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Timeline guidance

COBS 7.3 Additional insurance distribution obligations

Demands and needs

COBS 7.3.1 R
  1. (1)

    1Prior to the conclusion of a life policy, a firm must specify, on the basis of the information obtained from the client, the demands and needs of that client.

  2. (2)

    The details must be modulated according to the complexity of the life policy proposed and the type of client.

  3. (3)

    A statement of the demands and needs must be communicated to the client prior to the conclusion of a life policy.

  4. (4)

    This rule and COBS 7.3.4R do not apply when a firm makes a personal recommendation in relation to a life policy.

[Note: first paragraph of article 20(1) and article 20(2) of the IDD]

COBS 7.3.2 G

1Firms are reminded that they are obliged to take reasonable steps to ensure that a personal recommendation is suitable for, and consistent with the insurance demands and needs of, the client and that, whenever a personal recommendation relates to a life policy, a suitability report is required (see COBS 9 or 9A).

COBS 7.3.3 G

1A firm may obtain information from the client in a number of ways including, for example, by asking the client questions in person or by way of a questionnaire prior to any life policy being proposed.

COBS 7.3.4 R

1When proposing a life policy a firm must ensure it is consistent with the client’s insurance demands and needs.

[Note: recital 44 to, and second paragraph of article 20(1) of, the IDD]

COBS 7.3.5 R

The sale of a life policy must always be accompanied by a demands and needs test on the basis of information obtained from the client.

[Note: recital 44 to, and article 20(1) of, the IDD]

Distribution of connected contracts through exempt persons

COBS 7.3.6 R
  1. (1)

    1Where an insurance distributor is distributing through a person relying on the connected contracts exemption in article 72B of the Regulated Activities Order, the insurance distributor must ensure that the requirements in (2) are met.

  2. (2)

    The requirements referred to in (1) are:

    1. (a)

      SYSC 19F.2 (Remuneration and insurance incentives)

    2. (b)

      COBS 4 (Communicating with clients, including fair financial promotions);

    3. (c)

      COBS 2.1.1R (client’s best interests);

    4. (d)

      COBS 6.1ZA.7AR(1)(a) and (c) (Status disclosure general information: insurance distribution);

    5. (e)

      COBS 7.3.1R to COBS 7.3.5R (Additional insurance distribution obligations: demands and needs); and

    6. (f)

      COBS 6.1ZA.16AR to 6.1ZA.16DR (cross-selling).

[Note: article 1(4) of the IDD]

COBS 7.3.7 G

1To comply with the relevant chapter of SYSC or Principle 3, an insurance distributor will need to have appropriate arrangements in place to ensure compliance with COBS 7.3.6R.

COBS 7.4 Insurance distribution: Means of communication to clients

COBS 7.4.1 R

1This section applies to all information required to be provided to a client in COBS 7.3 and where it is stated to apply in other sections or chapters.

Means of communication to customers: Non-telephone sales

COBS 7.4.2 R
  1. (1)

    1A firm must communicate information to a client using any of the following:

    1. (a)

      paper; or

    2. (b)

      a durable medium other than paper; or

    3. (c)

      a website (where it does not constitute a durable medium) where the website conditions are satisfied.

  2. (2)

    The firm must communicate the information in (1):

    1. (a)

      in a clear and accurate manner, comprehensible to the client;

    2. (b)

      in an official language of the State of the commitment or in any other language agreed by the parties; and

    3. (c)

      free of charge.

[Note: article 23(1), (2), (4) and (5) of the IDD]

COBS 7.4.3 R

1Where the information is communicated using a durable medium other than paper or by means of a website, the firm must, upon request and free of charge, also send the customer a paper copy.

[Note: article 23(3) of the IDD]

Means of communications to clients: Telephone sales

COBS 7.4.4 R

1In the case of telephone selling:

  1. (1)

    the information must be given in accordance with the distance marketing disclosure rules (see COBS 5); and

  2. (2)

    if prior to the conclusion of the contract the information is provided:

    1. (a)

      orally; or

    2. (b)

      on a durable medium other than paper,

    the firm must also provide the information to the client in accordance with COBS 7.4.2R and COBS 7.4.3R immediately after the conclusion of the life policy.

[Note: article 23(7) of the IDD]