosure exemption: connected travel insurance

ICOBS 4.1.5

See Notes

handbook-rule
In relation to a connected travel insurance contract, a firm need only provide the procedures allowing customers and other interested parties to register complaints about the firm with the firm and the Financial Ombudsman Service or, if the Financial Ombudsman Service does not apply, information about the out-of-court complaint and redress procedures available for the settlement of disputes between the firm and its customers.

Scope of service

ICOBS 4.1.6

See Notes

handbook-rule
  1. (1) Prior to the conclusion of an initial contract of insurance (other than a connected travel insurance contract) and, if necessary, on its amendment or renewal, a firm must tell the customer whether:
    1. (a) it gives advice on the basis of a fair analysis of the market; or
    2. (b) it is under a contractual obligation to conduct insurance mediation business exclusively with one or more insurance undertakings; or
    3. (c) it is not under a contractual obligation to conduct insurance mediation business exclusively with one or more insurance undertakings and does not give advice on the basis of a fair analysis of the market.
  2. (2) A firm that does not advise on the basis of a fair analysis of the market must inform its customer that he has the right to request the name of each insurance undertaking with which the firm may and does conduct business. A firm must comply with such a request.

[Note: article 12(1) of the Insurance Mediation Directive]

ICOBS 4.1.7

See Notes

handbook-rule
Prior to conclusion of an initial contract of insurance with a consumer a firm must state whether it is giving a personal recommendation or information.

Guidance on using panels to advise on the basis of a fair analysis

ICOBS 4.1.8

See Notes

handbook-guidance
  1. (1) One way a firm may give advice on a fair analysis basis is by using 'panels' of insurance undertakings which are sufficient to enable the firm to give advice on a fair analysis basis and are reviewed regularly.
  2. (2) A firm which provides a service based on a fair analysis of the market (or from a sector of the market) should ensure that its analysis of the market and the available contracts is kept adequately up-to-date. For example, a firm should update its selection of contracts if aware that a contract has generally become available offering an improved product feature, or a better premium, compared with its current selection. The update frequency will depend on the extent to which new contracts are made available on the market.
  3. (3) The panel selection criteria will be important in determining whether the panel is sufficient to meet the 'fair analysis' criteria. Selection should be based on product features, premiums and services offered to customers, not solely on the benefit offered to the firm.

Means of communication to customers

ICOBS 4.1.9

See Notes

handbook-rule
  1. (1) All information to be provided to a customer in accordance with this chapter must be communicated:
    1. (a) on paper or on any other durable medium available and accessible to the customer;
    2. (b) in a clear and accurate manner, comprehensible to the customer; and
    3. (c) in an official language of the State of the commitment or in any other language agreed by the parties.
  2. (2) The information may be provided orally where the customer requests it, or where immediate cover is necessary.
  3. (3) In the case of telephone selling, the information may be given in accordance with the distance marketing disclosure rules (see ICOBS 3.1.14 R).
  4. (4) If the information is provided orally, it must be provided to the customer in accordance with (1) immediately after the conclusion of the contract of insurance.

[Note: article 13 of the Insurance Mediation Directive]

ICOBS 4.2

Additional requirements for protection policies for insurance intermediaries and insurers

Application: what?

ICOBS 4.2.1

See Notes

handbook-rule
This section applies in relation to a pure protection contract or a payment protection contract for a consumer.

Ensuring customers can make an informed decision

ICOBS 4.2.2

See Notes

handbook-guidance
In considering a customer's information needs for the purposes of Principle 7, a firm should have regard to the importance of information for a customer's purchasing decision when deciding when and how to give it.

ICOBS 4.2.3

See Notes

handbook-guidance
If a firm provides elements of status disclosure information orally as part of an interactive dialogue, it should do so for all elements of the information. In the case of telephone selling, the information may be given in accordance with the distance marketing disclosure rules (see ICOBS 3.1.14 R).

Disclosing the limits of the service provided

ICOBS 4.2.4

See Notes

handbook-rule
  1. (1) In a sale that does not involve a personal recommendation, a firm must take reasonable steps to ensure a customer understands he is responsible for deciding whether a policy meets his demands and needs.
  2. (2) If this is done orally, the information must be provided to the customer in writing or any other durable medium no later than immediately after the conclusion of the contract.
  3. (3) If a firm anticipates providing, or provides, information on any main characteristic of a policy orally during a non-advised sale, taking reasonable steps includes explaining the customer's responsibility orally.
  4. (4) A policy's main characteristics include its significant benefits, its significant exclusions and limitations, its duration and price information.

Status disclosure for insurers

ICOBS 4.2.5

See Notes

handbook-rule
  1. (1) Prior to the conclusion of an initial contract and, if necessary, on its amendment or renewal, an insurer must disclose to the customer at least:
    1. (a) the statutory status disclosure statement (see GEN 4);
    2. (b) whose policies it offers; and
    3. (c) whether it is providing a personal recommendation or information.
  2. (2) If this is done orally, the disclosure must be provided in writing or any other durable medium no later than immediately after the conclusion of the contract.

ICOBS 4.2.6

See Notes

handbook-guidance
Insurers cannot carry on an insurance mediation activity in respect of a third party's products unless they can show a natural fit or necessary connection between their insurance business and the third party's products (see the restriction of business in INSPRU 1.5.13 R).

ICOBS 4.3

Fee disclosure

ICOBS 4.3.1

See Notes

handbook-rule
  1. (1) A firm must provide its customer with details of the amount of any fees other than premium monies for an insurance mediation activity.
  2. (2) The details must be given before the customer incurs liability to pay the fee, or before conclusion of the contract, whichever is earlier.
  3. (3) To the extent that an actual fee cannot be given, a firm must give the basis for calculation.

ICOBS 4.3.2

See Notes

handbook-guidance
The fee disclosure requirement extends to all such fees that may be charged during the life of a policy.

ICOBS 4.4

Commission disclosure for commercial customers

Commission disclosure rule

ICOBS 4.4.1

See Notes

handbook-rule
  1. (1) An insurance intermediary must, on a commercial customer's request, promptly disclose the commission that it and any associate receives in connection with a policy.
  2. (2) Disclosure must be in cash terms (estimated, if necessary) and in writing or another durable medium. To the extent this is not possible, the firm must give the basis for calculation.

ICOBS 4.4.2

See Notes

handbook-guidance
An insurance intermediary should include all forms of remuneration from any arrangements it may have. This includes arrangements for sharing profits, for payments relating to the volume of sales, and for payments from premium finance companies in connection with arranging finance.

ICOBS 4.4.3

See Notes

handbook-guidance
  1. (1) The commission disclosure rule is additional to the general law on the fiduciary obligations of an agent in that it applies whether or not the insurance intermediary is an agent of the commercial customer.
  2. (2) In relation to contracts of insurance, the essence of these fiduciary obligations is generally a duty to account to the agent's principal. But where a customer employs an insurance intermediary by way of business and does not remunerate him, and where it is usual for the firm to be remunerated by way of commission paid by the insurer out of premium payable by the customer, then there is no duty to account but if the customer asks what the firm's remuneration is, it must tell him.

ICOBS 4.5

Initial disclosure document

ICOBS 4.5.1

See Notes

handbook-guidance
Using an initial disclosure document (see ICOBS 4 Annex 1G) or combined initial disclosure document satisfies the status disclosure, scope of service and fee disclosure requirements if it is used in accordance with its notes and provided to the customer at the correct time.

ICOBS 4 Annex 1

Initial disclosure document

See Notes

handbook-guidance

This annex consists only of one or more forms. Forms are to be found through the following address:

Initial disclosure document - icob4_annex1.pdf

ICOBS 5

Identifying client needs and advising

ICOBS 5.1

General

Eligibility to claim benefits: general insurance contracts and pure protection contracts

ICOBS 5.1.1

See Notes

handbook-guidance
  1. (1) In line with Principle 6, a firm should take reasonable steps to ensure that a customer only buys a policy under which he is eligible to claim benefits.
  2. (2) If, at any time while arranging a policy, a firm finds that parts of the cover apply, but others do not, it should inform the customer so he can take an informed decision on whether to buy the policy.

Eligibility to claim benefits: payment protection contracts

ICOBS 5.1.2

See Notes

handbook-rule

A firm arranging a payment protection contract must:

  1. (1) take reasonable steps to ensure that the customer only buys a policy under which he is eligible to claim benefits; and
  2. (2) if, at any time while arranging the policy, it finds that parts of the cover do not apply, inform the customer so he can take an informed decision on whether to buy the policy.

ICOBS 5.1.3

See Notes

handbook-guidance
For a typical payment protection contract the reasonable steps required in the first part of the eligibility rule are likely to include checking that the customer meets any qualifying requirements for different parts of the policy.

Disclosure of material facts

ICOBS 5.1.4

See Notes

handbook-guidance

A firm should bear in mind the restriction on rejecting claims for non-disclosure (). Ways of ensuring a customer knows what he must disclose include:

  1. (1) explaining the duty to disclose all circumstances material to a policy, what needs to be disclosed, and the consequences of any failure to make such a disclosure; or
  2. (2) ensuring that the customer is asked clear questions about any matter material to the insurance undertaking.

ICOBS 5.2

Statement of demands and needs

Application: who? what?

ICOBS 5.2.1

See Notes

handbook-rule

This section applies to:

Statement of demands and needs

ICOBS 5.2.2

See Notes

handbook-rule
  1. (1) Prior to the conclusion of a contract, a firm must specify, in particular on the basis of information provided by the customer, the demands and the needs of that customer as well as the underlying reasons for any advice given to the customer on that policy.
  2. (2) The details must be modulated according to the complexity of the policy proposed.

[Note: article 12(3) of the Insurance Mediation Directive]

Means of communication to customers

ICOBS 5.2.3

See Notes

handbook-rule
  1. (1) A statement of demands and needs must be communicated:
    1. (a) on paper or on any other durable medium available and accessible to the customer;
    2. (b) in a clear and accurate manner, comprehensible to the customer; and
    3. (c) in an official language of the State of the commitment or in any other language agreed by the parties.
  2. (2) The information may be provided orally where the customer requests it, or where immediate cover is necessary.
  3. (3) In the case of telephone selling, the information may be given in accordance with the distance marketing disclosure rules (see ICOBS 3.1.14 R).
  4. (4) If the information is provided orally, it must be provided to the customer in accordance with (1) immediately after the conclusion of the contract of insurance.

[Note: article 13 of the Insurance Mediation Directive]

Statement of demands and needs: non-advised sales

ICOBS 5.2.4

See Notes

handbook-guidance

The format of a statement of demands and needs is flexible. Examples of approaches that may be appropriate where a personal recommendation has not been given include:

  1. (1) providing a demands and needs statement as part of an application form, so that the demands and needs statement is made dependent upon the customer providing personal information on the application form. For instance, the application form might include a statement along the lines of: "If you answer 'yes' to questions a, b and c your demands and needs are those of a pet owner who wishes and needs to ensure that the veterinary needs of your pet are met now and in the future";
  2. (2) producing a demands and needs statement in product documentation that will be appropriate for anyone wishing to buy the product. For example, "This product meets the demands and needs of those who wish to ensure that the veterinary needs of their pet are met now and in the future";
  3. (3) giving a customer a record of all his demands and needs that have been discussed; and
  4. (4) providing a key features document.

ICOBS 5.3

Advised sales

Suitability

ICOBS 5.3.1

See Notes

handbook-rule
A firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgment.

Suitability guidance for protection policies

ICOBS 5.3.2

See Notes

handbook-guidance

In taking reasonable care to ensure the suitability of advice on a payment protection contract or a pure protection contract a firm should:

  1. (1) establish the customer's demands and needs. It should do this using information readily available and accessible to the firm and by obtaining further relevant information from the customer, including details of existing insurance cover; it need not consider alternatives to policies nor customer needs that are not relevant to the type of policy in which the customer is interested;
  2. (2) take reasonable care to ensure that a policy is suitable for the customer's demands and needs, taking into account its level of cover and cost, and relevant exclusions, excesses, limitations and conditions; and
  3. (3) inform the customer of any demands and needs that are not met.

Advice on the basis of a fair analysis

ICOBS 5.3.3

See Notes

handbook-rule

If an insurance intermediary informs a customer that it gives advice on the basis of a fair analysis, it must give that advice on the basis of an analysis of a sufficiently large number of contracts of insurance available on the market to enable it to make a recommendation, in accordance with professional criteria, regarding which contract of insurance would be adequate to meet the customer's needs.

[Note: article 12(2) of the Insurance Mediation Directive]

ICOBS 6

Product Information

ICOBS 6.1

General

Responsibilities of insurers and insurance intermediaries

ICOBS 6.1.1

See Notes

handbook-rule
An insurer is responsible for producing, and an insurance intermediary for providing to a customer, the information required by this chapter and by the distance communication rules (see ICOBS 3.1). However, an insurer is responsible for providing information required on mid-term changes, and an insurance intermediary is responsible for producing price information if it agrees this with an insurer.

ICOBS 6.1.2

See Notes

handbook-rule
If there is no insurance intermediary, the insurer is responsible for producing and providing the information.

ICOBS 6.1.3

See Notes

handbook-rule
An insurer must produce information in good time to enable the insurance intermediary to comply with the rules in this chapter, or promptly on an insurance intermediary's request.

ICOBS 6.1.4

See Notes

handbook-rule
These general rules on the responsibilities of insurers and insurance intermediaries are modified by ICOBS 6 Annex 1 if one of the firms is not based in the United Kingdom, and in certain other situations.

Ensuring customers can make an informed decision

ICOBS 6.1.5

See Notes

handbook-rule
A firm must take reasonable steps to ensure a customer is given appropriate information about a policy in good time and in a comprehensible form so that the customer can make an informed decision about the arrangements proposed.

ICOBS 6.1.6

See Notes

handbook-guidance
The appropriate information rule applies pre-conclusion and post-conclusion, and so includes matters such as mid-term changes and renewals. It also applies to the price of the policy.

ICOBS 6.1.7

See Notes

handbook-guidance

The level of information required will vary according to matters such as:

  1. (1) the knowledge, experience and ability of a typical customer for the policy;
  2. (2) the policy terms, including its main benefits, exclusions, limitations, conditions and its duration;
  3. (3) the policy's overall complexity;
  4. (4) whether the policy is bought in connection with other goods and services;
  5. (5) distance communication information requirements (for example, under the distance communication rules less information can be given during certain telephone sales than in a sale made purely by written correspondence (see ICOBS 3.1.14 R)); and
  6. (6) whether the same information has been provided to the customer previously and, if so, when.

ICOBS 6.1.8

See Notes

handbook-guidance
In determining what is "in good time", a firm should consider the importance of the information to the customer's decision-making process and the point at which the information may be most useful. Distance communication timing requirements are also relevant (for example, the distance communication rules enable certain information to be provided post-conclusion in telephone and certain other sales (see ICOBS 3.1.14 R and ICOBS 3.1.15 R)).

ICOBS 6.1.9

See Notes

handbook-guidance
Cancellation rights do not affect what information it is appropriate to give to a customer in order to enable him to make an informed purchasing decision.

ICOBS 6.1.10

See Notes

handbook-guidance
A firm dealing with a consumer may wish to provide information in a policy summary or as a key features document (see ICOBS 6 Annex 2).

Providing evidence of cover

ICOBS 6.1.11

See Notes

handbook-guidance
Under Principle 7 a firm should provide evidence of cover promptly after inception of a policy. Firms will need to take into account the type of customer and the effect of other information requirements, for example those under the distance communication rules (ICOBS 3.1).

Group policies

ICOBS 6.1.12

See Notes

handbook-guidance
Under Principle 7, a firm that sells a group policy should provide appropriate information to the customer to pass on to other policyholders. It should tell the customer that he should give the information to each policyholder.

Price disclosure: connected goods or services

ICOBS 6.1.13

See Notes

handbook-rule
  1. (1) If a policy is bought by a consumer in connection with other goods or services a firm must, before conclusion of the contract, disclose its premium separately from any other prices and whether buying the policy is compulsory.
  2. (2) In the case of a distance contract, disclosure of whether buying the policy is compulsory may be made in accordance with the timing requirements under the distance communication rules (see ICOBS 3.1.8 R, ICOBS 3.1.14 R and ICOBS 3.1.15 R).

Exception to the timing rules: distance contracts and voice telephony communications

ICOBS 6.1.14

See Notes

handbook-rule
Where a rule in this chapter requires information to be provided in writing or another durable medium before conclusion of a contract, a firm may instead provide that information in accordance with the distance communication timing requirements (see ICOBS 3.1.14 R and ICOBS 3.1.15 R).

ICOBS 6.2

Pre-contract information: general insurance contracts

Application: what?

ICOBS 6.2.1

See Notes

handbook-rule
This section applies in relation to a general insurance contract.

Non-life insurance directive disclosure requirements

ICOBS 6.2.2

See Notes

handbook-rule

Before a general insurance contract is concluded, a firm must inform a customer who is a natural person of:

  1. (1) the law applicable to the contract where the parties do not have a free choice, or the fact that the parties are free to choose the law applicable and, in the latter case, the law the firm proposes to choose; and
  2. (2) the arrangements for handling policyholders' complaints concerning contracts including, where appropriate, the existence of a complaints body (usually the Financial Ombudsman Service), without prejudice to the policyholders' right to take legal proceedings.

[Note: article 31 of the Third Non-Life Directive]

ICOBS 6.2.3

See Notes

handbook-rule
  1. (1) If the insurance undertaking is an EEA firm, the firm must inform the customer, before any commitment is entered into, of the EEA State in which the head office or, where appropriate, the branch with which the contract is to be concluded, is situated.
  2. (2) Any documents issued to the customer must convey the information required by this rule.

[Note: article 43(2) of the Third Non-Life Directive]

ICOBS 6.2.4

See Notes

handbook-rule

The contract or any other document granting cover, together with the insurance proposal where it is binding upon the customer, must state the address of the head office, or, where appropriate, of the branch of the insurance undertaking which grants the cover.

[Note: article 43(2) of the Third Non-Life Directive]

Disclosure of cancellation right

ICOBS 6.2.5

See Notes

handbook-rule
  1. (1) A firm must provide a consumer with information on the right to cancel a policy.
  2. (2) The information to be provided on the right to cancel is:
    1. (a) its existence;
    2. (b) its duration;
    3. (c) the conditions for exercising it;
    4. (d) information on the amount which the consumer may be required to pay if he exercises it;
    5. (e) the consequences of not exercising it; and
    6. (f) the practical instructions for exercising it.
  3. (3) The information must be provided in good time before conclusion of the contract and in writing or another durable medium.

ICOBS 6.3

Pre- and post-contract information: pure protection contracts

Life insurance directive disclosure requirements

ICOBS 6.3.1

See Notes

handbook-rule
  1. (1) Before a pure protection contract is concluded, a firm must inform a customer of the information in the table below.
  2. (2) The information must be communicated in a clear and accurate manner, in writing, and in an official language of the State of the commitment or in another language agreed by the parties.

[Note: Annex III(A) to the Consolidated Life Directive]

ICOBS 6.3.2

See Notes

handbook-guidance
If the contract is concluded with a commercial customer by telephone, the information in this section may be provided immediately after conclusion.

Mid-term changes

ICOBS 6.3.3

See Notes

handbook-rule

In addition to the policy conditions, both general and special, a customer must, throughout the term of a pure protection contract, receive:

  1. (1) any change in the name of the insurance undertaking, its legal form or the address of its head office and, where appropriate, of the agency or branch which concluded the contract; and
  2. (2) all the information marked '*' in the table of information to be communicated before conclusion, in the event of a change in the policy conditions or amendment of the law applicable to the contract.

[Note: Annex III(B) to the Consolidated Life Directive]

ICOBS 6.4

Pre- and post-contract information: protection policies

Application: what?

ICOBS 6.4.1

See Notes

handbook-rule
This section applies in relation to a payment protection contract or a pure protection contract except as otherwise stated.

Oral sales: ensuring customers can make an informed decision

ICOBS 6.4.2

See Notes

handbook-rule
  1. (1) If a firm provides information orally during a sales dialogue with a customer on a main characteristic of a policy, it must do so for all the policy's main characteristics.
  2. (2) A firm must take reasonable steps to ensure that the information provided orally is sufficient to enable the customer to take an informed decision on the basis of that information, without overloading the customer or obscuring other parts of the information.

ICOBS 6.4.3

See Notes

handbook-guidance
  1. (1) A policy's main characteristics include its significant benefits, its significant exclusions and limitations, its duration and price information.
  2. (2) A significant exclusion or limitation is one that would tend to affect the decision of customers generally to buy. In determining what exclusions or limitations are significant, a firm should particularly consider the exclusions or limitations that relate to the significant features and benefits of a policy and factors which may have an adverse effect on the benefit payable under it. Another type of significant limitation might be that the contract only operates through certain means of communication, e.g. telephone or internet.

Policy summary

ICOBS 6.4.4

See Notes

handbook-rule
A firm must provide a consumer with a policy summary in good time before the conclusion of a contract.

Payment protection contracts: importance of reading documentation

ICOBS 6.4.5

See Notes

handbook-rule
  1. (1) A firm must draw a consumer's attention to the importance of reading payment protection contract documentation before the end of the cancellation period to check that the policy is suitable for the consumer.
  2. (2) This must be done orally if a firm provides information orally on any main characteristic of a policy.

Price information: general

ICOBS 6.4.6

See Notes

handbook-rule
A firm must provide price information in a way calculated to enable the customer to relate it to a regular budget.

ICOBS 6.4.7

See Notes

handbook-guidance

Price information is likely also to include at least the total premium (or the basis for calculating it so that the customer can verify it) and, where relevant:

  1. (1) for policies of over one year with reviewable premiums, the period for which the quoted premium is valid, and the timing of reviews;
  2. (2) other fees, administrative charges and taxes payable by the customer through the firm; and
  3. (3) a statement identifying separately the possibility of any taxes not payable through the firm.

ICOBS 6.4.8

See Notes

handbook-guidance
Price information should be given in writing or another durable medium in good time before conclusion of the contract. This is in addition to any requirement or decision to provide the information orally. In the case of a distance contract concluded over the telephone, it may be provided in writing or another durable medium no later than immediately after conclusion.

Price information: premiums paid using a non-revolving credit agreement

ICOBS 6.4.9

See Notes

handbook-rule
  1. (1) This rule applies when a premium will be paid using a credit agreement other than a revolving credit agreement.
  2. (2) A firm must provide price information in a way calculated to enable the customer to understand the additional repayments that relate to the purchase of the policy, and the total cost of the policy.
  3. (3) Price information must reflect any difference between the duration of the policy and that of the credit agreement.
  4. (4) A firm must explain to a customer, as applicable, that the premium will be added to the amount provided under the credit agreement and that interest will be payable on it.

Price information: policies sold in connection with revolving credit arrangements

ICOBS 6.4.10

See Notes

handbook-guidance
  1. (1) This guidance applies to policies bought as secondary products to revolving credit agreements (such as store cards or credit cards).
  2. (2) Price information should be given in a way calculated to enable a typical customer to understand the typical cumulative cost of taking out the policy. This does not require oral disclosure where there is a sales dialogue with a customer. However, consistent with Principle 7, a firm should ensure that this element of price information is not undermined by any information given orally.

Mid-term changes

ICOBS 6.4.11

See Notes

handbook-rule
  1. (1) Throughout the term of a policy, a firm must provide a customer with information about any change to:
    1. (a) the premium, unless the change conforms to a previously disclosed formula; and
    2. (b) any term of the policy, together with an explanation of any implications of the change where necessary.
  2. (2) This information must be provided in writing or another durable medium in good time before the change takes effect or, if the change is at the customer's request, as soon as is practicable provided the firm explains the implications of the change before it takes effect.

ICOBS 6.4.12

See Notes

handbook-guidance
  1. (1) When explaining the implications of a change, a firm should explain any changes to the benefits and significant or unusual exclusions arising from the change.
  2. (2) Firms will need to consider whether mid-term changes are compatible with the original policy, in particular whether it reserves the right to vary premiums, charges or other terms. Firms also need to ensure that any terms which reserve the right to make variations are not themselves unfair under the Unfair Terms Regulations.

ICOBS 6 Annex 1

Responsibilities of insurers and insurance intermediaries in certain situations

See Notes

handbook-rule
This annex belongs to ICOBS 6.1.4 R

The table in this annex modifies the general rules on the responsibilities of insurers and insurance intermediaries for producing and providing to a customer the information required by this chapter.

ICOBS 6 Annex 2

Policy summary for consumers

This annex belongs to ICOBS 6.1.10 G and ICOBS 6.4.4 R

ICOBS 7

Cancellation

ICOBS 7.1

The right to cancel

The right to cancel

ICOBS 7.1.1

See Notes

handbook-rule

A consumer has a right to cancel, without penalty and without giving any reason, within:

  1. (1) 30 days for a contract of insurance which is, or has elements of, a pure protection contract or payment protection contract; or
  2. (2) 14 days for any other contract of insurance or distance contract.

[Note: article 6(1) of the Distance Marketing Directive in relation to a distance contract and article 35 of the Consolidated Life Directive in relation to a pure protection contract]

ICOBS 7.1.2

See Notes

handbook-guidance
A firm may provide longer or additional cancellation rights voluntarily, but if it does these should be on terms at least as favourable to the consumer as those in this chapter, unless the differences are clearly explained.

Exceptions to the right to cancel

ICOBS 7.1.3

See Notes

handbook-rule

The right to cancel does not apply to:

  1. (1) a travel and baggage policy or similar short-term policy of less than one month's duration;
  2. (2) a policy the performance of which has been fully completed by both parties at the consumer's express request before the consumer exercises his right to cancel;
  3. (3) a pure protection contract of six months' duration or less which is not a distance contract;
  4. (4) a pure protection contract effected by the trustees of an occupational pension scheme, an employer or a partnership to secure benefits for the employees or the partners in the partnership;
  5. (5) a general insurance contract which is neither a distance contract nor a payment protection contract, sold by an intermediary who is an unauthorised person (other than an appointed representative); and
  6. (6) a connected contract which is not a distance contract.

[Note: articles 6(2)(b) and (c) of the Distance Marketing Directive and 35(1) and (2) of the Consolidated Life Directive]

ICOBS 7.1.4

See Notes

handbook-guidance
A 'similar short-term policy' is any policy where the event or activity being insured is less than one month's duration. 'Duration' refers to the period of cover rather than the period of the contract.

Start of the cancellation period

ICOBS 7.1.5

See Notes

handbook-rule

The cancellation period begins either:

  1. (1) from the day of the conclusion of the contract, except in respect of a pure protection contract where the time limit begins when the customer is informed that the contract has been concluded; or
  2. (2) from the day on which the consumer receives the contractual terms and conditions and any other pre-contractual information required under this sourcebook, if that is later than the date referred to above.

[Note: article 35 of the Consolidated Life Directive and article 6(1) of the Distance Marketing Directive]

Exercising a right to cancel

ICOBS 7.1.6

See Notes

handbook-rule

If a consumer exercises the right to cancel he must, before the expiry of the relevant deadline, notify this following the practical instructions given to him. The deadline shall be deemed to have been observed if the notification, if on paper or another durable medium, is dispatched before the deadline expires.

[Note: article 6(1) and (6) of the Distance Marketing Directive]

ICOBS 7.2

Effects of cancellation

Termination of contract

ICOBS 7.2.1

See Notes

handbook-rule
By exercising the right to cancel, the consumer withdraws from the contract and the contract is terminated.

Payment for the service provided before cancellation

ICOBS 7.2.2

See Notes

handbook-rule
  1. (1) When a consumer exercises the right to cancel he may only be required to pay, without any undue delay, for the service actually provided by the firm in accordance with the contract.
  2. (2) The amount payable must not:
    1. (a) exceed an amount which is in proportion to the extent of the service already provided in comparison with the full coverage of the contract; and
    2. (b) in any case be such that it could be construed as a penalty.
  3. (3) A firm must not require a consumer to pay any amount:
    1. (a) unless it can prove that the consumer was duly informed about the amount payable; or
    2. (b) if it commenced the performance of the contract before the expiry of the cancellation period without the consumer's prior request.
  4. (4) A consumer cannot be required to pay any amount when exercising the right to cancel a pure protection contract.
  5. (5) A consumer cannot be required to pay any amount when exercising the right to cancel a payment protection contract unless a claim is made during the cancellation period and settlement terms are subsequently agreed.

[Note: article 7(1), (2) and (3) of the Distance Marketing Directive]

ICOBS 7.2.3

See Notes

handbook-guidance

The amount payable may include:

  1. (1) any sums that a firm has reasonably incurred in concluding the contract, but should not include any element of profit;
  2. (2) an amount for cover provided (i.e. a proportion of the policy's exposure that relates to the time on risk);
  3. (3) a proportion of the commission paid to an insurance intermediary sufficient to cover its costs; and
  4. (4) a proportion of any fees charged by an insurance intermediary which, when aggregated with any commission to be repaid, would be sufficient to cover its costs.

ICOBS 7.2.4

See Notes

handbook-guidance
In most cases, the FSA would expect the proportion of a policy's exposure that relates to the time on risk to be a pro rata apportionment. However, where there is material unevenness in the incidence of risk, an insurer could use a more accurate method. The sum should be reasonable and should not exceed an amount commensurate to the risk incurred.

ICOBS 7.2.5

See Notes

handbook-guidance
An insurer and an insurance intermediary should take reasonable steps to ensure that double recovery of selling costs is avoided, particularly where the contract for the insurance intermediary's services is a distance contract, or where both commission and fees are recouped by the insurer and insurance intermediary respectively.

Firm's obligation on cancellation

ICOBS 7.2.6

See Notes

handbook-rule
  1. (1) A firm must, without any undue delay and no later than within 30 days, return to a consumer any sums it has received from him in accordance with the contract, except as specified in this section.
  2. (2) This period shall begin from the day on which the firm receives the notification of cancellation.

[Note: article 7(4) of the Distance Marketing Directive]

Consumer's obligation on cancellation

ICOBS 7.2.7

See Notes

handbook-rule
  1. (1) A firm is entitled to receive from a consumer any sums and/or property he has received from the firm without any undue delay and no later than within 30 days.
  2. (2) This period shall begin from the day on which the consumer dispatches the notification of cancellation.

[Note: article 7(5) of the Distance Marketing Directive]

ICOBS 7.2.8

See Notes

handbook-guidance
If an insurer has made a charge for services provided, the sums and property to be returned by a consumer should not include any money or property provided in settling a claim.

Set off

ICOBS 7.2.9

See Notes

handbook-rule
Any sums payable under this section are owed as simple contract debts and may be set off against each other.

Automatic cancellation of an attached distance contract

ICOBS 7.2.10

See Notes

handbook-guidance
A consumer's notice to cancel a distance contract may also operate to cancel any attached contract which is also a distance financial services contract. This is unless the consumer gives notice that cancellation of the contract is not to operate to cancel the attached contract. (See the Distance Marketing Regulations.) Where relevant, this should be disclosed to the consumer along with other information on cancellation.

ICOBS 8

Claims handling

ICOBS 8.1

Insurers: general

ICOBS 8.1.1

See Notes

handbook-rule

An insurer must:

  1. (1) handle claims promptly and fairly;
  2. (2) provide reasonable guidance to help a policyholder make a claim and appropriate information on its progress;
  3. (3) not unreasonably reject a claim (including by terminating or avoiding a policy); and
  4. (4) settle claims promptly once settlement terms are agreed.

ICOBS 8.1.2

See Notes

handbook-rule

A rejection of a consumer policy holder's claim is unreasonable, except where there is evidence of fraud, if it is for:

  1. (1) non-disclosure of a fact material to the risk which the policyholder could not reasonably be expected to have disclosed; or
  2. (2) non-negligent misrepresentation of a fact material to the risk; or
  3. (3) breach of warranty or condition unless the circumstances of the claim are connected to the breach and unless (for a pure protection contract):
    1. (a) under a 'life of another' contract, the warranty relates to a statement of fact concerning the life to be assured and, if the statement had been made by the life to be assured under an 'own life' contract, the insurer could have rejected the claim under this rule; or
    2. (b) the warranty is material to the risk and was drawn to the customer's attention before the conclusion of the contract.

ICOBS 8.2

Motor vehicle liability insurers

Application: who? what?

ICOBS 8.2.1

See Notes

handbook-rule
  1. (1) This section applies to a motor vehicle liability insurer.
  2. (2) The rules in this section relating to the appointment of claims representatives apply in relation to claims by injured parties resulting from accidents occurring in an EEA State other than the injured party's EEA State of residence which are caused by the use of vehicles insured through an establishment in, and normally based in, an EEA State other than the injured party's EEA State of residence.
  3. (3) The rules in this section relating to claims handling apply in respect of claims arising from any accident caused by a vehicle normally based in the United Kingdom.

[Note: article 1 of the Fourth Motor Insurance Directive and article 4(4)(4e) of the Fifth Motor Insurance Directive]

Requirement to appoint claims representatives

ICOBS 8.2.2

See Notes

handbook-guidance
A firm must have a claims representative in each EEA State other than the United Kingdom (see threshold condition 2A).

Conditions for appointing claims representatives

ICOBS 8.2.3

See Notes

handbook-rule

A firm must ensure that each claims representative:

  1. (1) is responsible for handling and settling a claim by an injured party;
  2. (2) is resident or established in the EEA State where it is appointed;
  3. (3) collects all information necessary in connection with the settlement of a claim and takes the measures necessary to negotiate its settlement;
  4. (4) possesses sufficient powers to represent the firm in relation to an injured party and to meet an injured party's claim in full; and
  5. (5) is capable of examining cases in the official language(s) of the EEA State of residence of the injured party.

[Note: article 4(1), (4) and (5) of the Fourth Motor Insurance Directive]

ICOBS 8.2.4

See Notes

handbook-guidance
The requirement to possess sufficient powers does not prevent a claims representative from seeking additional authority or instructions if needed. It does prevent it from declining to deal with, or transferring responsibility for, claims properly referred to it by an injured party, or their representative.

Notifying the appointment of claims representatives

ICOBS 8.2.5

See Notes

handbook-rule
  1. (1) A firm must notify to the information centres of all EEA States:
    1. (a) the name and address of the claims representative which they have appointed in each of the EEA States;
    2. [Note: article 5(2) of the Fourth Motor Insurance Directive]
    3. (b) the telephone number and effective date of appointment; and
    4. (c) any material change to information previously notified.
  2. (2) Notification must be made within ten business days of an appointment or of a material change.

Motor vehicle liability claims handling rules

ICOBS 8.2.6

See Notes

handbook-rule

Within three months of the injured party presenting his claim for compensation:

  1. (1) the firm of the person who caused the accident or its claims representative must make a reasoned offer of compensation in cases where liability is not contested and the damages have been quantified; or
  2. (2) the firm to whom the claim for compensation has been addressed or its claims representative must provide a reasoned reply to the points made in the claim in cases where liability is denied or has not been clearly determined or the damages have not been fully quantified.

[Note: article 4(6) of the Fourth Motor Insurance Directive and article 4(4)(4e, first paragraph) of the Fifth Motor Insurance Directive]

ICOBS 8.2.7

See Notes

handbook-rule
  1. (1) If liability is initially denied, or not admitted, within three months of any subsequent admission of liability, the firm must (directly, or through a claims representative) make a reasoned offer of settlement, if, by that time, the relevant claim for damages has been fully quantified.
  2. (2) If an injured party's claim for damages is not fully quantified when it is first made, within three months of the subsequent receipt of a fully quantified claim for damages, the firm must (directly, or through a claims representative) make a reasoned offer of damages, if liability is admitted at that time.

ICOBS 8.2.8

See Notes

handbook-rule
A claim for damages will be fully quantified for the purpose of this section when the injured party provides written evidence which substantiates or supports the amounts claimed.

Interest on compensation

ICOBS 8.2.9

See Notes

handbook-rule
  1. (1) If the firm, or its claims representative, does not make an offer as required by this section, the firm must pay simple interest on the amount of compensation offered by it or awarded by the court to the injured party, unless interest is awarded by any tribunal.
  2. (2) The interest calculation period begins when the offer should have been made and ends when the compensation is paid to the injured party, or his authorised representative.
  3. (3) The interest rate is the Bank of England's base rate (from time to time), plus 4%.

[Note: article 4(6) of the Fourth Motor Insurance Directive. Regulation 6 of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 makes this rule actionable under section 150 of the Act (Actions for damages) by any person who suffers loss as a result of its contravention]

ICOBS 8.2.10

See Notes

handbook-rule
A firm will be taken to have received a claim, or a fully quantified claim, for damages when the claim is delivered to it, or a claims representative, by any person by any method of delivery which is lawful in the firm's, or its claims representative's, respective State of residence or establishment.

ICOBS 8.2.11

See Notes

handbook-guidance
The provisions in this section are not intended to, and do not, restrict any rights which the injured party, or its motor vehicle liability insurer, or any other insurer acting on its behalf, may have and which would enable any of them to begin legal proceedings against the person causing the accident or that person's, or the vehicle's, insurers.

ICOBS 8.3

Insurance intermediaries (and insurers handling claims on another insurer's policy)

Application: who?

ICOBS 8.3.1

See Notes

handbook-guidance
This section applies to an insurance intermediary, and to an insurer handling a claim on another insurance undertaking's policy.

Interaction with the general law

ICOBS 8.3.2

See Notes

handbook-guidance
A firm is expected to comply with the general law on the duties of an insurance intermediary. This section does not seek to set out the full extent of those duties.

Conflicts of interest

ICOBS 8.3.3

See Notes

handbook-guidance
  1. (1) Principle 8 requires a firm to manage conflicts of interest fairly. SYSC 10 also requires an insurance intermediary to take all reasonable steps to identify conflicts of interest, and maintain and operate effective organisational and administrative arrangements to prevent conflicts of interest from constituting or giving rise to a material risk of damage to its clients.
  2. (2) [deleted]
  3. (3) If a firm acts for a customer in arranging a policy, it is likely to be the customer's agent (and that of any other policyholders). If the firm intends to be the insurance undertaking's agent in relation to claims, it needs to consider the risk of becoming unable to act without breaching its duty to either the insurance undertaking or the customer making the claim. It should also inform the customer of its intention.
  4. (4) A firm should in particular consider whether declining to act would be the most reasonable step where it is not possible to manage a conflict, for example where the firm knows both that its customer will accept a low settlement to obtain a quick payment, and that the insurance undertaking is willing to settle for a higher amount.

Dealing with claims notifications without claims handling authority

ICOBS 8.3.4

See Notes

handbook-guidance
A firm that does not have authority to deal with a claim should forward any claim notification to the insurance undertaking promptly, or inform the policyholder immediately that it cannot deal with the notification.

Transitional Provisions and Schedules

ICOBS TP 1

Transitional Provisions

ICOBS Sch 1

Record keeping requirements

See Notes

handbook-guidance

See Notes

handbook-guidance

ICOBS Sch 2

Notification requirements

ICOBS Sch 2.1

See Notes

handbook-guidance
There are no notification requirements in ICOBS.

ICOBS Sch 3

Fees and other required payments requirements

ICOBS Sch 3.1

See Notes

handbook-guidance
There are no requirements for fees or other payments in ICOBS.

ICOBS Sch 4

Powers exercised

ICOBS Sch 4.1

See Notes

handbook-guidance

ICOBS Sch 4.2

See Notes

handbook-guidance

ICOBS Sch 5

Rights of action for damages

ICOBS Sch 5.1

See Notes

handbook-guidance
The table below sets out the rules in ICOBS contravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.

ICOBS Sch 5.2

See Notes

handbook-guidance
If a "Yes" appears in the column headed "For private person?", the rule may be actionable by a private person under section 150 (or, in certain circumstances, his fiduciary or representative; see article 6(2) and (3)(c) of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256)). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right of action under section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given.

ICOBS Sch 5.3

See Notes

handbook-guidance
The column headed "For other person?" indicates whether the rule may be actionable by a person other than a private person (or his fiduciary or representative) under article 6(2) and (3) of those Regulations. If so, an indication of the type of person by whom the rule may be actionable is given.

ICOBS Sch 5.4

See Notes

handbook-guidance

ICOBS Sch 6

Rules that can be waived

ICOBS Sch 6.1

See Notes

handbook-guidance
As a result of regulation 10 of the Regulatory Reform (Financial Services and Markets Act 2000) Order 2007 (SI 2007/1973) the FSA has power to waive all its rules. However, if the rules incorporate requirements laid down in European directives, it will not be possible for the FSA to grant a waiver that would be incompatible with the United Kingdom's responsibilities under those directives.