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COB 8A.3 Duties of firms acting on behalf of policyholders

COB 8A.3.1R

COB 8A.3 applies to a firm.

COB 8A.3.2G

COB 8A.3 will usually apply to a firm that is not an insurer, but it may also apply to an insurer, for example, if it were dealing with a claim on a policy insured by another insurer.

A firm's duty of care, skill and diligence

COB 8A.3.3R

A firm when acting for a policyholder in relation to a claim must act with due care, skill and diligence.

COB 8A.3.4G

The rules and guidance in COB 8A.3 do not seek to set out the full extent of the duties owed by firms to any person for whom they act, nor do they displace the general law on the duties of agents.

A firm's duty to avoid conflicts of interest

COB 8A.3.5R
  1. (1)

    A firm must not, in connection with any claim, put itself in a position where its own interest, or its duty to any person for whom it acts, conflicts with its duty to any policyholder for whom it acts, unless:

    1. (a)

      it made proper disclosure to that policyholder of all information needed to put the policyholder in a position where he can give informed consent to the arrangement; and

    2. (b)

      it has obtained the prior informed consent of the policyholder.

  2. (2)

    A firm must decline to act for the person or policyholder referred to in (1), or any of them, unless in the particular circumstances of the case disclosure and informed consent are sufficient to enable it to reconcile the conflict.

COB 8A.3.6G

COB 8A.3.5 R imposes a requirement on a firm to avoid conflicts of interest in relation to claims where it acts on behalf of a policyholder unless it can manage them by disclosure to, and the obtaining of consent from, the policyholder.

COB 8A.3.7G

A firm should consider whether it is possible to manage the conflict by disclosing the conflict to the policyholder and obtaining his consent. Where a firm acts for a policyholder in arranging a policy, it is likely to be the agent for the policyholder in connection with the preparation and handling of any claim against the insurer. If the firm intends to be the agent of an insurer in relation to claims under that policy, it will need to consider whether it is at risk of putting itself in the position where it cannot act without some breach of duty either to the insurer or the policyholder. The firm should consider whether disclosure and consent are sufficient to reconcile the conflicting obligations. An example of a circumstance in which disclosure and consent are unlikely to be sufficient and when a firm may well consider it should not act for the insurer or the policyholder or either, is where the firm knows that the policyholder will, to obtain a quick payment, accept a low amount in settlement of a claim and also knows the insurer is willing to settle for a higher amount.

COB 8A.3.8R

If a firm acts for an insurer and not for a policyholder in relation to a claim on a contract which it arranged for that policyholder, the firm must inform the policyholder that, in relation to that claim, it is acting on behalf of the insurer and not the policyholder.

COB 8A.3.9G

COB 8A.3.8 R would apply, for example, where a firm has delegated authority for claims handling and deals with a claim in relation to a contract that is sold to a policyholder, if the firm is not acting on behalf of that policyholder in relation to the claim.

COB 8A.3.10R

If a firm is notified of a claim in relation to a policy which it has arranged, and the insurer has not given it the authority to deal with that claim, it must:

  1. (1)

    forward the notification to the insurer promptly; or

  2. (2)

    inform the policyholder immediately that it cannot deal with the notification.