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ICOB 7.5 Retail customers: performance standards for handling claims

Responding to notification of the claim

ICOB 7.5.1R

An insurer must respond promptly to a notification by a retail customer of a claim.

ICOB 7.5.2G

Notification of a claim is a demand of the insurer to pay or provide a benefit insured under the policy, e.g. by submitting a claim form or giving the equivalent information orally, where permitted by the policy. An enquiry that precedes such a demand, for example, as to whether a particular loss is covered, and therefore whether a claim could be made under the terms of the policy, is not notification of a claim.

ICOB 7.5.3G

ICOB 7.5.1 R requires an insurer to respond promptly once it has received notification of a claim. Generally a prompt response would be one within five business days of a retail customer making a claim, although in some circumstances, a prompt response could be less than five business days, such as where the retail customer would expect a swifter response because of the nature of the claim or the terms of the policy (for example, a roadside assistance policy).

ICOB 7.5.4R

The response referred to in ICOB 7.5.1 R must:

  1. (1)

    provide the information set out in ICOB 7.5.5 R;

  2. (2)

    be in a durable medium, unless the notification by the retail customer is made orally and the insurer does not require the retail customer to complete a claim form; and

  3. (3)

    provide the retail customer with a claim form, if the insurer requires one to be completed.

ICOB 7.5.5R

The information referred to in ICOB 7.5.4 R(1) is:

  1. (1)

    that the claim relates to a risk that is clearly outside the scope of the policy, if that is the case (in which case no further information need be provided);

  2. (2)

    the action that will be taken by the insurer, and when that action will be taken;

  3. (3)

    if the insurer is appointing any other parties to contact the retail customer on the insurer's behalf, in respect of each other party appointed the following information, if known (but, if the purpose of the appointment is to investigate the validity of a claim, the information need not be given if to give it would limit or prevent the effective investigation of the claim or any part of it):

    1. (a)

      its name (unless the other party trades under the name of the insurer);

    2. (b)

      its function; and

    3. (c)

      the work it will carry out in relation to the claim.

ICOB 7.5.6G

The purpose of the rules and guidance in ICOB 7.5.1 R to ICOB 7.5.5 R is to provide the retail customer at an early stage with information in relation to the processing and settlement of his claim by the insurer. ICOB 7.5.5 R(1) is intended to prevent a retail customer pursuing a claim for which he is clearly not covered, for example, making a claim on a contents insurance policy for possessions away from home, when the policy only covers possessions in the home. It is not intended to pre-empt the outcome of an investigation of a claim.

ICOB 7.5.7G

The purpose of ICOB 7.5.5 R(3) is to ensure that a retail customer knows the name and function of any party who will contact him in relation to a claim as a representative of the insurer e.g. an outsourcedclaims handling company or a loss adjuster. An insurer would not be expected to notify the retail customer of other parties who are appointed to investigate the validity of a claim, if this would limit or prevent an effective investigation. However, if a third party such as a loss adjuster is appointed to liaise with the retail customer on the insurer's behalf, as well as assess the validity of the claim, the insurer would be expected to disclose the information in ICOB 7.5.5 R(3) unless it would limit or prevent an effective investigation.

Investigation and processing of the claim

ICOB 7.5.8R

An insurer must keep the retail customer reasonably informed about the progress of his claim.

ICOB 7.5.9G

Where the investigation of a claim is likely to be protracted, an insurer should provide periodic progress or status reports, when appropriate, to a retail customer, including providing the retail customer with any relevant update in relation to the information provided under ICOB 7.5.5 R. The insurer should also respond without undue delay to any reasonable request by the retail customer for information.

Determining the claim

ICOB 7.5.10R

An insurer must notify the retail customer as soon as practicable whether it:

  1. (1)

    rejects all of his claim;

  2. (2)

    rejects his claim but, without prejudice to the rejection, makes an offer in compromise; or

  3. (3)

    accepts all or part of his claim.

ICOB 7.5.11R

If the insurer rejects the claim, but without prejudice to the rejection makes an offer in compromise, it must notify the retail customer of the terms of that offer as soon as practicable.

ICOB 7.5.12R

If the insurer accepts all or part of the retail customer's claim, it must notify the retail customer as soon as practicable whether:

  1. (1)

    as to the parts it accepts, it agrees to provide the money, property or service claimed by the retail customer in full; or

  2. (2)

    it makes some other offer in compromise. In that event, it must notify the retail customer of the terms of its offer.

ICOB 7.5.13R
  1. (1)

    Unless the insurer accepts the retail customer's claim in full, the insurer must explain why it rejects all or part of the retail customer's claim or makes a compromise offer, specifying any relevant term of the policy.

  2. (2)

    The insurer must offer the retail customer the choice of receiving the information at ICOB 7.5.13 R(1) in a durable medium.

ICOB 7.5.14G

Motor vehicle liability insurers should refer to the rules and guidance at ICOB 7.6.8 R to ICOB 7.6.11 G in respect of a claim for damages by an injured party in the circumstances set out in ICOB 7.6.11 G (1).

ICOB 7.5.15R

The insurer must, in respect of each part of the claim that it accepts, inform the retail customer whether the claim will be settled by paying him, or by paying another person to provide goods or services, or by providing those goods or services.

ICOB 7.5.16G

Examples of a payment to others for the provision of goods or services are: to a garage for repairs carried out to a vehicle, to a supplier for the provision of replacement electrical goods, or to a doctor for medical treatment.

Settling a claim

ICOB 7.5.17R

An insurer must settle a claim by a retail customer promptly.

ICOB 7.5.18G
  1. (1)

    Settlement terms are agreed when:

    1. (a)

      the insurer accepts the retail customer's claim; and

    2. (b)

      the retail customer accepts the insurer's offer of settlement.

  2. (2)

    When the insurer settles the claim by paying the retail customer, the insurer should aim to make payment within five business days after the insurer and the retail customer have agreed settlement terms, subject to any pre-conditions laid down by the insurer or in law being met by the retail customer. This does not prevent the insurer paying a claim before the retail customer has finally agreed settlement terms.

  3. (3)

    The guidance in (2) would not apply if the non-investment insurance contract otherwise provides, or the insurer settles the claim by:

    1. (a)

      payment against a liability due on a future date;

    2. (b)

      the provision of goods or services;

    3. (c)

      making payments on a date specified by the retail customer; or

    4. (d)

      payment of the claim through an employer or other party on a monthly or some other basis;

    and in the case of (a) or (b) the insurer should make prompt payment or arrange for prompt provision of the goods or services after the insurer and the retail customer have agreed settlement terms.

ICOB 7.5.19G

The arrangements for settlement set out in ICOB 7.5.18 G(3)(a) are likely to apply, for example, when payments are made under a creditor insurance policy to meet periodic repayments due under a loan agreement.

ICOB 7.5.20G

The arrangements for settlement set out in ICOB 7.5.18 G(3)(b) apply to arrangements to supply goods or services to the retail customer. In such situations, the goods or services should be provided promptly, but where they cannot be the insurer should tell the retail customer when to expect them.

ICOB 7.5.21G

An insurer should note that unless it has previously informed a retail customer that a claim will not be met in full or in part until premiums have been paid, the insurer may not delay payment of a claim on the grounds that premiums are outstanding.

Pre-action protocols

ICOB 7.5.22G

A customer who does not accept an insurer's rejection of his claim (or part of it) may challenge that rejection. If he chooses to do so through the courts, firms should be aware that in England and Wales there are pre-action protocols which lay down certain requirements as to the steps to be taken before proceedings are issued. This chapter does not displace these requirements, to which firms should have regard in the event that a rejection of a claim moves towards litigation.