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ICOB 1.1 Application and purpose

Application

ICOB 1.1.1 G

ICOB appliesto every firm as specified in the remainder of this chapter.

Purpose

ICOB 1.1.2 G
  1. (1)

    The purpose of this chapter is to set out to whom, for what activities, and within what territorial limits the rules, evidential provisions and guidance in ICOB apply. The purpose of other chapters in ICOB is set out at the beginning of each chapter.

  2. (2)

    ICOB implements, in part, provisions contained in a number of EC directives:

    1. (a)

      the Insurance Mediation Directive, in respect of non-investment insurance contracts;

    2. (b)

      the Distance Marketing Directive, in respect of non-investment insurance contracts and distance non-investment mediation contracts;

    3. (c)

      the Consolidated Life Directive, in respect of cancellation rights and information requirements relating to non-investment insurance contracts which are pure protection contracts;

    4. (d)

      the Third Non-Life Directive, in respect of information requirements relating to general insurance contracts; and

    5. (e)

      the Fourth Motor Insurance Directive, in respect of claims made by an EEA resident arising from a motor accident in the EEA but outside his country of residence.

  3. (3)

    This chapter also provides guidance on the application of other parts of the Handbook to an insurance intermediary that carries on insurance mediation activities to which ICOB applies.

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) ("A")7 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 applying to the third party processor only to the extent that it applies to A and as7 requiring disclosure of the identity of A7.4

    47
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).

7Customers and policyholders

ICOB 1.2.5A G
  1. (1)

    7In ICOB 2 (General rules) and ICOB 7 (Claims handling) (and in ICOB 1 (Application and purpose) in respect of those chapters), a customer is a policyholder or a prospective policyholder. Otherwise, only a policyholder or prospective policyholder who makes the arrangements preparatory to him concluding the contract of insurance (directly or through an agent) is a customer.

  2. (2)

    A policyholder includes anyone who, upon the occurrence of the contingency insured against, is entitled to make a claim directly to the insurance undertaking.

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 PERG 5.11.13G to PERG 5.11.15G5.

    5

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 2 (General rules) and7ICOB 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)

    A policyholder7 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 a customer7 concludes7 a group policy, 7only limited provisions in ICOB will apply to other policyholders7 as specified in ICOB 1.2.15 R and by the definition of customer7.

    777
  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 or a policyholder7.

  4. (4)

    ICOB 5.3.29 R and 7ICOB 5.4.8 R provide for customers7 who conclude group policies to be given a policy summary, unless the customer is a commercial customer and there is no policyholder who is capable of being a retail customer7, and to be informed that they should give that policy summary to each policyholder who is capable of being a retail customer7.

    77
  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.

6 Pension term assurance policies : election to apply COB rules

ICOB 1.2.17 R
  1. (1)

    6ICOB does not apply to the extent that:

    1. (a)

      the activities within ICOB 1.2.1 R relate to a pension term assurance policy; and

    2. (b)

      the firm has elected to comply with COB;

    but the firm must then comply with the rest of the Handbook treating the pension term assurance policy as a life policy and a designated investment, and not as a non-investment insurance contract.

  2. (2)

    A firm must make a record in a durable medium of the election (and any reversal of or amendment to the election) which includes:

    1. (a)

      the date from which the election takes effect; and

    2. (b)

      a precise description of the part of the firm's business to which the election applies;

    and must retain that record indefinitely.

ICOB 1.3 General application: where?

UK establishments: Territorial scope of ICOB 2 to ICOB 8

ICOB 1.3.1 R

Except as set out in this section, ICOB 2 to ICOB 8 apply in relation to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom only.

ICOB 1.3.2 R

In addition to the situation in ICOB 1.3.1 R, ICOB 4.2.19 R (Overseas business for UK retail customers) applies wherever the activity is conducted.

UK establishments: Exemption for insurers and managing agents1

ICOB 1.3.2A R
  1. (1)

    1Notwithstanding ICOB 1.3.1 R, this rule sets out circumstances in which some or all of the rules in ICOB are disapplied for an insurer or a managing agent in relation to any non-investment insurance contract provided, or which may be provided, by it (or in the case of a managing agent, by members for whom it acts).

  2. (2)

    ICOB does not apply if:

    1. (a)

      the intermediary (whether or not an insurance intermediary) in contact with the customer is not established in the United Kingdom; and

    2. (b)

      the customer is not habitually resident in, and, if applicable, the State of the risk is outside, an EEA State.

  3. (3)

    A rule in ICOB which goes beyond the minimum required by Community legislation does not apply if the customer is habitually resident in (and, if applicable, the State of the risk is) an EEA State other than the United Kingdom, to the extent that the EEA State in question imposes measures of like effect.

Financial promotions: Territorial scope of ICOB 3

ICOB 1.3.3 R

Notwithstanding ICOB 1.3.1 R, the territorial scope of ICOB 3 (Financial promotion) is set out in ICOB 3.4 (Application: where?).

General insurance contracts: Territorial scope of ICOB 5

ICOB 1.3.4 R

In addition to the situation in ICOB 1.3.1 R, but subject to ICOB 1.3.6 R, ICOB 5.5.20 R(1) to (3) (Directive-required information) and the other rules in ICOB 5 (in so far as they relate to such information) apply to firms in relation to business in respect of general insurance contracts if the State of the risk is the United Kingdom.

Pure protection contracts: Territorial scope of ICOB 5 and ICOB 6

ICOB 1.3.5 R

In addition to the situation in ICOB 1.3.1 R, but subject to ICOB 1.3.6 R, ICOB 5.5.20 R(4) to (15) and (22) (Directive-required information), the other rules in ICOB 5 (in so far as they relate to such information), and ICOB 6 apply to firms in relation to business in respect of non-investment insurance contracts which are pure protection contracts if the habitual residence of the customer is in the United Kingdom.

Exception to extended territorial scope of ICOB 5 and ICOB 6 for distance contracts provided from other EEA States

ICOB 1.3.6 R

The rules in ICOB 1.3.4 R and ICOB 1.3.5 R do not apply with respect to an activity exclusively concerning a distance contract with a retail customer, if the following conditions are satisfied:

  1. (1)

    the firm carries on the activity from an establishment maintained by the firm in an EEA State other than the United Kingdom;

  2. (2)

    either that EEA State:

    1. (a)

      has implemented the DMD; or

    2. (b)

      has obligations in its domestic law corresponding to those provided for by the DMD;

  3. (3)

    and, in either case, with the result that the obligations provided for by the DMD (or corresponding obligations) are applied by that EEA State when the firm carries on that activity; and

  4. (4)

    the firm is a national of an EEA State or a company or firm mentioned in article 48 of the Treaty.

ICOB 1.3.7 G

The restriction in ICOB 1.3.6 R reflects the fact that the provisions of the Distance Marketing Directive will be for the country of origin of the insurance intermediary to enforce. This is the state of the firm's establishment (head office or branch) carrying on the insurance mediation activity.

ICOB 1.3.8 R

The territorial scope of this sourcebook is modified by ECO in relation to electronic commerce activities and electronic commerce communications.

ICOB 1.3.9 G

ICOB 1.4 contains guidance on how this sourcebook is modified by ECO.

IMD passported activities1

ICOB 1.3.10 R
  1. (1)

    1In addition to ICOB 1.3.1 R, the provisions in ICOB 1.3.11 R apply to the passported activities carried on by a UK firm under the IMD from a branch elsewhere in the EEA unless the Host State regulator imposes measures which implement articles 12 and 13 of the IMD for those activities.

  2. (2)

    Notwithstanding ICOB 1.3.1 R, the provisions in ICOB which implement articles 12 and 13 of the IMD do not apply to a UK firm providing cross border services in another EEA State under the IMD, except that:

    1. (a)

      the provisions in ICOB 1.3.11 R apply if the Host State regulator does not impose minimum measures which implement articles 12 and 13 of the IMD for those activities; and

    2. (b)

      the other provisions in ICOB relating to articles 12 and 13 of the IMD apply unless the Host State regulator imposes measures of like effect for those activities.

  3. (3)

    Notwithstanding the other rules in this section, the only provisions in ICOB that apply to an incoming EEA firm carrying on passported activities under the IMD in the United Kingdom are:2

    1. (a)

      ICOB 1.3.8 R (Electronic commerce activities and communications) and ICOB 3 (Financial promotion); 2

      2
    2. (b)

      the provisions in ICOB 1.3.11 R if the firm's Home State regulator does not impose minimum measures which implement articles 12 and 13 of the IMD for those activities;

      22
    3. (c)

      the other provisions in ICOB relating to articles 12 and 13 of the IMD (beyond the minimum required to implement these articles) unless the firm's Home State regulator imposes measures of like effect for those activities; and2

      22
    4. (d)

      (if the activities are carried on from a branch in the UK and are in connection with a distance contract with a retail customer) the provisions in ICOB which implement the DMD in respect of a distance non-investment mediation contract, unless the firm'sHome State imposes measures which implement, or correspond to obligations provided for by, the DMD.2

ICOB 1.3.11 R

1The provisions referred to in ICOB 1.3.10 R are:

  1. (1)

    ICOB 4.2.2 R to ICOB 4.2.8 R, ICOB 4.2.11 R, ICOB 4.2.14 R and ICOB 4.2.20 R;

  2. (2)

    ICOB 4.3;

  3. (3)

    ICOB 4.4 (except ICOB 4.4.7 R); and

  4. (4)

    ICOB 4.8.1 R.

ICOB 1.3.12 G
  1. (1)

    1The provisions in ICOB 1.3.11 R are the minimum provisions required for the implementation of articles 12 and 13 of the IMD.

  2. (2)

    The effect of ICOB 1.3.10 R is to apply these minimum provisions to firms in respect of their insurance mediation activities passported under the IMD if other EEA States have not implemented articles 12 and 13 of the IMD for those activities.

  3. (3)

    Firms are reminded that insurers have passporting rights under the Insurance Directives but not under the IMD, and so ICOB 1.3.10 R does not apply to insurers.

ICOB 1.4 Application in respect of electronic commerce activities and communications

Application and purpose

ICOB 1.4.1 G
  1. (1)

    ICOB 1.4 applies to a firm:

    1. (a)

      which is an electronic commerce activity provider, that is, any firm which carries on an electronic commerce activity;

    2. (b)

      in relation to a financial promotion which is an electronic commerce communication;

    3. (c)

      which concludes distance contracts, the making or performance of which constitutes, or is part of, insurance mediation activity in relation to non-investment insurance contracts.

  2. (2)

    Paragraph (1) means that firms need to be aware of this section whenever they are providing a service which:

    1. (a)

      is normally provided for remuneration;

    2. (b)

      is provided at a distance;

    3. (c)

      is so provided by means of electronic equipment for the processing (including digital compression) and storage of data;

    4. (d)

      is so provided at the individual request of a recipient of the service.

Modification of ICOB resulting from the E-Commerce Directive

ICOB 1.4.2 G

The modifications made to ICOB resulting from the introduction of the E-Commerce Directive are of three kinds:

  1. (1)

    ECO 1.1.6 R modifies ICOB so that a firm providing an electronic commerce activity from an establishment elsewhere in the EEA to a recipient who is in the United Kingdom (an incoming ECA provider) is not required to comply with any provisions of ICOB.

  2. (2)

    ECO 2:

    1. (a)

      modifies ICOB so that, in relation to a financial promotion which is an outgoing electronic commerce communication, ICOB 3 has an extended application to cover the whole of the EEA; and

    2. (b)

      obliges such a firm, in providing an electronic commerce activity within the EEA, to comply with the minimum information and other requirements in the E-Commerce Directive;

    otherwise ICOB applies in the usual way to such a firm.

  3. (3)

    ECO 3 applies to a firm providing an electronic commerce activity from an establishment in the United Kingdom to a recipient who is in the United Kingdom or in a non-EEA State (a domestic ECA provider). Such a firm has to comply with ICOB in the usual way and so the requirements in ECO 3 are in addition to ICOB. ECO 3 sets out the minimum information and other requirements in the E-Commerce Directive.

ICOB 1.5 Summary of Handbook provisions for insurance intermediaries

ICOB 1.5.1 G

A table summarising the application of the Handbook to firms carrying on insurance mediation activities is set out in ICOB 1 Annex 2 G. For the detailed application of each module, see the application provision at the start of the module, or its chapter or section.

ICOB 1.6 Application to appointed representatives

ICOB 1.6.1 G
  1. (1)

    Although ICOB does not apply directly to a firm'sappointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of ICOB, anything done or omitted by a firm'sappointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act).

  2. (2)

    ICOB 8.5 (Cancellation requirements) does not apply to a distance non-investment mediation contract entered into by an appointed representative itself to provide insurance mediation activity services to a retail customer. Regulation 9 (Right to cancel) to 13 (Payment for services provided before cancellation) of the Distance Marketing Regulations apply instead. See also ICOB 1.7.3 G (4) (guidance on distance non-investment mediation contracts).1

  3. (3)

    Firms should refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives.

ICOB 1.7 Guidance on application of the Distance Marketing Regulations and expressions derived from the Distance Marketing Directive

ICOB 1.7.1 G

The purpose of ICOB 1.7.2 G and ICOB 1.7.3 G is to provide:

  1. (1)

    guidance on the application of parts of the Distance Marketing Regulations for non-investment insurance contracts and distance non-investment mediation contracts; and

  2. (2)

    guidance on expressions in ICOB derived from the Distance Marketing Directive.

Application of parts of the Distance Marketing Regulations

ICOB 1.7.2 G

ICOB implements most of the Distance Marketing Directive for non-investment insurance contracts that are distance contracts and for distance non-investment mediation contracts. However, certain aspects of the Distance Marketing Directive are implemented by provisions of the Distance Marketing Regulations, which apply in addition to ICOB, in particular:

  1. (1)

    Regulation 12 (Automatic cancellation of an attached distance contract); and1

  2. (2)

    Regulation 14 (Payment cards).1

Guidance on expressions derived from the Distance Marketing Directive

ICOB 1.7.3 G

ICOB adopts certain expressions derived from the Distance Marketing Directive, as follows:

  1. (1)

    Retail customer

    1. (a)

      The Distance Marketing Directive applies to 'any natural person who is acting for purposes which are outside his trade, business or profession'. In ICOB the term 'retail customer' has been adopted. In practice, private individuals may act in a number of capacities. In the FSA's view, a customer will be a commercial customer and not a retail customer if he is an individual acting, for example:

      1. (i)

        as trustee of a trust such as a housing or NHS trust;

      2. (ii)

        as member of the governing body of a club or other unincorporated association such as a trade body and a student union;

      3. (iii)

        as pension trustee;

      4. (iv)

        as a person taking out, or who has taken out, a non-investment insurance contract relating to property bought under a buy-to-let mortgage;

      5. (v)

        as partner in a partnership when taking out insurance for purposes wholly related to his profession.

    2. (b)

      Examples of individuals who would be regarded as retail customers include:

      1. (i)

        personal representatives, including executors, unless they are acting in a professional capacity, for example, a solicitor acting as executor; and1

      2. (ii)

        private individuals acting in personal or other family circumstances, for example, as trustee of a family trust.1

  2. (2)

    Distance contract

    1. (a)

      To be a distance contract, a contract must be concluded under an 'organised distance sales or service-provision scheme' run by the contractual provider of the service who, for the purpose of the contract, makes exclusive use (directly or through an insurance intermediary) of one or more means of distance communication up to and including the time at which the contract is concluded. So:

      1. (i)

        the insurance intermediary must have put in place facilities designed to enable a retail customer to deal with it exclusively at a distance, such as facilities for a retail customer to deal with it purely by post, telephone, fax or the Internet. If an insurance intermediary normally operates face-to-face and has no facilities in place enabling a retail customer to deal with it customarily by distance means, the DMD will not apply. A one-off transaction effected exclusively by distance means to meet a particular contingency or emergency will not be a distance contract; and

      2. (ii)

        there must have been no simultaneous physical presence of the insurance intermediary and the retail customer throughout the offer, negotiation and conclusion of the contract. So, for example, contracts offered, negotiated and concluded over the Internet, through a telemarketing operation or by post, will normally be distance contracts. A retail customer may visit the local office of the insurance intermediary in the course of the offer, negotiation or conclusion of a contract with that insurance intermediary. Wherever, in the literal sense, there has been "simultaneous physical presence" of the insurance intermediary and the retail customer at the time of such a visit, any ensuing contract will not be a distance contract.

    2. (b)

      The mere fact that an intermediary (acting for the insurance undertaking or for the retail customer) is involved, does not make the sale of a financial product or service a distance contract.

  3. (3)

    Conclusion of a contract

    1. (a)

      A contract is concluded when an offer to be bound by the non-investment insurance contract has been accepted. An offer in the course of negotiations (for example, an offer by an insurance undertaking to consider an application) is not an offer to be bound, but is part of a pre-contractual negotiation. A customer will provide all the information an insurance undertaking needs to decide whether to accept a risk and to calculate the premium. The customer may do this orally, in writing or by completing a proposal form. The response by an insurance undertaking, giving a quotation to the customer specifying the premium and the terms, is likely to amount to an offer of the terms on which the insurance undertaking will insure the risk. Agreement by the customer to those terms is likely to be an acceptance which concludes the contract. In other cases where the insurance undertaking requires a signed proposal form (for example, some pure protection contracts), the proposal form may amount to an offer by the customer on which the insurance undertaking decides whether to insure the risk and in such cases the insurance undertaking's response is likely to be the acceptance.

    2. (b)

      Where the parties to a contract agree that insurance cover should commence before all the terms and conditions have been agreed, the customer should be provided with information required by rules in ICOB to be provided before conclusion of the contract to the extent that agreement has been reached.

  4. (4)

    Distance non-investment mediation contracts

    1. (a)

      Some of the services which some insurance intermediaries provide will themselves fall within the scope of the Distance Marketing Directive. ICOB 8 applies to an insurance intermediary which enters into a distance non-investment mediation contract with a retail customer. The FSA expects the requirements in ICOB 8 to be relevant in a small minority of cases. ICOB 8 will not apply in the typical case where an insurance intermediary sells an insurance contract to a retail customer on a one-off basis, even if the insurance intermediary is involved in the renewal of that contract and handling claims under it. ICOB 8 will also not apply if an insurance intermediary, in its terms of business, makes clear that it does not, in conducting insurance mediation activities, act contractually on behalf of, or for, its retail customer, in which case the insurance intermediary can proceed on the basis that no distance non-investment mediation contract will arise.

    2. (b)

      ICOB 8 is only relevant if both of the following conditions are satisfied:

      1. (i)

        an insurance intermediary concludes a distance contract with a retail customer covering its insurance mediation activities which is additional to any insurance contract which it is marketing;

      2. (ii)

        the insurance intermediary's distance contract is concluded other than merely as a stage in the effecting or carrying out of an insurance contract by the firm or another person, in other words it has some continuity independent of an insurance contract, as opposed, for example, to being concluded as part of marketing an insurance contract.

    3. (c)

      An example of a distance non-investment mediation contract would be a distance contract under which an insurance intermediary agrees to provide advice on a retail customer's insurance needs as and when they arise.

ICOB 1 Annex 1 Summary of the application of the chapters of ICOB

G

This annex belongs to ICOB 1.2.4 G and summarises the application of the various chapters of ICOB to firms that carry on insurance mediation activities. For the detailed application of each chapter, see the application rule at the start of that chapter.

Chapter

Who does the chapter apply to?

ICOB 2 (General rules, including unfair inducements)

(1)

ICOB 2 applies to:

(a) an insurer;

(b) an insurance intermediary;

(c) a managing agent.

(2)

ICOB 2.3 , ICOB 2.4, ICOB 2.5, ICOB 2.6, ICOB 2.7 and ICOB 2.8 apply to a firm that communicates or approves a non-investment financial promotion.

ICOB 3 (Financial promotion)

ICOB 3 applies to every firm which communicates or approves a non-investment financial promotion.

ICOB 4 (Advising and selling standards)

(1)

ICOB 4 applies to an insurance intermediary.

(2)

ICOB 4.7 (Unsolicited services) applies to:

(a) an insurer;

(b) a managing agent.

ICOB 5 (Product disclosure)

ICOB 5 applies to:

(1)

an insurer;

(2)

an insurance intermediary other than when introducing;

(3)

a managing agent.

ICOB 6 (Cancellation)

ICOB 6 applies to:

(1)

an insurer;

(2)

a managing agent.

ICOB 7 (Claims handling)

(1)

ICOB 7 , except for ICOB 7.6, applies to:

(a) an insurer;

(b) an insurance intermediary;

(c) a managing agent.

(2)

ICOB 7.6 applies in respect of motor vehicle liability insurance business to:

(a) a motor vehicle liability insurer;

(b) the Society.

ICOB 8 (Distance non-investment mediation contracts with retail customers)

ICOB 8 applies to an insurance intermediary.

ICOB 1 Annex 2 Summary of Handbook provisions for insurance intermediaries

G

1

This table belongs to ICOB 1.5.1 G.

2

This table sets out the provisions in the Handbook that apply to firms which are insurance intermediaries where they:

(1)

carry on insurance mediation activities in relation to a non-investment insurance contract; or

(2)

communicate or approve a non-investment financial promotion.

3

It also sets out the provisions in the Handbook that apply to approved persons.

4

For convenience, the former activity is referred to in the table as (1) and the latter as (2).

Module

Application

High Level Standards

General provisions, GEN

Applies (at least in part) in respect of (1) and (2).

Principles for Businesses, PRIN

Threshold Conditions, COND

Statements of Principle and Code of Practice for Approved Persons, APER

Applies to every approved person who performs a controlled function under an arrangement entered into by an insurance intermediary when doing either (1) or (2).

The Fit and Proper test for Approved Persons, FIT

Applies to an insurance intermediary in respect of any application that it makes for the approval of a person to perform a controlled function, and in respect of the continuing approval of that person.

Senior Management Arrangements, Systems and Controls, SYSC

Applies in respect of (1) and (2), except SYSC 3.2.6A R to SYSC 3.2.6J G4.

Business Standards

Interim Prudential sourcebooks

IPRU(BANK)

Applies in respect of (1) where the insurance intermediary is also a bank.

IPRU(BSOC)

Applies in respect of (1) where the insurance intermediary is also a building society.

IPRU(FSOC)

Applies in respect of (1) where the insurance intermediary is also a friendly society.

IPRU(INS)

Applies in respect of (1) where the insurance intermediary is also an insurer.

IPRU(INV)

Applies in respect of (1) where the insurance intermediary is also an investment firm.

Prudential sourcebook

PRU 9.1 - PRU 9.3

Applies in respect of (1).

PRU 2

Applies in respect of (1) where the insurance intermediary is also an insurer.2

PRU 9.4 2

Applies in respect of (1) where the insurance intermediary is also an insurer or a mortgage lender.2

Market conduct, MAR

Does not apply to a firm when doing either (1) or (2). However, certain chapters of MAR will apply if:

(a) the insurance intermediary also engages in behaviour in relation to qualifying investments traded on prescribed markets - then MAR 1 applies;

(b) the insurance intermediary undertakes or is concerned with offers of securities that may involve price stabilising activity - then MAR 2 applies;

(c) the insurance intermediary carries on inter-professional business - then MAR 3 applies; (d) the insurance intermediary carries on designated investment business - then MAR 4 applies.

Conduct of Business sourcebook, COB

Does not apply to an insurance intermediary when doing (1) or (2) unless it opts to provide key features instead of a policy summary (see ICOB 5.5.4 R). However, COB may apply to an insurance intermediary if it also carries on any other regulated activity or communicates or approves a financial promotion not relating to non-investment insurance contracts or qualifying credit.

Mortgages: Conduct of Business sourcebook, MCOB

Does not apply to an insurance intermediary when doing (1) or (2). However, MCOB may apply to an insurance intermediary if it is also a mortgage lender or carries on mortgage mediation activities.

Training and Competence sourcebook, TC

TC 1 applies when a firm is doing (1) or (2).TC 2 applies only in circumstances where an insurance intermediary has employees advising on non-investment insurance contracts with or for a retail customer as listed in TC 2.1.4 R.4

Client Assets sourcebook, CASS

CASS 5 applies when a firm is doing (1) if it receives and holds money from or on behalf of a client, or receives and holds money as agent for an insurance undertaking.

Regulatory processes

Authorisation manual, AUTH

Applies to:

(1) a person, other than an authorised person, considering carrying on the regulated activities that include insurance mediation activities in the United Kingdom, and who requires guidance on whether authorisation is required and, if so, how to apply to the FSA for Part IV permission;

(2) an EEA firm or a Treaty firm that wishes to establish a branch or provide cross border services into the United Kingdom in relation to insurance mediation activities or wishes to apply for a top-up permission that includes insurance mediation activities;

(3) a person wishing to obtain approval for persons to perform controlled functions in relation to insurance mediation activities; and

(4) a person wishing to understand how the FSA will use its powers in relation to authorisation to determine applications.

Supervision manual, SUP

The following chapters of SUP apply to an insurance intermediary when doing (1) or (2): 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 15, 16, 18 (but only if the insurance intermediary is an insurer), 20.

The following chapters of SUP do not apply to an insurance intermediary when doing (1) or (2): 4, 13, 14, 17, 18 (unless the insurance intermediary is an insurer), 19.

Enforcement manual, ENF

Applies to an insurance intermediary when doing (1) or (2).

Decision making manual, DEC

Applies to an insurance intermediary when doing (1) or (2).

Redress

Dispute resolution: Complaints, DISP

Applies to an insurance intermediary when doing (1) or (2).

Compensation, COMP

An insurance intermediary, as a participant firm for the purposes of COMP in respect of insurance mediation activities relating to non-investment insurance contracts, is liable to contribute to a levy raised by the firm for the purposes of paying compensation.

Specialist sourcebooks

Credit Unions, CRED

Applies to an insurance intermediary doing (1) or (2) where it is also a credit union.

Electronic Commerce Directive, ECO

Applies to an insurance intermediary doing (1) or (2).

Electronic money, ELM

Does not apply to an insurance intermediary doing (1).

May apply to an insurance intermediary doing (2).

Professional firms, PROF

Applies to an insurance intermediary doing (1) or (2) where it is also a professional firm.

Lloyd's sourcebook, LLD

Applies only to the Society but some requirements are relevant to an insurance intermediary doing (1) or (2) where it is also an underwriting agent.

Collective Investment Schemes sourcebooks, COLL and CIS1

Apply to an insurance intermediary doing (1) or (2) where it is also an operator or a depositary of an AUT, ICVC or certain other collective investment schemes.1

Recognised Investment Exchanges and Recognised Clearing Houses, REC

Does not apply

Listing, Prospectus and Disclosure3

Listing Rules, LR3

May apply if the firm is applying for listing in the United Kingdom, is a listed issuer in the United Kingdom, is a sponsor or is applying for approval as a sponsor.3

Prospectus Rules, PR3

May apply if the firm makes an offer of transferable securities to the public in the United Kingdom or is seeking the admission to trading of transferable securities on a regulated market situated or operating in the United Kingdom.3

Disclosure Rules and Transparency Rules, DTR3

May apply if the firm is an issuer, any class of whose financial instruments have been admitted to trading on a regulated market, or are the subject of an application for admission to trading on a regulated market, other than issuers who have not requested or approved admission of their financial instruments to trading on a regulated market.3