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Timeline guidance

ICOBS 2.1 Client categorisation


ICOBS 2.1.1 G RP

1Different provisions in this sourcebook may apply depending on the type of person with whom a firm is dealing:

  1. (1)

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

  2. (2)

    Only a policyholder or a prospective policyholder who makes the arrangements preparatory to him concluding a contract of insurance (directly or through an agent) is a customer. In this sourcebook, customers are either consumers or commercial customers.

  3. (3)

    A consumer is any natural person who is acting for purposes which are outside his trade or profession.

  4. (4)

    A commercial customer is a customer who is not a consumer.

Customer to be treated as consumer when status uncertain

ICOBS 2.1.2 R RP

If it is not clear in a particular case whether a customer is a consumer or a commercial customer, a firm must treat the customer as a consumer.

Customer covered in both a private and business capacity

ICOBS 2.1.3 G RP
  1. (1)

    Except where paragraph (2) applies, if a customer is acting in the capacity of both a consumer and a commercial customer in relation to a particular contract of insurance, the customer is a commercial customer.

  2. (2)

    For the purposes of ICOBS 5.1.4 G and ICOBS 8.1.2 R, if, in relation to a particular contract of insurance, the customer entered into it mainly for purposes unrelated to his trade or profession, the customer is a consumer.


Customer classification examples

ICOBS 2.1.4 G RP

In practice, private individuals may act in a number of capacities. The following table sets out a number of examples of how an individual acting in certain capacities should, in the FCA's view, be categorised.

Customer classification examples



Personal representatives, including executors, unless they are acting in a professional capacity, for example, a solicitor acting as executor.


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


Trustee of a trust such as a housing or NHS trust.

Commercial customer

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

Commercial customer

Pension trustee.

Commercial customer

Person taking out a policy covering property bought under a buy-to-let mortgage.

Commercial customer

Partner in a partnership when taking out insurance for purposes related to his profession.

Commercial customer

ICOBS 2.2 Communications to clients and financial promotions


ICOBS 2.2.1 R RP

In addition to the general application rule for this sourcebook, this section applies to the communication, or approval for communication, to a person in the United Kingdom of a financial promotion of a non-investment insurance contract unless it can lawfully be communicated by an unauthorised communicator without approval.

Clear, fair and not misleading rule

ICOBS 2.2.2 R RP

When a firm communicates information, including a financial promotion, to a customer it must ensure that2 is clear, fair and not misleading.

[Note: article 17(2) of the IDD]2

Marketing communications

ICOBS 2.2.2A R

2A firm must ensure that, in relation to insurance distribution, marketing communications are always clearly identifiable as such.

[Note: article 17(2) of the IDD]

Approving financial promotions

ICOBS 2.2.3 R RP
  1. (1)

    Before a firmapproves a financial promotion it must take reasonable steps to ensure that the financial promotion is clear, fair and not misleading.

  2. (2)

    If, subsequently, a firm becomes aware that a financial promotion is not clear, fair and not misleading, it must withdraw its approval and notify any person that it knows to be relying on its approval as soon as reasonably practicable.

Pricing claims: guidance on the clear, fair and not misleading rule

ICOBS 2.2.4 G RP
  1. (1)

    This guidance applies in relation to a financial promotion that makes pricing claims, including financial promotions that indicate or imply that a firm can reduce the premium, provide the cheapest premium or reduce a customer's costs.

  2. (2)

    Such a financial promotion should:

    1. (a)

      be consistent with the result reasonably expected to be achieved by the majority of customers who respond, unless the proportion of those customers who are likely to achieve the pricing claims is stated prominently;

    2. (b)

      state prominently the basis for any claimed benefits and any significant limitations; and

    3. (c)

      comply with other relevant legislative requirements, including the Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection from Misleading Marketing Regulations 2008.1


The reasonable steps defence

ICOBS 2.2.5 R

2If, in relation to a particular communication or financial promotion, a firm takes reasonable steps to ensure it is fair, clear and not misleading then:

  1. (1)

    the firm will not contravene ICOBS 2.2.2R where:

    1. (a)

      the recipient is a customer that does not make the arrangements preparatory to the conclusion of the contract of insurance; or

    2. (b)

      the communication is made in relation to activities other than insurance distribution; and

  2. (2)

    a contravention of the clear, fair and not misleading rule (ICOBS 2.2.2R) does not give rise to a right of action under section 138D of the Act.

ICOBS 2.3 Inducements

ICOBS 2.3.1 G RP
  1. (1)

    Principle 8 requires a firm to manage conflicts of interest fairly, both between itself and its customers and between a customer and another client. This principle extends to soliciting or accepting inducements where this would conflict with a firm's duties to its customers. A firm that offers such inducements should consider whether doing so conflicts with its obligations under:1

    1. (a)

      Principles 1 and 6 to act with integrity and treat customers fairly; and1

    2. (b)

      the customer’s best interests rule.1

  2. (2)

    An inducement is a benefit offered to a firm, or any person acting on its behalf, with a view to that firm, or that person, adopting a particular course of action. This can include, but is not limited to, cash, cash equivalents, commission, goods, hospitality or training programmes.

ICOBS 2.4 Record-keeping

ICOBS 2.4.1 G RP
  1. (1)

    The Senior Management Arrangements, Systems and Controls sourcebook (SYSC) 2 contains high-level record-keeping requirements (see SYSC 3.2.20 R, 2SYSC 9.1.1 R and SYSC 9.1.1 AR2).

  2. (2)

    This sourcebook does not generally have detailed record-keeping requirements: firms will need to decide what records they need to keep in line with the high-level record-keeping requirements and their own business needs.

  3. (3)

    Firms should bear in mind the need to deal with requests for information from the FCA as well as queries and complaints from customers which may require evidence of matters such as:

    1. (a)

      the reasons for personal recommendations;

    2. (b)

      what documentation has been provided to a customer; and

    3. (c)

      how claims have been settled and why.

ICOBS 2.5 Acting honestly, fairly and professionally, exclusion of liability, conditions and warranties 1

4The customer’s best interests rule

ICOBS 2.5.-1 R

4A firm must act honestly, fairly and professionally in accordance with the best interests of its customer.

[Note: article 17(1) of the IDD]

Exclusion of liability and conditions

ICOBS 2.5.1 R RP
  1. (1)

    A firm must not seek to exclude or restrict, or rely on any exclusion or restriction of, any duty or liability it may have to a customer or other policyholder unless it is reasonable for it to do so and the duty or liability arises other than under the regulatory system.1

  2. (2)

    A Solvency II firm must ensure that general and special policy conditions do not include any conditions intended to meet, in an individual case, the particular circumstances of the risk to be covered.1

    [Note: article 187 of the Solvency II Directive]1

ICOBS 2.5.2 G RP

The general law, including the Unfair Terms Regulations (for contracts entered into before 1 October 2015) and the CRA, 2also limits the scope for a firm to exclude or restrict any duty or liability to a consumer.

Conditions and warranties in policies


3An insurer must ensure that any condition or warranty included in a policy with a consumer:

  1. (1)

    has operative effect only in relation to the types of crystallised risk covered by the policy that are connected to that condition or warranty; and

  2. (2)

    (for a warranty in a pure protection contract) is material to the risks to which it relates and is drawn to the customer’s attention before the conclusion of the contract.


3 ICOBS 2.5.2AR(2) does not apply to a ‘life of another’ contract where the warranty relates to a statement of fact concerning the life to be assured.


3An insurer may choose to draft its conditions and warranties so that they clearly state the particular types of crystallised risks covered by the policy to which they are connected, for the purposes of ICOBS 2.5.2AR(1). Alternatively the insurer may in practice have systems and controls which operate the conditions and warranties in a way that has the same effect.

Reliance on others

ICOBS 2.5.3 G RP
  1. (1)

    Where it is compatible with the nature of the obligation imposed by a particular rule, including the customer’s best interests rule,4 and with the Principles, in particular Principles 1 (Integrity), 2 (Skill, care and diligence) and 3 (Management and control), firms may rely on third parties in order to comply with the rules in this sourcebook.

  2. (2)

    For example, where a rule requires a firm to take reasonable steps to achieve an outcome, it will generally be reasonable for a firm to rely on information provided to it in writing by an unconnected authorised person or a professional firm, unless it is aware or ought reasonably to be aware of any fact that would give reasonable grounds to question the accuracy of that information. However, a firm cannot delegate its responsibility under the regulatory system. For example, where a rule imposes an absolute obligation (such as the requirement for an insurer to handle claims promptly and fairly) although a firm could use outsourcing arrangements to fulfil its obligation, it retains regulatory responsibility for achieving the outcome required.

4Other requirements

ICOBS 2.5.4 G

4 Firms are reminded of their obligations in SYSC 19F.2 to ensure remuneration arrangements do not conflict with their duty to act in the customer’s best interests.

ICOBS 2.6 Distribution of connected contracts through exempt persons

ICOBS 2.6.1 R
  1. (1)

    1Where an insurance distributor is distributing through a person relying on the connected contracts exemption in article 72B of the Regulated Activities Order, the insurance distributor must ensure that the requirements in (2) are met.

  2. (2)

    The requirements referred to in (1) are:

    1. (a)

      SYSC 19F.2 (Remuneration and insurance distribution activities);

    2. (b)

      ICOBS 2.2.2R and ICOBS 2.2.2AR (Clear, fair and not misleading rule and marketing communications);

    3. (c)

      ICOBS 2.5.-1R (Customer’s best interests);

    4. (d)

      ICOBS 4.1.2R(1)(a) and (c) (Status disclosure: general information provided by insurance intermediaries or insurers);

    5. (e)

      ICOBS 5.2 (Demands and needs);

    6. (f)

      ICOBS 6.1.5R(4) (Ensuring customers can make an informed decision: the appropriate information rule);

    7. (g)

      ICOBS 6.1.10AR (How must IPID information be provided?) (see also ICOBS 6.1.10BG); and

    8. (h)

      ICOBS 6A.3 (Cross-selling).

[Note: article 1(4) of the IDD]

ICOBS 2.6.2 G

1To comply with the relevant chapter of SYSC or Principle 3, an insurance distributor will need to have appropriate arrangements in place to ensure compliance with ICOBS 2.6.1R.