GIGI 3
Insurance:
Conduct of Business sourcebook (ICOB)
GIGI 3.1
Introduction
- 01/12/2004
What does ICOB cover?
GIGI 3.1.1
See Notes
This chapter provides a guide to the
rules in the Insurance: Conduct of Business sourcebook (ICOB). These rules
govern a firm's relationship with its customers before, during and after the
sale of a non-investment insurance contract. They aim to ensure that firms
treat customers fairly.
- 01/12/2004
GIGI 3.1.2
See Notes
The table below summarises the content
of each chapter of ICOB.
Not all of ICOB will
be relevant to you and not all the content of any given chapter will be relevant
- it will depend on the business you do. For example, some of our rules will
apply only when you deal with a retail customer and others will apply only
when you deal with a commercial customer. Some rules apply to insurance companies
in their capacity as product providers and these are generally not covered
in this Guide. At the beginning of each chapter of ICOB you will find a section titled 'Application'.
This will tell you if all or part of that chapter applies to you.
- 01/12/2004
GIGI 3.1.3
See Notes
This Guide does not cover the rules on
distance non-investment mediation contracts in ICOB 8 as we think these contracts rarely exist. You should check the
guidance at ICOB 1.7.3 G (4) to see if
you provide distance non-investment mediation contracts.
- 01/12/2004
GIGI 3.1.4
See Notes
Summary of
the content of ICOB
| Chapter | Title | Does it apply to you? | What does it include? |
| ICOB 1 | Application and purpose | Yes | •Sets
out the scope of ICOB,
including to which firms the rules apply, to what activities
and where the rules apply •A summary of which parts of the ICOB rules apply to firms •Guidance on the application of other parts of the Handbook |
| ICOB 2 | General rules including unfair inducements | Yes | •General
requirements that apply throughout ICOB •Communications to customers must be clear, fair and not misleading •Rules on inducements •Prohibition on excessive charges for retail customers |
| ICOB 3 | Financial promotion | Yes | •Requirement
for financial promotions to be clear, fair and not misleading •Rules on comparative advertising •Rules on the approval of promotions |
| ICOB 4 | Advising and selling standards | Yes | •Information
on the status of the firm •Suitability of advice •Provision of a demands and needs statement •Provision of commission information for commercial customers •Restrictions on unsolicited services (including tacit renewals) |
| ICOB 5 | Product disclosure | Yes - partially | •Responsibilities
of insurance companies and intermediaries •Content of product information and when it must be provided |
| ICOB 6 | Cancellation | No - although the rules will be of interest to insurance intermediaries (see paragraph 3.5.2) | •Cancellation rights for retail customers in relation to non-investment insurance contracts |
| ICOB 7 | Claims handling | Yes - partially | •Obligations
on insurance companies •Obligations on intermediaries to act with due care, skill and diligence and to avoid conflicts of interest |
| ICOB 8 | Distance non-investment mediation contracts | Yes - if you arrange these contracts | •Information
to be given to customers •Restrictions on unsolicited services (including tacit renewals) •Cancellation requirements |
- 06/03/2006
What activities does ICOB apply to?
GIGI 3.1.5
See Notes
ICOB applies only to intermediaries who
sell and administer 'non-investment insurance contracts' or who communicate
and approve 'non-investment financial promotions'. The terms 'non-investment
insurance contract' and 'non-investment financial promotion' have a special
meaning in the rules - see Appendix A. The defined term 'insurance intermediary'
(see Appendix A) includes an insurance company when selling directly. However, as we explained in Chapter
1, this Guide is
not designed for insurance companies and does not cover all the rules that
apply to them. Where
there is a chain of intermediaries between the insurance company and the customer,
ICOB applies only to the intermediary in contact with the customer (ICOB
1.2.3 R (2)).
- 31/05/2005
Which customers does ICOB apply to?
GIGI 3.1.6
See Notes
ICOB uses the defined terms 'retail customer'
and 'commercial customer' (these terms have a special meaning in the rules
- see Appendix A for details). 'Customer' means the customer taking out a policy and not other
'policyholders' (see 3.1.8 below for an explanation of policyholder), so disclosures
required under ICOB only need to be made to that person unless otherwise stated.
The only chapters that apply more widely are Chapter 2 (General rules including
unfair inducements) and Chapter 7 (Claims handling).
- 06/03/2006
GIGI 3.1.7
See Notes
If it is not clear whether your customer
is a retail or commercial one, he should be treated as a retail customer (ICOB
1.2.6 R). Guidance on when a customer is a retail customer
or a commercial customer is given in ICOB 1.7.3 G (1). Where a customer who is an individual buys a policy that covers
him in both a private capacity and for his business, he must be treated as
a retail customer (ICOB 1.2.6A R). For example,
a driving instructor taking out motor insurance to cover both his business
and private use of the vehicle should be treated as a retail customer.
- 06/03/2006
How does ICOB apply to group policies?
GIGI 3.1.8
See Notes
ICOB contains separate provisions for
'group policies' (see ICOB 1.2.15 Rand ICOB
1.2.16 G), which are defined as non-investment insurance contracts that
someone (either
a commercial or a retail customer) enters into as legal holder of the policy on his own behalf and
for other persons who are, or will become, policyholders (group policy is
a defined term - see the Handbook Glossary for the full definition). A policyholder
includes anyone who is entitled to make a claim directly to the insurance
company (ICOB 1.2.16 G (2)). ICOB applies
in full in respect of the legal holder of the policy, but only the following
requirements must be met by intermediaries as regards the other persons who
are, or will become, policyholders under a group policy:
(1) if one of these persons receives a personal recommendation from
an intermediary about joining a group scheme, the intermediary must ensure
that the recommendation is suitable and give the person a demands and needs
statement (see paragraphs 3.3.18 to 3.3.25 of this Guide);
and
(2) a commercial or retail customer who is the legal holder of the policy must be given product
information to pass on to the other persons (see
ICOB 5.4.8 R to ICOB 5.4.9 G -
commercial customers, and ICOB 5.3.29 R to ICOB
5.3.30 G - retail customers).
- 06/03/2006
General requirements
GIGI 3.1.9
See Notes
There are several general rules that
apply in ICOB (set out in ICOB 2)
covering:
(1) clear, fair and not misleading communication (ICOB 2.2.3 R);
(2) unfair inducements (ICOB 2.3);
(3) when you can rely on information provided to you by another person
(ICOB
2.4);
(4) preventing you from avoiding or limiting any duty or liability
you have to a customer under the regulatory system (ICOB 2.5);
(5) general requirements related to distance contracts (ICOB 2.7);
(6) general requirements on record keeping (ICOB 2.8);
(7) general provision
allowing information to be sent only to the first-named customer where a contract
is effected jointly (ICOB 2.9); and
(8) general provision
that an insurance intermediary must ensure its charges to a retail customer
are not excessive (ICOB 2.10).
- 06/03/2006
Key Facts logo
GIGI 3.1.10
See Notes
We developed the key facts logo following consumer research to highlight
key information that customers should read. The ICOB rules say that it can
be used on the initial disclosure document (IDD) and that it must be used
on the combined initial disclosure document (CIDD) and policy summary (see
paragraphs 3.3.7 to 3.3.11 and 3.4.19
- 3.4.20 respectively).
You will find the logo on our website at: www.fsa.gov.uk/pubs/other/keyfacts_logo. We also require the logo to be used on certain documents required
by our rules in the investment and mortgage markets. The ICOB rules also prevent
firms using the key facts logo on other documents (ICOB 2.2.2 R and ICOB 3.8.1 R (3)).
- 31/05/2005
What do the rules say on excessive charges and when do they apply?
GIGI 3.1.11
See Notes
You need to ensure that your charges
to retail customers for insurance mediation services are not excessive (see ICOB 2.10). In determining whether or not your charges are
excessive you should consider:
(1) the level of
your charges compared to charges for similar services or products in the market;
(2) the degree to
which the charges are an abuse of the trust put in you by your retail customer;
and
(3) the nature and
extent of information provided to your customer on charges.
- 06/03/2006
GIGI 3.2
Financial promotion (ICOB 3)
- 01/12/2004
Introduction
GIGI 3.2.1
See Notes
Financial promotions include but are
not limited to advertisements. A financial promotion is an invitation or inducement
to engage in an investment activity (which includes insurance). They can be
solicited or unsolicited and can take a variety of forms, such as mailshots
and newspaper or TV advertisements. The financial promotion rules relating
to non-investment insurance contracts (which we call 'non-investment financial
promotions') are in ICOB 3.
- 01/12/2004
What is the scope of the financial promotion rules?
GIGI 3.2.2
See Notes
Financial promotions are prohibited unless:
| • | they are communicated by an authorised person; or |
| • | an authorised person has approved the content of the promotion; or |
| • | an exemption applies. |
- 31/05/2005
GIGI 3.2.3
See Notes
- 31/05/2005
GIGI 3.2.4
See Notes
Even if the rules in ICOB 3 do
not apply, because your promotion falls within an exemption, other rules in
ICOB still apply. For example, you would still need to comply with ICOB
2.2.3 R, which says that communications must be clear,
fair and not misleading. You may also need to give the information required
by ICOB
4 (advising and selling standards) and ICOB 5 (product information) as part of the promotion, e.g. if that is
the only way to ensure that the customer receives this information before
the conclusion of the contract.
- 31/05/2005
What rules apply to regulated non-investment financial promotions?
GIGI 3.2.5
See Notes
Where ICOB
3 applies, you must be able to show that you have taken
reasonable steps to ensure that the non-investment financial promotion is
clear, fair and not misleading (ICOB 3.8.1 R). ICOB
3.8.2 E contains a 'checklist' of matters you should
bear in mind when communicating or approving a non-investment financial promotion.
- 31/05/2005
GIGI 3.2.6
See Notes
In addition, ICOB 3.8.3 G contains guidance on the clear, fair and non-misleading obligation
which includes the following points:
(1) if a promotion is directed at a particular group of recipients
who are expected to have particular knowledge of the contract being promoted,
this should be made clear;
(2) any quotations of opinion should be a fair representation and
it should be made clear if there is a connection between the person expressing
the opinion and the firm;
(3) you should avoid
using small print to qualify prominent claims;
(4) price quotations, if they are not precise, should be representative
of the premium that would be charged for someone in a similar position to
the customer;
(5) if a quote is
an estimate only, you should make that clear, together with the fact that
the actual premium will depend upon individual circumstances; and
(6) if the promotion
says you can reduce a premium, give the cheapest premium or reduce other costs,
the promotion should contain a prominent statement explaining how this will be achieved,
and should explain with equal prominence any significant limitations on the
availability of the savings offered.
- 01/02/2006
GIGI 3.3
Advising and Selling Standards (ICOB 4)
- 01/12/2004
Introduction
GIGI 3.3.1
See Notes
This section of the Guide explains the
advising and selling rules in ICOB 4.
The rules in ICOB 4 cover:
(1) information about your firm ('status disclosure') (ICOB 4.2);
(2) suitability of advice (ICOB 4.3);
(3) statement of demands and needs (ICOB 4.4);
(4) [deleted]
(5) telling commercial customers about your commission (ICOB 4.6);
(6) unsolicited services (ICOB 4.7);
and
(7) the language in which information should be provided (ICOB
4.8).
None of these
rules apply when you are dealing with a commercial customer insuring a 'large
risk' (a contract of large risks has a special meaning in the rules - see
Appendix A). An
AR that has an insurer as its principal must comply with all the above rules
even if its insurer principal benefits from an exemption in ICOB 4 (for example, from status disclosure), but does not need to do
so if the AR is acting as a third party processor for the insurer (see paragraphs
3.3.12 to 3.3.14 below).- 06/03/2006
What information do you need to give customers about your firm and the services you provide?
GIGI 3.3.2
See Notes
Summarised below is the information
you need to disclose to your retail and commercial customers unless you are
introducing (ICOB 4.2.8 R provides a more
detailed explanation):
(1) Name and address of your firm.
(2) Your firm's statutory status, using the appropriate wording required
by the General Provisions sourcebook (see GEN 4 Annex 1),
for example, that you are authorised and regulated by the Financial Services
Authority.
(3) That (1) and (2) can be checked on the FSA's Register.
(4) Any holdings you have in an insurance company, and that an insurance company or its parent has in your firm
that represent more than 10 per cent of the voting rights or the capital of
the insurance company or your firm.
(5) The range of insurance companies you are selecting products from
in a sale to a particular customer. This can be from a wide range of insurance
companies (which is referred to in the rules as providing a service on the
basis of a 'fair analysis' of the market), or from just one or a limited number
of insurance companies. You must also tell the customer that he can request
a list of the insurance companies you deal with, unless the service you provide
is on the basis of a 'fair analysis' of the market.
(6) How the customer can complain to you and that complaints may subsequently
be referred to the Financial Ombudsman Service (FOS).
(7) The compensation arrangements if you are unable to meet your liabilities.
- 31/05/2005
When do you have to give this information?
GIGI 3.3.3
See Notes
You must provide all the information above before conclusion of the non-investment
insurance contract, in
a durable medium unless one of the following situations, set out in ICOB
4.2.2 R, applies:
(1) the customer asks for the information to be provided orally;
(2) immediate cover is required; or
(3) the contract with the intermediary is by telephone and the customer agrees to receiving more limited
information.
- 31/05/2005
GIGI 3.3.4
See Notes
In the first two cases you must give the information
at paragraph 3.3.2 orally before the conclusion of the non-investment insurance contract.
However, if the contract is concluded over the telephone and the customer agrees to receiving limited information,
at least the details listed below must be provided before conclusion of the
contract:
(1) the name of your firm;
(2) if you initiated contact, the purpose of the contact;
(3) the name of the person in contact with the customer and his link
with your firm; and
(4) that other information is available on request, and the nature
of the information.
- 31/05/2005
GIGI 3.3.5
See Notes
You must then give the customer all the information in paragraph 3.3.2 in a durable medium immediately after conclusion
of the contract.
- 31/05/2005
GIGI 3.3.6
See Notes
The information above does not need to
be given when contracts are renewed if the information given out at inception
of the contract remains up-to-date. If certain elements have changed then
you must update the customer on these particular elements but you do not need
to send out a whole new set of information (ICOB 4.2.20 R).
- 01/12/2004
Do you have to use the template documents in the rules when giving information about your status?
GIGI 3.3.7
See Notes
We have included two template documents
in Annexes 1 and 2 to ICOB 4 that
you can use to give the status information in paragraph 3.3.2 to your customers.
We call these the initial disclosure document (IDD) and the combined initial
disclosure document (CIDD). These documents have been developed by us and
tested using consumer research. You can download templates of these documents from our website:
www.fsa.gov.uk/Pages/Doing/small_firms/general/templates/index.shtml
.
Using these
documents is optional; you can choose to present the status disclosure information in a different format if
you wish.
- 06/03/2006
GIGI 3.3.8
See Notes
Where you are selling just non-investment
insurance contracts, you can use the IDD to provide the status information
above. You can use all or part of the IDD, but in all cases you must ensure
that all the status information required by the rules is given to the customer.
However, if you choose not to use the full IDD then you must not include the
key facts logo or the heading and text in Section 1 of the IDD.
- 01/12/2004
GIGI 3.3.9
See Notes
Where you use the full IDD, it must be a standalone
document and there
are certain rules on the use of the key facts logo, for example, on its size,
prominence and positioning (ICOB 4.2.6 R). You cannot make
changes (including adding, altering or removing text) to the full IDD unless
allowed by the notes that accompany the form.
- 31/05/2005
GIGI 3.3.10
See Notes
Where you are arranging mortgages and/or
packaged products and also non-investment insurance contracts, you can give
the customer a CIDD. This means you can describe the service you are providing
in relation to all these products in one document. If you choose to use the
CIDD, you must use the document in full and make no changes to the text other
than those allowed by the notes that accompany the form. Also, unlike the
insurance rules, the rules in the Mortgage: Conduct of Business sourcebook
(MCOB) and Conduct of Business sourcebook (COB) require you to give the IDD
or CIDD on initial contact with the customer.
- 01/12/2004
GIGI 3.3.11
See Notes
There are examples of completed IDDs
and CIDDs on our website:
www.fsa.gov.uk/Pages/Doing/small_firms/insurance/disclosure/idds.shtml
and www.fsa.gov.uk/Pages/Doing/small_firms/insurance/disclosure/cidds.shtml.
- 06/03/2006
Changes to disclosure requirements when your firm carries on insurance mediation activities or regulated mortgage activities for another authorised firm or an AR
GIGI 3.3.12
See Notes
A waiver and modification by consent
has been in force for firms (third party processors)
who undertake regulated activities on
behalf of another authorised firm. This waiver and modification affected MCOB 1.2.1 R, ICOB 1.2.1 R and GEN
4.3.1 R. This has now been replaced by permanent rule
amendments, which came into force on 1 June 2005. See the Third Party Processors
Instrument 2005 - 2005/25 - www.fsahandbook.info/FSA/handbook/LI/2005/2005_25.pdf
- 31/05/2005
GIGI 3.3.13
See Notes
The
rule amendments allow a third party processor (Firm A) undertaking regulated mortgage
activities or insurance mediation activities (in relation to non-investment
insurance contracts) on
behalf of another authorised firm (Firm B) under an outsourcing contract to disclose
to customers that
it is B where our rules would otherwise require A to disclose its real identity.
The outsourcing agreement
between the two firms must acknowledge that the firm outsourcing the activities (Firm B) accepts responsibility
for the activities carried on by the other firm (Firm A) on its behalf.
- 31/05/2005
GIGI 3.3.14
See Notes
The rules also cater for cases where an AR acts as third party
processor for
its principal,
or where an authorised firm acts as third party processor for an AR.
- 31/05/2005
What do you have to disclose about your firm when you are only introducing?
GIGI 3.3.15
See Notes
Where you are only introducing a customer
to another intermediary (or to an insurance company) you are not required
to give the information at paragraph 3.3.2. Instead, you must give the customer
the following information in good time before the introduction is made (see ICOB 4.2.9 R):
(1) the name and address of your firm;
(2) your statutory status using the appropriate wording required by
the General Provisions sourcebook (see GEN 4 Annex 1R);
(3) details of any fees you will charge for the introduction; and
(4) whether you and the firm you are introducing to are members of
the same group.
- 31/05/2005
When can you tell the customer that you are providing a service on a fair analysis basis?
GIGI 3.3.16
See Notes
As noted above,
one of your options is to disclose that you provide a service on a fair analysis
basis. You cannot state that you offer a fair analysis service - that is,
that you consider a representative sample of the market when selecting products
- unless you have considered a sufficiently large number of insurance contracts
in the relevant sector for that particular customer and that consideration
is based on adequate knowledge of that sector. There is guidance on how this
requirement can be satisfied, including the selection and use of panels and
the frequency with which panel arrangements should be reviewed, in ICOB
4.2.12 G to ICOB 4.2.13 G.
- 31/05/2005
What information do you have to give on fees?
GIGI 3.3.17
See Notes
You must disclose
any fees (actual fees or, where actual fees cannot be given, the basis for
calculating fees) you charge to retail and commercial customers for mediation
services (ICOB 4.2.15 R to ICOB
4.2.18 G). The information must be given to the customer
before they become liable to pay the fee, or before conclusion of the contract,
whichever is earlier. So, for example, fees that will be charged for mid-term
adjustments must be disclosed before conclusion of the contract. The information
can be provided in any medium before conclusion of the contract, and must
be given in a durable medium immediately after conclusion of the contract.
Fees do not include premiums or commission that forms part of premium.
- 31/05/2005
GIGI 3.3.18
See Notes
If you choose to use
the full IDD (see paragraph 3.3.9), section 4 requires you to state the amount
of the fee you charge for your services, if any, together with an explanation
of what the fee is for and when it is payable. If you do not know the exact
amount of the fee you may give the basis of calculating it (e.g. £X
per hour). If the fee is only payable in certain circumstances then you may
state this and cross refer to another document for details of the circumstances.
If you use the full IDD you cannot add words to describe what other remuneration
you might receive, e.g. commission.
- 31/05/2005
What are the requirements for advised sales?
GIGI 3.3.19
See Notes
The rules on
advised sales are in ICOB 4.3 (Suitability).
These rules apply when you make a 'personal recommendation' (this term has
a special meaning - see Appendix A for further details) to a customer to buy
or sell a non-investment insurance contract. The personal recommendation must
be based on the scope of the service you provide (selection of insurance contracts
on a fair analysis basis or from one or a limited number of insurance companies).
- 31/05/2005
GIGI 3.3.20
See Notes
A
personal recommendation has three elements:
(1) you must give advice describing the merits of buying or selling
the insurance contract;
(2) the advice must relate to a specific contract, e.g. 'I recommend
ABC's contents insurance'; and
(3) the advice must be to a specific person or specific group of people.
- 31/05/2005
GIGI 3.3.21
See Notes
There is guidance on the regulated activity
of 'advising on contracts of insurance' in the perimeter guidance in the Perimeter Guidance manual (see PERG
5.8).
- 06/03/2006
GIGI 3.3.22
See Notes
If your sale involves a personal recommendation, you must ensure
that the contract is suitable for the customer's demands and needs.
To do this you should first assess the customer's demands and needs
and then assess the suitability of the contract against these.
- 31/05/2005
What is the statement of demands and needs and when do you have to give it to the customer?
GIGI 3.3.23
See Notes
You must give
all your customers a demands and needs statement when you sell them a non-investment
insurance contract, including at renewal (ICOB 4.4.1 R).
The statement must contain:
(1) details of your customer's demands and needs;
(2) a statement of whether a personal recommendation has, or has not,
been provided; and
(3) where a personal recommendation is made, the reasons for making
the recommendation.
- 31/05/2005
GIGI 3.3.24
See Notes
The statement
must also reflect the complexity of the contract. ICOB 4.4.3 G to ICOB 4.4.6 G includes guidance
on the style and presentation of the demands and needs statement. If the contract
is straightforward, and you have not made a personal recommendation, this
guidance says that you may be able to satisfy the rule by including a generic
statement in your product information, for example.
- 31/05/2005
GIGI 3.3.25
See Notes
The
demands and needs statement must be given before conclusion of the contract,
unless the contract is concluded over the telephone. For telephone sales it
must be provided immediately after the conclusion of the contract in a durable
medium.
- 31/05/2005
GIGI 3.3.26
See Notes
The
demands and needs statement can be provided orally if the customer requests
it or if immediate cover is necessary, but in both cases it must be provided
in a durable medium immediately after contract conclusion.
- 31/05/2005
Do you need to keep records of the advice you give?
GIGI 3.3.27
See Notes
Where
a personal recommendation is made and the customer acts on that recommendation
by buying from you the contract you recommended, you must keep a copy of the
demands and needs statement. You must keep this for at least three years from
the date on which you made the personal recommendation (see ICOB 4.4.7 R). You do not need to keep a copy if the customer does not act on
your recommendation.
- 31/05/2005
GIGI 3.3.28
See Notes
[text moved
to GIGI
3.1.11 G]
- 06/03/2006
Do you need to disclose the commission you receive?
GIGI 3.3.29
See Notes
ICOB 4.6 requires you to disclose
commission to commercial customers on request. If asked, you must disclose
any commission earned by you plus any commission earned by any associate.
The commission has to be disclosed in a durable medium and in cash terms.
If you cannot indicate it in cash terms, you must give the basis of its calculation,
also in a durable medium.
- 31/05/2005
GIGI 3.3.30
See Notes
Commission includes remuneration arrangements
for sharing profits and payments relating to volume of sales (see ICOB
4.6.7 G).
- 31/05/2005
GIGI 3.3.31
See Notes
By associate, we mean any company in
the same group, any appointed representative of your firm or a firm in the
same group or any other person or firm connected to your firm. Where an associate
is part of a distribution chain, you still need to disclose any commission
paid to it. But you do not need to give information on the commission earned
throughout the distribution chain.
- 31/05/2005
GIGI 3.3.32
See Notes
There are no rules requiring you to tell
retail customers about your commission although normal agency law requirements
apply.
- 31/05/2005
What do the rules on unsolicited services mean?
GIGI 3.3.33
See Notes
ICOB 4.7.1 R prevents
you from providing services to retail customers in connection with non-investment
insurance contracts, where this involves a request for immediate or deferred
payment, unless you have obtained the customer's prior consent. This includes
entering into these contracts but does not prevent the tacit renewal of these
contracts (ICOB 4.7.2 R). For example,
this means that the common practice of rolling forward insurance contracts
at renewal and continuing to take direct debit payments can continue without
breaching this rule. This rule only applies to distance contracts.
- 31/05/2005
GIGI 3.4
Product disclosure (ICOB 5)
- 01/12/2004
Introduction
GIGI 3.4.1
See Notes
This section explains the rules on product
information, which are in
ICOB 5.
- 31/05/2005
GIGI 3.4.2
See Notes
The rules differentiate between the information
to be provided to commercial customers and to retail customers. The rules
cover:
(1) the responsibilities of insurance companies and intermediaries
in terms of producing and delivering product information (ICOB 5.2);
(3) the form and content of the information provided (ICOB 5.5);
(4) white labelling (ICOB 5.6);
and
(5) record keeping (ICOB 5.7).
- 01/12/2004
What are the responsibilities of insurance companies and intermediaries?
GIGI 3.4.3
See Notes
If both the insurance company and intermediary
are authorised and are operating from a permanent place of business in the
UK, the insurance company will normally produce most of the product information
and the intermediary will be required to give it to the customer (ICOB
5.2.2 R). However, if the insurance company whose contract
you are selling does not operate from a permanent place of business in the
UK, you will be responsible for producing the information and giving it to
the customer.
- 01/12/2004
GIGI 3.4.4
See Notes
An insurance company we regulate must
enable you to comply with our rules (e.g. to provide information to the customer before the conclusion
of the contract) by giving you the information that it prepares in good time
to allow you to meet those standards (ICOB 5.2.12 R).
- 31/05/2005
What information do you have to give retail customers when selling insurance?
GIGI 3.4.5
See Notes
ICOB 5.3 sets
out the information that you have to give to a retail customer before and
after conclusion of a contract, mid-term and on renewal. This includes information
about the terms of the contract, price, cancellation rights and claims handling. ICOB
5.3 needs to be read with ICOB 5.5, which gives more details about the content of such information,
in particular the policy summary and price information.
- 01/12/2004
GIGI 3.4.6
See Notes
We distinguish between different types of sale. The information that needs to be given in each case is shown in the table below. The types of sale are:
(1) non-distance sales - where there is some face-to-face contact between you and the customer, even if some of the negotiations take place by telephone, fax etc (see ICOB 5.3.1 R to ICOB 5.3.5 G);
(2) distance sales where you are able to provide information to the customer in a durable medium before the contract is concluded, for example, post and e-mail (see ICOB 5.3.6 R (1)); and
(3) distance sales where you are unable to provide information to the customer in a durable medium before the contract is concluded, for example, by telephone (see ICOB 5.3.6 R (2) to ICOB 5.3.8 R).
- 01/12/2004
GIGI 3.4.7
See Notes
Product information
requirements for different mediums of sale with retail customers:
| Before conclusion of the contract | After conclusion of the contract |
| Non-distance sales (ICOB 5.3.1 R to ICOB 5.3.5 G) | |
| Policy
summary Price Directive-required information Draw attention orally to policy summary and the section on exclusions | Policy
document Claims information Cancellation information, where applicable Compensation scheme - extent and level of cover* |
| Distance sales - where information can be provided in a durable medium before contract conclusion (ICOB 5.3.6 R (1)) | |
| Policy
summary Price Directive-required information Policy document Claims information Cancellation information, where applicable Compensation information, where applicable, if not already in policy summary* | No additional information |
| Distance sales where information cannot be provided in a durable medium before contract conclusion (ICOB 5.3.6 R (2) to ICOB 5.3.8 R) | |
| Name
of insurance undertaking Type of insurance and cover Significant features and benefits Significant or unusual exclusions or limitations Total price Possibility that taxes or costs may exist that are not payable via the intermediary Cancellation information Where to notify a claim The nature of other information available on request (for telephone sales only) | Policy
summary Price Directive-required information Policy document Claims information Cancellation information Compensation information, where applicable, if not already included in policy summary* |
| * The policy summary must state whether or not there is a compensation scheme. The extent and level of cover can be included in the policy summary or be provided separately. | |
- 31/05/2005
GIGI 3.4.8
See Notes
Where our rules require
you to give the name of the insurance undertaking, you only need to disclose
the first-named undertaking before conclusion of a coinsured policy. If the
policy is insured at Lloyd's, it is sufficient to use 'The association of
underwriters known as Lloyd's' or similar wording. You need to give details
of all the insurers after conclusion. For Lloyd's syndicates it is sufficient
detail to identify the syndicates - for example, the Lloyd's agreed abbreviation.
- 31/05/2005
What information do you have to give a retail customer on renewal of his policy?
GIGI 3.4.9
See Notes
Before a policy
is due for renewal, unless you have a good reason to believe that your retail
customer will not want to renew the policy, you must give the retail customer
information about changes to the policy, information on price and cancellation
and tell him that he can ask for a new policy document if he wishes. This
information has to be given to the customer no less than 21 days before his policy expires, or
you must tell the customer no less than 21 days before expiry that you no longer deal with the insurance
company or it is not willing to renew. Examples of situations when you could
assume the customer would not want to renew are short term travel policies
and creditor insurance tied to a loan, where the insurance ends at the same
time as the loan. The rules on renewals for retail customers are covered in ICOB
5.3.15 R to ICOB 5.3.23 G.
- 06/03/2006
GIGI 3.4.10
See Notes
The situation
is different for a policy with monthly renewal - see ICOB 5.3.16 R. See also ICOB
6.1.3 G for
guidance on when such a policy exists.
- 31/05/2005
What do you have to do if there is a mid-term change?
GIGI 3.4.11
See Notes
A retail customer must be told about
changes to any term or condition of the contract before the change takes effect,
and you must explain to him the implications of any change. This includes
changes to the premium, unless the change is in line with previously agreed
terms of the contract, for example, a periodic percentage increase. The information
must usually be given to the retail customer in a durable medium before the
changes takes effect, but if the change has been requested by the retail customer
himself, you can if necessary just explain the implications orally and give
him the information in a durable medium promptly afterwards. These rules are
in ICOB
5.3.24 R to ICOB 5.3.28 G.
- 31/05/2005
Information for commercial customers
What information do you have to give commercial customers when selling insurance?
GIGI 3.4.12
See Notes
You must always give
your commercial customer information about a contract before the conclusion
of that contract, unless the contract relates to a large risk. The amount
of detail given can vary depending on the customer's knowledge, experience
and ability - the rules simply say that it must be sufficient to allow the
customer to make an informed decision. In addition, you must tell your commercial
customer the amount of the premium and any fees and certain additional information
required under various European directives (ICOB 5.4.1 R).
- 31/05/2005
GIGI 3.4.13
See Notes
After the contract is concluded you must give the commercial customer
the policy document promptly (ICOB 5.4.5 R)
(as previously mentioned, the rules require insurance companies to give you
documents in time for you to comply with rules such as this one). The requirement
to give the commercial customer a policy document promptly after conclusion
also applies (unlike the pre-conclusion requirements) to commercial customers
insuring large risks.
- 31/05/2005
GIGI 3.4.14
See Notes
These rules are set out in ICOB 5.4.1 R to ICOB
5.4.7 G.
- 31/05/2005
What happens with group policies sold to commercial and retail customers?
GIGI 3.4.15
See Notes
If you sell a group policy to a commercial or retail customer
and members of the group have a direct right to claim under that policy, you
must, promptly after the conclusion of the contract, give:
(1) the retail customer
in all cases; and
(2) the commercial
customer, where there are members of the group policy who are capable of being
retail customers;
a policy document
and policy summary. And you must inform the customer that they should provide
the policy summary to each policyholder who is capable of being a retail customer
and tell them a copy of the policy document is available on request.- 31/05/2005
GIGI 3.4.16
See Notes
The
information can be given in any form which is in writing - examples include
a booklet or an employer's intranet.
- 31/05/2005
GIGI 3.4.17
See Notes
ICOB
5.3.29 R to ICOB 5.3.30 G apply
where a retail customer takes out a group policy, and ICOB 5.4.8 R to ICOB 5.4.9 G where a commercial
customer takes out a group policy.
- 31/05/2005
What do you have to do when renewing a commercial customer's policy?
GIGI 3.4.18
See Notes
A commercial
customer must be given renewal terms 'in good time' before expiry of his policy,
or be told that you no longer deal with the insurance company or it is not
willing to renew, unless you have reason to believe that the customer does
not want to renew the policy (ICOB 5.4.10 R to ICOB
5.4.14 R). As explained in ICOB 5.2.13 G, we consider 'in good time' to mean that the customer should receive
the information early enough to be useful to him.
- 31/05/2005
What does the policy summary have to contain and who do you have to give it to?
GIGI 3.4.19
See Notes
You will need to give
a policy summary to all retail customers and also to a commercial customer
who takes out a group policy where there are members of the group policy who
are capable of being retail customers. The policy summary will usually be
produced by the insurance company. The policy summary contains key information
a retail customer should read before deciding whether or not to take out a
policy. So we require it to be a separate document or - if it is part of another
document - to be in a prominent place and clearly identifiable as important
information for the customer. It must also include the key facts logo (ICOB
5.5.5 R).
- 31/05/2005
GIGI 3.4.20
See Notes
The policy summary can only include the information set out in
our rules. This includes the key facts logo, the main features of the policy,
and significant or unusual exclusions
or limitations. It also has to include signposting from the significant or unusual exclusions
or limitations to the policy document, in case the customer wants more information.
These rules are in ICOB 5.5.1 R to ICOB 5.5.13 G.
- 01/02/2006
What directive information do you have to give to retail and commercial customers?
GIGI 3.4.21
See Notes
The information that you must give the
customer as required under various European directives is summarised in ICOB
5.5.20 R. This sometimes duplicates information you
have to give customers under other rules in ICOB 5 or
in ICOB
4 (Advising and selling standards). ICOB 5.5.17 G explains that you do not have to give information twice unless
this is required by a specific rule.
- 31/05/2005
What does the policy document consist of?
GIGI 3.4.22
See Notes
The 'policy document' is all the contract
terms and conditions, including the terms specific to a particular customer.
It is defined as "a policy in a durable medium", and a policy
is "a contract of insurance ... or any instrument evidencing such a
contract". As explained in ICOB 5.5.27 R to ICOB
5.5.28 G, the terms and conditions can be set out in
more than one document, but must be given to the customer at the same time.
Our rules require a policy document to be given to the customer before the
contract is concluded in the case of distance contracts falling under ICOB
5.3.6 R (1). Provided the full terms and conditions
are given to the retail customer before conclusion in or with a document providing
evidence of the contract, for example, a cover note, the policy booklet can
be provided after conclusion.
- 31/05/2005
What does the statement of price rule require?
GIGI 3.4.23
See Notes
The statement of price rule requires
you to identify separately certain components of the total price as well as
the total price that the customer will pay (see ICOB 5.5.14 R). For example, you must disclose the amount of premium and fees
separately.
- 31/05/2005
GIGI 3.4.24
See Notes
You will need to give an exact amount
for the components of the total price and for the total price as well. You
may show the basis of calculation of the amount instead, but only if it is
not possible to give an exact amount. For example, if a creditor insurance
policy is financed by a loan agreement and it is possible to state the total
amount payable in line with the Consumer Credit Act 1974 requirements to show
the total price, you will need to state the total price as well as the interest
amount payable on the premium.
- 31/05/2005
What rules are there on white labelling?
GIGI 3.4.25
See Notes
You may want to make your own brand the
main one on documents you give the customer, and to have prominence over the
insurance company's name. This is known as white labelling. ICOB 5.6 gives guidance on what is acceptable under our rules.
- 31/05/2005
GIGI 3.4.26
See Notes
Our rules do not allow you to give the
customer only your firm's name and not that of the insurance company. ICOB
4.2 (status information) and the product information
rules in ICOB 5 require the customer
to be told of the identity of both the insurance company and the intermediary,
and the policy summary must give only the name of the insurance company, and
not your firm's name. However, as long as you comply with the rules on financial
promotions (ICOB 3) and the general rule
that communications with customers must be clear, fair and not misleading
(ICOB
2.2.3 R), the way that information is presented to
the customer is not specifically regulated by us.
- 31/05/2005
GIGI 3.5
Cancellation (ICOB 6)
- 01/12/2004
Introduction
GIGI 3.5.1
See Notes
This section briefly sets out the cancellation
rights that an insurance company must offer retail customers when they purchase
or renew certain non-investment insurance contracts. The requirements do not
apply to contracts with commercial customers.
- 01/12/2004
GIGI 3.5.2
See Notes
The cancellation rules do not apply to
insurance intermediaries directly. As such, this Guide does not set out the
detail of the cancellation rules, which are in ICOB 6. However, you will find it useful to understand the rules because:
(1) under the product information rules in ICOB 5, you, as an insurance intermediary, must provide information to
retail customers about cancellation rights; and
(2) the cancellation rules might affect the arrangements you have
in place with the insurance company for payment of commission.
- 01/12/2004
Which contracts do cancellation rights apply to?
GIGI 3.5.3
See Notes
In general, cancellation rights apply to non-investment insurance contracts taken out by retail customers. There are, however, a number of exemptions, which are set out in ICOB 6.1.5 R to ICOB 6.1.10 G.
- 01/12/2004
What must you tell the customer about cancellation?
GIGI 3.5.4
See Notes
Before conclusion of the contract, you
must inform your retail customers of their cancellation rights. These requirements
are in ICOB
5.3.12 R. See also Chapter 3.4 above.
- 01/12/2004
How long does the customer have to cancel the contract?
GIGI 3.5.5
See Notes
For general insurance contracts, insurance companies
must give a cancellation period of 14 days and for pure protection contracts
the cancellation period must be 30 days. For mixed contracts which include
both pure protection and general insurance policies, the cancellation period
is 30 days (ICOB
6.2.1 R to ICOB
6.2.4 R).
- 31/05/2005
GIGI 3.5.6
See Notes
For pure protection contracts, the cancellation
period starts on the day on which the customer is informed that the contract
has been concluded, or the day he receives the terms and conditions in a durable
medium,
whichever is the later. For general insurance contracts, the period starts
on the day on which the contract is concluded or the day the customer receives
the terms and conditions in a durable medium, whichever is the later (ICOB
6.2.5 R).
- 31/05/2005
What happens to attached insurance contracts when the financial services contracts to which they are attached are cancelled?
GIGI 3.5.7
See Notes
The Financial Services (Distance Marketing)
Regulations 2004 require that when a distance financial services contract
is cancelled, any attached contracts are automatically cancelled. This is unless
the customer gives notice that cancelling the main contract does not cancel
the attached contract. This is referred to in guidance at ICOB
6.4.2 G. Broadly an attached contract is one which is subsidiary to the
main contract. For example, creditor insurance taken out to protect a loan
would be an attached contract and the loan would be the main contract. This
means that if the loan (the main contract) is cancelled, then the creditor
insurance (the attached contract) would also be cancelled automatically. The
reverse, however, does not apply - i.e. the loan (the main contract) would
not be automatically cancelled if the creditor insurance (the attached contract)
was cancelled.
- 31/05/2005
Can an insurance company make a charge for contracts that are cancelled?
GIGI 3.5.8
See Notes
Where a customer cancels a contract,
an insurance company must return to the customer any sums paid to it without
delay, and no later than 30 days from the date of cancellation, though it
may charge for any costs incurred in connection with a general insurance contract
(ICOB
6.4.3 R). This might include administrative costs for
intermediaries and/or a time on risk charge for insurance companies. The charge
for costs incurred must not exceed an amount that is in proportion to the
service provided and must not be capable of being construed as a penalty.
So the insurance company must not profit from cancellation by a customer and
may only retain an amount that accurately reflects its costs. An insurance
company is not permitted to make a charge to a retail customer for a cancelled
pure protection contract.
- 01/12/2004
GIGI 3.5.9
See Notes
As well as returning any sums paid to
the insurance company by the customer, the customer must return any sums and
property the customer received from the insurance company (such as a motor
insurance certificate) within 30 days of cancellation (ICOB 6.4.3 R (4)).
- 01/12/2004
GIGI 3.5.10
See Notes
Under ICOB 6.4.9 R, if cover started
during the cancellation period and the insurance company has made a charge, the sums and property
returned by the customer under ICOB 6.4.3 R (4) must not include any claims money that the insurer paid out in the cancellation period. This does not mean, however,
that if the insurance company chooses not to charge, that it has the right
to refuse claims made during the cancellation period if cover commenced during
the cancellation period.
- 31/05/2005
Can an intermediary charge for its selling costs if the contract is cancelled?
GIGI 3.5.11
See Notes
As mentioned above, the insurance company
can recover the administrative costs that intermediaries incur in the charges
it makes for cancelled general insurance contracts. In addition, where you
charge the customer a separate fee for the mediation service you have provided
this is unaffected by the cancellation rules in ICOB 6 (although the cancellation rules in ICOB 8 may apply if you have a distance mediation contract and this will
affect what fees you can recover).
If you charge a fee you will need to disclose it to the customer (see paragraph 3.3.16) and you should
make clear that it will not be refundable if the non-investment contract is
cancelled if this is the case.
- 31/05/2005
GIGI 3.5.12
See Notes
If you charge a fee and also receive
commission, then the insurance company is restricted in the amount of commission
it can recover from the retail customer when a general insurance contract
is cancelled to an amount which, when added to your fee, is sufficient to
cover your costs (see ICOB 6.4.5 G(3)).
- 01/12/2004
GIGI 3.6
Claims handling (ICOB 7)
- 01/12/2004
GIGI 3.6.1
See Notes
- 01/12/2004
What are an intermediary's obligations in relation to a claim?
GIGI 3.6.2
See Notes
Most of the obligations relating to claims
handling fall on insurance companies and if you act on behalf of an insurance
company in relation to a claim (e.g. you have delegated authority for claims
handling) then the insurance company is responsible for ensuring that the
rules are complied with. But if you act for the customer in relation to a
claim, there are certain rules that you must comply with. These rules are
set out in ICOB 7.4. In particular, you
must:
(1) act with due care, skill and diligence when acting for a customer
in relation to a claim; and
(2) avoid conflicts of interest.
- 01/12/2004
GIGI 3.6.3
See Notes
You could have a conflict of interest
if, for example, you were acting for both a customer and an insurance company
in relation to a claim; or you were acting for two customers that were parties
to a dispute over liability. If you face a potential conflict of interest,
you must tell the customer(s) of the conflict and ask their consent to continue
to act for them. However, if it is not possible to manage the conflict by
disclosing it the customer(s), you will need to withdraw from acting for one
or both parties.
- 01/12/2004
GIGI 3.6.4
See Notes
You may have arranged a policy for a
customer, but when it comes to a claim, you act for the insurance company
and not for the customer. In these cases, you must tell the customer that
you are acting for the insurance company and not for him in relation to the
claim.
- 01/12/2004
GIGI 3.6.5
See Notes
If you are notified of a claim by a customer,
but do not have the insurance company's authority to handle the claim, you
must forward the notification to the insurance
company promptly or
tell the customer immediately that you cannot deal with the notification.
- 31/05/2005