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Status: You are viewing the version of the handbook as on 2005-06-30.

ICOB 1.2 General application: who? what?

ICOB 1.2.1 R
4
  1. (1)

    Except as provided for in ICOB 1.2.8 R to ICOB 1.2.15 R, ICOB applies to:4

    4
    1. (a)

      an insurance intermediary, including an insurer, when it carries on insurance mediation activities for a customer in relation to a non-investment insurance contract or enters into a distance non-investment mediation contract with a retail customer;4

    2. (b)

      an insurer when acting as product provider in relation to a non-investment insurance contract;4

    3. (c)

      a firm when it manages the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's, in relation to a non-investment insurance contract;4

    4. (d)

      a firm which communicates or approves a non-investment financial promotion;4

    5. (e)

      a motor vehicle liability insurer; and4

    6. (f)

      the Society in relation to motor vehicle liability insurance business.4

  2. (2)

    Where a firm (or its appointed representative) has outsourced insurance mediation activities to a third party processor, any rule in ICOB which requires the third party processor, when acting as such, to disclose its identity to a customer must be read as requiring disclosure of the identity of the firm (or appointed representative, as appropriate) which is taking responsibility for the acts and omissions of the third party processor when carrying on the outsourced activities7.4

    4
ICOB 1.2.2 G
  1. (1)

    The definition of insurance intermediary includes an insurer when the insurer is carrying on insurance mediation activities, for example when, through its sales force, it advises on or arranges its own non-investment insurance contracts or those of another insurer.

  2. (2)

    In relation to (1), insurers should note that PRU 7.6.13 R prevents an insurer from carrying on an insurance mediation activity in respect of a third party's products, unless the insurer can show that there is a natural fit or necessary connection between the insurer's insurance business and the third party's products.3

  3. (3)

    Firms which outsource regulated activities are reminded of the guidance on outsourcing in SYSC 3.2.4 G.4

ICOB 1.2.3 R
  1. (1)

    In the case of a non-investment insurance contract that is underwritten at Lloyd's by its members, the firm responsible for the management of the insurance business of the member (that is, the managing agent) discharges the obligations of the product provider, which would otherwise be discharged by an insurer. References to managing agents in ICOB therefore relate to their functions in managing the obligations of the member as product provider.

  2. (2)

    Where there is a chain of insurance intermediaries between the insurer and the customer, ICOB applies only to the insurance intermediary in contact with the customer.

Summary of the application of the chapters of ICOB

ICOB 1.2.4 G

A table summarising the application of the various chapters of ICOB to firms is set out in ICOB 1 Annex 1 G. For the detailed application of each chapter, see the application rule at the start of that chapter.

ICOB 1.2.5 G

All chapters of ICOB are relevant to a firm that deals with a retail customer. Certain chapters of ICOB apply in part only or not at all if a firm is dealing with a commercial customer. Guidance on the term retail customer is set out in ICOB 1.7.3 G(1).

Customer to be treated as retail customer when status uncertain

ICOB 1.2.6 R

If it is not clear in a particular case whether a customer is a retail customer or a commercial customer, an insurance intermediary or an insurer, in relation to a non-investment insurance contract or a distance non-investment mediation contract, must comply with ICOB as if the customer were a retail customer.

Customer to be treated as retail customer when contract covers him in both a private and business capacity

ICOB 1.2.6A R

2If an insurance intermediary or an insurer is dealing with a customer who is an individual in relation to a non-investment insurance contract or a distance non-investment mediation contract which would cover him in both a private and business capacity, the insurance intermediary or an insurer must comply with ICOB as if the customer were a retail customer.

Application to insurers where the intermediary is unauthorised or where the sale involves a connected contract

ICOB 1.2.7 G
  1. (1)

    An insurer must comply with the following ICOB requirements, which are applicable to insurers as product providers, if its non-investment insurance contracts are sold through an intermediary to whom ICOB does not apply (because the intermediary is not a firm) or if its non-investment insurance contracts are connected contracts:

    1. (a)

      ICOB 2 (General rules (including unfair inducements));

    2. (b)

      ICOB 3 (Financial promotion) if the insurer communicates or approves a financial promotion;

    3. (c)

      ICOB 4.7 (Unsolicited services);

    4. (d)

      ICOB 5 (Product disclosure) as explained in ICOB 5.2;

    5. (e)

      ICOB 6 (Cancellation) except for general insurance contracts and connected contracts that are not distance contractsICOB 6.1.5 R (5) and (6); and

    6. (f)

      ICOB 7 (Claims handling).

  2. (2)

    The circumstances in (1) may occur where article 72B of the Regulated Activities Order excludes certain regulated activities from regulation when carried on by providers of non-motor goods and services related to travel in relation to connected contracts. Guidance on the conditions that need to be satisfied by connected contracts is contained in AUTH App 5.11.13 G to AUTH App 5.11.15 G.

Large risks within the EEA

ICOB 1.2.8 R

Where an insurance intermediary carries on insurance mediation activities for commercial customers in relation to contracts of large risks where the risk is located within the European Economic Area, the only provisions of ICOB that apply are:

  1. (1)

    ICOB 5.4.5 R (Provision of a policy document to commercial customers); and2

  2. (2)

    ICOB 5.4.8 R and ICOB 5.4.9 G (Group policies sold to commercial customers)2

ICOB 1.2.9 G

Other parts of the Handbook apply where relevant to an insurance intermediary within ICOB 1.2.8 R, including Principle 7 (Communications with customers) instead of ICOB 2.2.3 R, which restates Principle 7 in slightly amended form.

ICOB 1.2.9A G

2A provision in ICOB that applies to an insurer when acting as product provider or as a motor vehicle liability insurer applies where relevant in relation to contracts of large risks where the risk is located within the European Economic Area.

Authorised professional firms

ICOB 1.2.10 R

ICOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities except for:

  1. (1)

    ICOB 2.2.3 R to ICOB 2.2.7 G (Clear, fair and not misleading communication);

  2. (2)

    ICOB 3 (Financial promotion);

  3. (3)

    ICOB 4.2.2 R in relation to the information for customers in table ICOB 4.2.8 R items numbered (8), (9) and note 4 covering complaints and compensation; and

  4. (4)

    those sections in ICOB which implement articles 12 and 13 of the IMD, unless:

    1. (a)

      the designated professional body of the firm has made rules which implement some or all of the provisions of 1articles 12 and 13 of the IMD;

    2. (b)

      those rules have been approved by the FSA under section 332(5) of the Act; and

    3. (c)

      the firm is subject to the rules in the form in which they were approved.

    in which case those sections of ICOB which implement articles 12 and 13 of the IMD are disapplied to the extent that these articles are implemented by the rules of the designated professional body.1

ICOB 1.2.11 G
  1. (1)

    Compliance by an authorised professional firm with provisions of the Distance Marketing Regulations is dealt with in PROF 5.4 .

  2. (2)

    The effect of ICOB 1.2.10 R(4) is that if the relevant designated professional body of an authorised professional firm does not make rules implementing articles 12 and 13 of the IMD applicable to authorised professional firms those authorised professional firms will need to comply with those sections of ICOB which implement articles 12 and 13 of the IMD, namely ICOB 4.1to ICOB 4.4 and ICOB 4.8.

Service companies

ICOB 1.2.12 R

ICOB does not apply to a service company, except for:

  1. (1)

    ICOB 1.4 (Application in respect of electronic commerce activities and communications);

  2. (2)

    ICOB 3 (Financial promotion); and

  3. (3)

    any provision of ICOB incorporated into (1) or (2) by reference.

What contracts? Reinsurance contracts

ICOB 1.2.13 R

ICOB does not apply if the activities within ICOB 1.2.1 R relate to a reinsurance contract.

Contracts of large risks outside the EEA

ICOB 1.2.14 R

ICOB does not apply to the mediation of contracts of large risks where the risk is located outside the European Economic Area.

Group policies

ICOB 1.2.15 R
  1. (1)

    If a non-investment insurance contract is a group policy, ICOB (except for ICOB 7 (Claims handling)) does not apply with respect to a person under such a policy who is not the legal holder of the policy, subject to (2).

  2. (2)

    If a firm makes a personal recommendation that a person becomes a policyholder member of a group policy, ICOB 4.3 and ICOB 4.4 apply to that personal recommendation as if the contract were being concluded.

ICOB 1.2.16 G
  1. (1)

    All chapters of ICOB are relevant to a firm that deals with a retail customer unless ICOB 1.2.15 R applies. Certain chapters of ICOB apply in part only or not at all if a firm is dealing with a commercial customer.

  2. (2)

    In ICOB a customer is a policyholder or a prospective policyholder. A policyholder includes anyone who, upon the occurrence of the contingency insured against, could expect to have a claim, made by him directly to the insurance undertaking, accepted by the insurance undertaking. Policyholder includes a member of a group policy who did not conclude the group policy with the insurance undertaking but who is entitled under the terms of that policy to make a claim on the insurance undertaking. This would include a dependant of a policyholder member of a group policy if that dependant has a direct right to claim. Where such a person does not conclude a group policyonly limited provisions in ICOB will apply to him as specified in ICOB 1.2.15 R.

  3. (3)

    A person whose right or interest in a contract of insurance that is a group policy does not entitle him to make a claim directly to an insurance undertaking (for example, because he is required to make his claim to an employer or trustees) is not a customer.

  4. (4)

    The rule at ICOB 5.4.8 R provides for commercial customers who conclude group policies to be given a policy summaryand to be informed that they should give that policy summary to each policyholder .

  5. (5)

    ICOB 1.2.15 R applies regardless of how a person becomes a policyholder under a group policy, for example automatically as part of a contract of employment, or voluntarily as part of a flexible benefits package.