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COB 8A.1 Application and purpose

Who and what ?

COB 8A.1.1 R

This chapter applies in respect of claims handling under long-term care insurance contracts to:

  1. (1)

    an insurer;

  2. (2)

    a firm acting on behalf of a policyholder; and

  3. (3)

    a managing agent.

COB 8A.1.2 R

Throughout this chapter, references to an insurer apply equally to a managing agent.

COB 8A.1.3 G

An insurer is responsible for claims handling. A managing agent is responsible for claims handling for policies underwritten at Lloyd's. An insurer or a managing agent remains responsible for claims handling if it outsources any of its claims-related activities, including where it gives an intermediary authority to handle claims on its behalf. An insurer or a managing agent is not responsible for the administration and performance activities that a firm carries out on behalf of a policyholder in connection with a claim. In relation to these activities, a firm which acts on behalf of policyholders should refer to COB 8A.3.

COB 8A.1.4 G

An insurer should refer to the rules and guidance set out in SUP 2.3.5 R to SUP 2.3.10 G in respect of any person to whom it outsources its claims handling functions.

COB 8A.1.5 G

This chapter applies to claims made by or on behalf of policyholders.


COB 8A.1.6 G
  1. (1)

    The purpose of this chapter is to ensure that:

    1. (a)

      claims are handled fairly;

    2. (b)

      claims are settled promptly;

    3. (c)

      policyholders are provided with information on the claims handling process and with an explanation of why a claim is rejected or not settled in full, where relevant; and

    4. (d)

      firms acting on behalf of policyholders disclose and manage any conflicts of interest that may exist.

  2. (2)

    This chapter reinforces:

    1. (a)

      Principle 3 (Management and control), which requires a firm to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems;

    2. (b)

      Principle 6 (Customers' interests), which requires a firm to pay due regard to the interests of its policyholders and treat them fairly; and

    3. (c)

      Principle 8 (Conflicts of interest), which requires a firm to manage conflicts of interest fairly, both between itself and its policyholders and between a policyholder and another client.

COB 8A.2 Claims handling: general

Requirements to handle claims promptly and fairly

COB 8A.2.1 R

An insurer must carry out claims handling promptly and fairly.

COB 8A.2.2 G

When handling the claim of a policyholder, an insurer should comply with the rules and guidance in COB 8A.4.

COB 8A.2.3 G

An insurer should refer to the guidance in SYSC 3.2 (Areas covered by systems and controls) in its procedures for claims handling. For example, an insurer should have in place systems and controls which take account of reasonably foreseeable peaks in demand, to allow it to deal with claims promptly in such circumstances.

COB 8A.2.4 G

An insurer should refer to the guidance set out in TC 1 (Commitments) in respect of the competence of any person who carries out claims handling on its behalf.

Giving policyholders guidance on claiming

COB 8A.2.5 R

When an insurer is informed that a policyholder wishes to claim under his policy it must give the policyholder reasonable guidance to help him make a claim under his policy.

Rejecting or refusing claims

COB 8A.2.6 R

An insurer must not:

  1. (1)

    unreasonably reject a claim made by a policyholder;

  2. (2)

    except where there is evidence of fraud, refuse to meet a claim made by a policyholder on the grounds:

    1. (a)

      of non-disclosure of a fact material to the risk which the policyholder could not reasonably be expected to have disclosed;

    2. (b)

      of misrepresentation of a fact material to the risk unless the misrepresentation is negligent; or

    3. (c)

      of breach of warranty, unless the circumstances of the claim are connected with the breach and unless:

      1. (i)

        under a 'life of another' contract, the warranty relates to a statement of fact concerning the life to be assured and that statement would have constituted grounds for rejection of a claim by the insurer under COB 8A.2.6R (2)(a) or COB 8A.2.6R (2)(b) if it had been made by the life to be assured under an 'own life' contract; or

      2. (ii)

        the warranty is material to the risk and was drawn to the attention of the policyholder before the conclusion of the contract.

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

COB 8A.3.1 R

COB 8A.3 applies to a firm.

COB 8A.3.2 G

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.3.3 R

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

COB 8A.3.4 G

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.3.5 R
  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.3.6 G

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.3.7 G

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.3.8 R

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.3.9 G

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.3.10 R

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.

COB 8A.4 Policyholders: performance standards for handling claims

Responding to notification of the claim

COB 8A.4.1 R

An insurer must respond promptly to a notification by a policyholder of a claim.

COB 8A.4.2 G

Notification of a claim is a demand of the insurer to pay or provide a benefit insured under the policy, for example, by submitting a claim form or giving the equivalent information orally, where permitted by the policy. An enquiry that precedes such a demand, for example, as to whether a particular loss is covered, and therefore whether a claim could be made under the terms of the policy, is not notification of a claim.

COB 8A.4.3 G

COB 8A.4.1 R requires an insurer to respond promptly once it has received notification of a claim. Generally a prompt response would be one within five business days of a policyholder making a claim, although in some circumstances a prompt response could be less than five business days, such as where the policyholder would expect a swifter response because of the nature of the claim or the terms of the policy.

COB 8A.4.4 R

The response referred to in COB 8A.4.1 R must:

  1. (1)

    provide the information set out in COB 8A.4.5 R;

  2. (2)

    be in a durable medium, unless the notification by the policyholder is made orally and the insurer does not require the policyholder to complete a claim form; and

  3. (3)

    provide the policyholder with a claim form, if the insurer requires one to be completed.

COB 8A.4.5 R

The information referred to in COB 8A.4.4R (1) is:

  1. (1)

    that the claim relates to a risk that is clearly outside the scope of the policy, if that is the case (in which case no further information need be provided);

  2. (2)

    the action that will be taken by the insurer and when that action will be taken;

  3. (3)

    if the insurer is appointing any other parties to contact the policyholder on the insurer's behalf, in respect of each other party appointed the following information, if known (but, if the purpose of the appointment is to investigate the validity of a claim, the information need not be given if it would limit or prevent the effective investigation of the claim or any part of it):

    1. (a)

      its name (unless the other party trades under the name of the insurer);

    2. (b)

      its function; and

    3. (c)

      the work it will carry out in relation to the claim.

COB 8A.4.6 G

The purpose of the rules and guidance in COB 8A.4.1 R to COB 8A.4.5 R is to provide the policyholder at an early stage with information in relation to the processing and settlement of his claim by the insurer. COB 8A.4.5R (1) is intended to prevent a policyholder pursuing a claim for which he is clearly not covered. It is not intended to pre-empt the outcome of an investigation of a claim.

COB 8A.4.7 G

The purpose of COB 8A.4.5R (3) is to ensure that a policyholder knows the name and function of any party who will contact him in relation to a claim as a representative of the insurer, for example, an outsourced claims handling company. An insurer would not be expected to notify the policyholder of other parties who are appointed to investigate the validity of a claim if this would limit or prevent an effective investigation. However, if a third party is appointed to liaise with the policyholder on the insurer's behalf, as well as assess the validity of the claim, the insurer would be expected to disclose the information in COB 8A.4.5R (3) unless it would limit or prevent an effective investigation.

Investigation and processing of the claim

COB 8A.4.8 R

An insurer must keep the policyholder reasonably informed about the progress of his claim.

COB 8A.4.9 G

Where the investigation of a claim is likely to be protracted, an insurer should provide periodic progress or status reports, when appropriate, to a policyholder, including providing the policyholder with any relevant update in relation to the information provided under COB 8A.4.4 R. The insurer should also respond without undue delay to any reasonable request by the credit union for information.

Determining the claim

COB 8A.4.10 R

An insurer must notify the policyholder as soon as practicable whether it:

  1. (1)

    rejects all of his claim;

  2. (2)

    rejects his claim but without prejudice to the rejection makes an offer in compromise; or

  3. (3)

    accepts all or part of his claim.

COB 8A.4.11 R

If the insurer rejects the claim but without prejudice to the rejection makes an offer in compromise, it must notify the policyholder of the terms of that offer as soon as practicable.

COB 8A.4.12 R

If the insurer accepts all or part of the policyholder's claim, it must notify the policyholder as soon as practicable whether:

  1. (1)

    as to the parts it accepts, it agrees to provide the money, property or service claimed by the policyholder in full; or

  2. (2)

    it makes some other offer in compromise. In that event, it must notify the policyholder of the terms of its offer.

COB 8A.4.13 R
  1. (1)

    Unless the insurer accepts the policyholder's claim in full, the insurer must explain why it rejects all or part of the policyholder's claim or accepts his claim or makes a compromise offer, specifying any relevant term of the policy.

  2. (2)

    The insurer must offer the policyholder the choice of receiving the information at COB 8A.4.13R (1) in a durable medium.

COB 8A.4.14 R

The insurer must, in respect of each part of the claim which it accepts, inform the policyholder whether the claim will be settled by paying him, or by paying another person to provide goods or services, or by providing those goods or services.

Settling a claim

COB 8A.4.15 R

An insurer must settle a claim by a policyholder promptly.

COB 8A.4.16 G
  1. (1)

    Settlement terms are agreed when:

    1. (a)

      the insurer accepts the policyholder's claim; and

    2. (b)

      the policyholder accepts the insurer's offer of settlement.

  2. (2)

    When the insurer settles the claim by paying the policyholder, the insurer should aim to make payment within five business days after the insurer and the policyholder have agreed settlement terms, subject to any pre-conditions laid down by the insurer or in law being met by the policyholder. This does not prevent the insurer paying a claim before the policyholder has finally agreed settlement terms.

  3. (3)

    The guidance in (2) will not apply if the insurer settles the claim by:

    1. (a)

      payment against a liability due on a future date;

    2. (b)

      the provision of goods or services;

    3. (c)

      making payments on a date specified by the policyholder;

    4. (d)

      payment of the claim through another party (eg a care home) on a monthly or some other basis;

    and in the case of (a) or (b) the insurer should make prompt payment or arrange for prompt provision of the goods or services after the insurer and the policyholder have agreed settlement terms.

COB 8A.4.17 G

The arrangements for settlement set out in COB 8A.4.16G (3)(b) apply to arrangements to supply goods or services to the policyholder. In such situations, the goods or services should be provided promptly but where they cannot be, the insurer should inform the policyholder when to expect them.

COB 8A.4.18 G

An insurer should note that unless it has previously informed a policyholder that a claim will not be met in full or in part until premiums have been paid, the insurer may not delay the payment of a claim on the grounds that premiums are outstanding.

Pre-Action Protocols

COB 8A.4.19 G

A policyholder who does not accept an insurer's rejection of his claim (or part of it) may challenge that rejection. If he chooses to do so through the courts, firms should be aware that, in England and Wales, there are pre-action protocols which lay down certain requirements as to the steps to be taken before proceedings are issued. This chapter does not displace these requirements, to which firms should have regard in the event that a rejection of a claim moves towards litigation.

COB 8A.5 Record keeping

COB 8A.5.1 R

An insurer must make and retain, for the duration of the claim and for a minimum of six years after the insurer's obligations to the policyholder under the long-term care insurance contract have ceased, the following information in relation to each claim made against a policy issued by it or handled by it:

  1. (1)

    details of the claim;

  2. (2)

    a record of each communication with the policyholder including the date on which it was made; and

  3. (3)

    the date the claim was settled or rejected and details of settlement or rejection including information relevant to the basis for the settlement or rejection.