This chapter sets out the cancellation rights that a firm must offer to a retail customer upon inception or renewal of specified contracts. A renewal only occurs if a further policy is entered into at the expiry of an existing policy. For example, a creditor policy that remains in existence from month to month until the policyholder attains a certain age, until cancelled by either party, or until lapse because of non-payment of premiums would not be considered as a policy with monthlyrenewal under the ICOBrules.
This chapter does not apply to the following contracts:
a non-investment insurance contract, the performance of which has been fully completed by both parties at the retail customer's express request before the retail customer exercises his right to cancel;
In ICOB 6.1.5 R(1) the 'similar short-term insurance policy' referred to is any contract of insurance where the event or activity being insured is less than one month's duration. The reference to 'duration' is to the period of the cover rather than the period of the contract. So the exemption will cover travel insurance for a fortnight's holiday, even if the insurance was taken out two months before the holiday began. However, if the period of cover includes cancellation of the holiday from the point at which the contract is taken out, the policy will not benefit from the exemption.
In relation to ICOB 6.1.5 R(2):
a contract is fully completed where a claim has been made that leads to the contract being terminated. This could include a total loss claim (for example, a motor claim where the vehicle is written off and this results in termination of the contract).
The cancellation rights described in this chapter apply to all renewals and not just those where there have been significant changes.
This chapter reinforces Principle 6 (Customers' interests) which requires a firm to pay due regard to the interests of its customers and treat them fairly. In certain circumstances, retail customers who have entered into a non-investment insurance contract will be entitled to a period of reflection during which they can decide whether to proceed with their purchase.
This chapter also implements, where relevant, elements of the DMD and the Consolidated Life Directive relating to the cancellation of distance contracts and non-investment insurance contracts that are pure protection contracts.