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ICOB 4.2 Status disclosure

Retail and commercial customers: disclosure before or immediately after conclusion of the contract

ICOB 4.2.1G
  1. (1)

    ICOB 4.2.2 R to ICOB 4.2.14 R set out the status disclosure requirements that an insurance intermediary must meet to comply with the IMD.

  2. (2)

    The rules in ICOB 4.2 state the timing by which status disclosure information must be given to the customer, in accordance with the IMD and the DMD. The insurance intermediary may provide information to the customer earlier than the time specified in the rules. For example, an insurance intermediary who is also providing services in connection with packaged products or regulated mortgage contracts may wish to combine the information required by ICOB 4.2 with the status disclosure requirements in COB or MCOB, and provide the information to the customer on initial contact, using the combined initial disclosure document in ICOB 4 Annex 2 R.

  3. (3)

    For certain types of general insurance contract, such as motor insurance, it is customary for a customer to contact various insurance intermediaries for quick quotes which he can then compare. In these circumstances, it is not necessary for the insurance intermediary to give the status disclosure information at the time that the quick quote is provided, if the quote cannot be accepted (and a contract cannot be formed) without the insurance intermediary obtaining further information from the customer.

  4. (4)

    The rules in ICOB 4.2 do not specify the format in which information must be provided to the customer. An insurance intermediary may use the initial disclosure document in ICOB 4 Annex 1 G, the combined initial disclosure document in ICOB 4 Annex 2 R, a terms of business letter, or another document to provide information to the customer.

ICOB 4.2.2R
  1. (1)

    An insurance intermediary must provide the information in ICOB 4.2.8 R to the customer in a durable medium at any time before conclusion of a non-investment insurance contract, unless an exemption in (2) or (3) applies.

  2. (2)

    Exemption: oral disclosureThe information in ICOB 4.2.8 R need not be provided in a durable medium before conclusion of the contract but may be provided orally before the conclusion of the contract if:

    1. (a)

      the customer requests this; or

    2. (b)

      the customer requires immediate cover.

  3. (3)

    Exemption: telephone sales

    1. (a)

      This exemption applies if the service is being provided on the telephone and the customer wishes to enter into a non-investment insurance contract.

    2. (b)

      Provided the customer gives his explicit consent to receiving only limited information, the insurance intermediary may proceed on the basis of at least the following information:1

      1. (i)

        the name of the insurance intermediary;

      2. (ii)

        (if the call is initiated by the insurance intermediary) the commercial purpose of the call;

      3. (iii)

        the identity of the person in contact with the customer and his link with the insurance intermediary; and

      4. (iv)

        that other information is available on request, and the nature of the information.

    3. (c)

      If the customer does not give his explicit consent to receiving limited information, and the parties wish to proceed by telephone, the insurance intermediary must prior to the conclusion of the contract provide all of the information required by ICOB 4.2.8 R orally to the customer.1

  4. (4)

    Where (2) or (3) applies, the customer must be provided with the information in ICOB 4.2.8 R in a durable medium immediately after the conclusion of the contract.

ICOB 4.2.3G
  1. (1)

    The insurance intermediary may, if it so chooses, make the customer aware that he is able to receive the information in ICOB 4.2.8 R orally, in accordance with ICOB 4.2.2 R(2), or (in the case of telephone communications) that the more limited information requirements of ICOB 4.2.2 R(3) may apply.

  2. (2)

    If the customer requires immediate cover and the non-investment insurance contract is concluded over the telephone, the insurance intermediary may take advantage of either of the exemptions in ICOB 4.2.2 R(2) or ICOB 4.2.2 R(3), subject to the customer giving his explicit consent.

Use of the initial disclosure document and combined initial disclosure document

ICOB 4.2.4G
  1. (1)

    The requirement in ICOB 4.2.2 R(1) can be met by use of the initial disclosure document set out in ICOB 4 Annex 1 G. Alternatively, in circumstances where the insurance intermediary has reasonable grounds to be satisfied that the services which it is likely to provide will, in addition to relating to non-investment insurance contracts, also relate to regulated mortgage contracts, regulated lifetime mortgage contracts or packaged products, the insurance intermediary may use the combined initial disclosure document set out in ICOB 4 Annex 2 R.

  2. (2)

    Subject to ICOB 4.2.5 R, an insurance intermediary may use all or part of the wording and format of the initial disclosure document at ICOB 4 Annex 1 G (though if it chooses to omit any of the information required by ICOB 4.2.8 R, the insurance intermediary must still provide this information to the customer in a durable medium before the conclusion of the non-investment insurance contract in accordance with ICOB 4.2.2 R). This flexibility does not apply if an insurance intermediary uses the combined initial disclosure document (see ICOB 4.2.7 R), because the COB and MCOB rules require that the wording and the format of the document must not be changed.

  3. (3)

    The combined initial disclosure document must be given in accordance with the rules in COB and MCOB. In particular (and in contrast with the initial disclosure document set out in ICOB 4 Annex 1 G), it will need to be provided on initial contact.

ICOB 4.2.5R

If an insurance intermediary chooses to use the initial disclosure document at ICOB 4 Annex 1 G, it must not include the key facts logo and the heading and text in Section 1 unless it uses the document in full and makes no changes to the text other than changes allowed by the notes to the document.

ICOB 4.2.6R

If an insurance intermediary uses the initial disclosure document and includes the key facts logo, the key facts logo:

  1. (1)

    must be positioned as shown in ICOB 4 Annex 1 G;

  2. (2)

    must be accompanied by the words 'about our insurance services' as shown in ICOB 4 Annex 1 G;

  3. (3)

    may be a different size from that in ICOB 4 Annex 1 G, but it must be reasonably prominent and its proportions must not be distorted; and

  4. (4)

    may be in colour, but this must not diminish its prominence.

ICOB 4.2.7R

If an insurance intermediary chooses to use the combined initial disclosure document at ICOB 4 Annex 2 R, it must use the document in full and make no change to the text other than changes allowed by the notes to the document.

ICOB 4.2.8R

Information to be provided before conclusion of the contract or immediately after conclusion of the contract

This table belongs to ICOB 4.2.2 R

(1)

The name and address of the insurance intermediary.

(2)

The insurance intermediary's statutory status (in accordance with GEN 4 Annex 1 (Statutory status disclosure)).

(3)

That items 1 and 2 can be checked on the FSA's Register by visiting the FSA's website http://www.fsa.gov.uk/register or by contacting the FSA on 0845 606 1234.

(4)

Unless the insurance intermediary is an insurer, or a third party processor acting as such on behalf of an insurer, 3details of any holding, direct or indirect, that an insurance intermediary has that represents more than 10 per cent of the voting rights or of the capital in an insurance undertaking.

(5)

Unless the insurance intermediary is an insurer, or a third party processor acting as such on behalf of an insurer, 3details of any holding, direct or indirect, that an insurance undertaking or parent of an insurance undertaking has that represents more than 10 per cent of the voting rights or of the capital in the insurance intermediary.

(6)

In relation to the non-investment insurance contract provided, whether the insurance intermediary has provided, or will provide, advice or information:

(a)

on the basis of a fair analysis of the market; or

(b)

from a limited number of insurance undertakings; or

(c)

from a single insurance undertaking.

If (b) or (c) applies, the insurance intermediary must also disclose whether it is contractually obliged to conduct insurance mediation activity in this way.

(7)

If the contract provided has not been selected on the basis of a fair analysis of the market, that the customer can request a copy of the list of the insurance undertakings the insurance intermediary selects from or deals with in relation to the contract provided.

(8)

How to complain to the insurance intermediary and that complaints may subsequently be referred to the Financial Ombudsman Service or any other applicable named complaints scheme.

(9)

The compensation arrangements should the insurance intermediary be unable to meet its liabilities.1

Notes

(1)

If the customer is dealing with an appointed representative of an insurance intermediary, the insurance intermediary is responsible for ensuring that the appointed representative makes the appropriate disclosures (see ICOB 1.6). In that case, the insurance intermediary must ensure that:

(a)

for item 1, the appointed representative provides its own name and address;

(b)

for item 2, the appointed representative makes the disclosure required by GEN 4 Annex 1(4);

(c)

for item 4, the appointed representative discloses its own holding and not the holding of the insurance intermediary;

(d)

for item 5, the holding disclosed is the holding in the appointed representative and not in the insurance intermediary;

(e)

for item 6, the appointed representative discloses the basis on which it provides advice or information; and

(f)

for item 8, the details provided are details of how to complain to the appointed representative.

(2)

Under item 1, where the insurance intermediary trades under a different name from that under which it is authorised, it must disclose the name under which it is authorised and listed on the FSA Register. For an appointed representative, the same applies in relation to the name under which it is registered and listed on the FSA Register.

(3)

Under item 1, the address should be the head office address or, if more appropriate, the principal place of business from which the insurance intermediary or appointed representative expects to conduct business with the customer.

(4)

In addition to the disclosure required by item 9, the insurance intermediary must ensure that, where relevant, it describes the extent and level of compensation cover and how further information can be obtained, after the conclusion of the contract and in a durable medium. The insurance intermediary may provide this information before the contract is concluded, along with the information required by item 9, if it so chooses.

Disclosure by insurance intermediaries when introducing

ICOB 4.2.9R

Where contact by the insurance intermediary with the customer is limited to introducing the customer to another insurance intermediary (or to an insurer as product provider), the customer must be giventhe following information in good time before the introduction is made:

  1. (1)

    the information in ICOB 4.2.8 R (1) and (2);

  2. (2)

    details of fees, if any, that the customer will be charged for the service being provided; and

  3. (3)

    whether the insurance intermediaryintroducing the customer is a member of the same group as the firm to whom the introduction is to be made.

ICOB 4.2.10G

As article 33 of the Regulated Activities Order makes clear, the activity of introducing falls within article 25(2) of the Regulated Activities Order (Arranging deals in investments). ICOB 4.2.9 R applies in the limited circumstances where the arrangements made are confined to putting the customer in contact with another person. If the insurance intermediary goes further, for example by advising the customer on a particular contract of insurance which can be obtained from that person, ICOB 4.2.2 R applies.

Fair analysis

ICOB 4.2.11R

An insurance intermediary cannot hold itself out as giving information or advice to customers on non-investment insurance contracts on the basis of a fair analysis of the market in accordance with ICOB 4.2.8 R(6)(a) unless:

  1. (1)

    it has considered a sufficiently large number of non-investment insurance contracts available in the relevant sector or sectors of the market; and

  2. (2)

    the consideration in (1) is based on criteria which reflect adequate knowledge of non-investment insurance contracts in the relevant sector or sectors of the market.

ICOB 4.2.12G
  1. (1)

    If an insurance intermediary holds itself out as giving information or advice to customers on certain types of non-investment insurance contracts on the basis of a fair analysis of the market (or any sector of that market), the selection of insurance undertakings the insurance intermediary considers for this purpose will need to be sufficiently large to enable the insurance intermediary to satisfy the requirement in ICOB 4.2.11 R. One way in which this requirement may be satisfied is by the insurance intermediary using 'panels' of insurance undertakings which are sufficient to enable the insurance intermediary to give advice or information on a fair analysis basis and which are reviewed on a regular basis. An insurance intermediary which provides a service based on a fair analysis of the market (or from a sector of the market) should ensure that its analysis of the market and the available non-investment insurance contracts is kept adequately up-to-date. For example, an insurance intermediary would need to update its selection of non-investment insurance contracts if it became aware that a non-investment insurance contract had generally become available offering an improved product feature, or a better premium, when compared with the non-investment insurance contracts currently in the insurance intermediary's selection. The frequency with which the selection of contracts needs to be updated will depend on the extent to which new contracts are made available on the market.

  2. (2)

    Where a 'panel' of insurance undertakings is used, the criteria the insurance intermediary uses to select the panel will be important in determining whether the panel is sufficient for the insurance intermediary to provide a service based on a fair analysis of the market. The selection should be based on the product features, premiums and services offered by insurance undertakings to customers, and not solely on the benefit that the insurance undertakings offer to the insurance intermediary.

ICOB 4.2.13G
  1. (1)

    An insurance intermediary may provide advice or information on a different basis to the same customer for different types of non-investment insurance contracts. For example, an insurance intermediary may give advice or information on the basis of a fair analysis of the market in respect of motor insurance contracts, but give advice or information only on a single insurance undertaking's contract for home contents insurance. The disclosure at ICOB 4.2.8 R(6) should be based on the service that the insurance intermediaryis providing in relation to a particular non-investment insurance contract for that customer.

  2. (2)

    PRU 7.6.13R (Restriction of business to insurance) in practice restricts the business which an insurer can carry on.2

Information to be provided to customers on request

ICOB 4.2.14R
  1. (1)

    An insurance intermediary that provides a service under ICOB 4.2.8 R(6)(b) or (c) must maintain, and keep up-to-date, for each type of non-investment insurance contract it deals with, a list of insurance undertakings it selects from or deals with.

  2. (2)

    An insurance intermediary must provide a copy of the list in (1) in a durable medium to a customer on request, in accordance with ICOB 4.2.8 R(7).

Retail customers and commercial customers: information on fees

ICOB 4.2.15R

An insurance intermediary must provide a customer with details of the amount of any fees (or where an actual fee cannot be given the basis for calculating any fees, enabling the customer to verify them) for an insurance mediation activity before the customer incurs liability to pay the fee, or before conclusion of the contract, whichever is earlier.

ICOB 4.2.16G

ICOB 4.2.15 R means that fees charged over the life of the contract by the insurance intermediary, including fees for mid-term adjustments, must be disclosed before the non-investment insurance contract is concluded.

ICOB 4.2.17R

The information in ICOB 4.2.15 R can be provided in any medium before the conclusion of the contract but must be provided in a durable medium immediately after the conclusion of the contract.

ICOB 4.2.18G
  1. (1)

    The fees referred to in ICOB 4.2.15 R are fees for mediation services. Fees for non-investment insurance contracts are covered in ICOB 5.5.14 R(3).

  2. (2)

    Fees do not include premiums, or commissions that are part of premiums.

Overseas business for UK retail customers

ICOB 4.2.19R
  1. (1)

    Unless (3) applies, an3insurance intermediary must not conduct insurance mediation activities in respect of non-investment insurance contracts:

    3
    1. (a)

      from an office of its own (or of any appointed representative) outside the United Kingdom;

    2. (b)

      with or for a retail customer who is in the United Kingdom;

    unless it has, where relevant, made a disclosure in accordance with (2) to the retail customer.

  2. (2)

    The required disclosure in (1) means a written statement making it clear that in some or all respects the regulatory system applying, including any complaints handling or compensation arrangements, will be different from that of the United Kingdom. The statement may also indicate the protections or compensation available under another system of regulation.

  3. (3)

    (1) does not apply to an insurance intermediary when acting as a third party processor.3

Application for renewals and amendments where information has already been provided

ICOB 4.2.20R
  1. (1)

    ICOB 4.2 does not apply in relation to any insurance mediation activity that an insurance intermediary carries on with a customer in the course of renewing or amending a contract of insurance, if the information required by ICOB 4.2 has already been given to the customer in relation to the initial contract and is still accurate and up-to-date.

  2. (2)

    If the information in relation to the initial contract that the insurance intermediary has previously disclosed to the customer in accordance with ICOB 4.2 has changed, the insurance intermediary must give the customer the updated information in accordance with the provisions of ICOB 4.2, but does not need to provide the other information required by ICOB 4.2.

ICOB 4.2.21G

An insurance intermediary will normally need to provide updated information within ICOB 4.2.20 R(2) to the customer in a durable medium before the conclusion of the contract, unless an exemption in ICOB 4.2.2 R(2) (oral disclosure) or ICOB 4.2.2 R(3) (telephone sales) applies.