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ICOBS 4.1 General requirements for insurance intermediaries

Application: who?

ICOBS 4.1.1 R

1This section applies to an insurance intermediary.

Status disclosure: general

ICOBS 4.1.2 R

Prior to the conclusion of an initial contract of insurance and, if necessary, on its amendment or renewal, a firm must provide the customer with at least:

  1. (1)

    its name and address;

  2. (2)

    the fact that it is included in the Financial Services Register and the means for verifying this;

  3. (3)

    whether it has a direct or indirect holding representing more than 10% of the voting rights or capital in a given insurance undertaking (that is not a pure reinsurer);

  4. (4)

    whether a given insurance undertaking (that is not a pure reinsurer) or its parent undertaking has a direct or indirect holding representing more than 10% of the voting rights or capital in the firm; and

  5. (5)

    the procedures allowing customers and other interested parties to register complaints about the firm with the firm and the Financial Ombudsman Service or, if the Financial Ombudsman Service does not apply, information about the out-of-court complaint and redress procedures available for the settlement of disputes between the firm and its customers.

[Note: article 12(1) of the Insurance Mediation Directive]

Status disclosure exemption: introducers

ICOBS 4.1.3 R

A firm whose contact with a customer is limited to effecting introductions (see PERG 5.6) need only provide its name and address and whether it is a member of the same group as the firm to which it makes the introduction.

ICOBS 4.1.4 G

If a firm goes further than putting a customer in contact with another person (for example, by advising him on a particular policy available from the firm) the full status disclosure requirements will apply.

Status disclosure exemption: connected travel insurance

ICOBS 4.1.5 R

In relation to a connected travel insurance contract, a firm need only provide the procedures allowing customers and other interested parties to register complaints about the firm with the firm and the Financial Ombudsman Service or, if the Financial Ombudsman Service does not apply, information about the out-of-court complaint and redress procedures available for the settlement of disputes between the firm and its customers.2

2

Scope of service

ICOBS 4.1.6 R
  1. (1)

    Prior to the conclusion of an initial contract of insurance (other than a connected travel insurance contract)2 and, if necessary, on its amendment or renewal, a firm must tell the customer whether:

    1. (a)

      it gives advice on the basis of a fair analysis of the market; or

    2. (b)

      it is under a contractual obligation to conduct insurance mediation business exclusively with one or more insurance undertakings; or

    3. (c)

      it is not under a contractual obligation to conduct insurance mediation business exclusively with one or more insurance undertakings and does not give advice on the basis of a fair analysis of the market.

  2. (2)

    A firm that does not advise on the basis of a fair analysis of the market must inform its customer that he has the right to request the name of each insurance undertaking with which the firm may and does conduct business. A firm must comply with such a request.

[Note: article 12(1) of the Insurance Mediation Directive]

ICOBS 4.1.7 R

Prior to conclusion of an initial contract of insurance with a consumer a firm must state whether it is giving a personal recommendation or information.

Guidance on using panels to advise on the basis of a fair analysis

ICOBS 4.1.8 G
  1. (1)

    One way a firm may give advice on a fair analysis basis is by using ‘panels’ of insurance undertakings which are sufficient to enable the firm to give advice on a fair analysis basis and are reviewed regularly.

  2. (2)

    A firm 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 contracts is kept adequately up-to-date. For example, a firm should update its selection of contracts if aware that a contract has generally become available offering an improved product feature, or a better premium, compared with its current selection. The update frequency will depend on the extent to which new contracts are made available on the market.

  3. (3)

    The panel selection criteria will be important in determining whether the panel is sufficient to meet the ‘fair analysis’ criteria. Selection should be based on product features, premiums and services offered to customers, not solely on the benefit offered to the firm.

Means of communication to customers

ICOBS 4.1.9 R
  1. (1)

    All information to be provided to a customer in accordance with this chapter must be communicated:

    1. (a)

      on paper or on any other durable medium available and accessible to the customer;

    2. (b)

      in a clear and accurate manner, comprehensible to the customer; and

    3. (c)

      in an official language of the State of the commitment or in any other language agreed by the parties.

  2. (2)

    The information may be provided orally where the customer requests it, or where immediate cover is necessary.

  3. (3)

    In the case of telephone selling, the information may be given in accordance with the distance marketing disclosure rules (see ICOBS 3.1.14 R).

  4. (4)

    If the information is provided orally, it must be provided to the customer in accordance with (1) immediately after the conclusion of the contract of insurance.

[Note: article 13 of the Insurance Mediation Directive]

ICOBS 4.2 Additional requirements for protection policies for insurance intermediaries and insurers

Application: what?

ICOBS 4.2.1 R

This section applies in relation to a pure protection contract or a payment protection contract for a consumer.

Ensuring customers can make an informed decision

ICOBS 4.2.2 G

In considering a customer's information needs for the purposes of Principle 7, a firm should have regard to the importance of information for a customer's purchasing decision when deciding when and how to give it.

ICOBS 4.2.3 G

If a firm provides elements of status disclosure information orally as part of an interactive dialogue, it should do so for all elements of the information. In the case of telephone selling, the information may be given in accordance with the distance marketing disclosure rules (see ICOBS 3.1.14 R).

Disclosing the limits of the service provided

ICOBS 4.2.4 R
  1. (1)

    In a sale that does not involve a personal recommendation, a firm must take reasonable steps to ensure a customer understands he is responsible for deciding whether a policy meets his demands and needs.

  2. (2)

    If this is done orally, the information must be provided to the customer in writing or any other durable medium no later than immediately after the conclusion of the contract.

  3. (3)

    If a firm anticipates providing, or provides, information on any main characteristic of a policy orally during a non-advised sale, taking reasonable steps includes explaining the customer's responsibility orally.

  4. (4)

    A policy's main characteristics include its significant benefits, its significant exclusions and limitations, its duration and price information.

Status disclosure for insurers

ICOBS 4.2.5 R
  1. (1)

    Prior to the conclusion of an initial contract and, if necessary, on its amendment or renewal, an insurer must disclose to the customer at least:

    1. (a)

      the statutory status disclosure statement (see GEN 4);

    2. (b)

      whose policies it offers; and

    3. (c)

      whether it is providing a personal recommendation or information.

  2. (2)

    If this is done orally, the disclosure must be provided in writing or any other durable medium no later than immediately after the conclusion of the contract.

ICOBS 4.2.6 G

Insurers cannot carry on an insurance mediation activity in respect of a third party’s products unless they can show a natural fit or necessary connection between their insurance business and the third party’s products (see the restriction of business in INSPRU 1.5.13 R and rule 9 of the PRA Rulebook: Solvency II firms: Conditions Governing Business1).

ICOBS 4.3 Fee disclosure

ICOBS 4.3.1 R
  1. (1)

    A firm must provide its customer with details of the amount of any fees other than premium monies for an insurance mediation activity.

  2. (2)

    The details must be given before the customer incurs liability to pay the fee, or before conclusion of the contract, whichever is earlier.

  3. (3)

    To the extent that an actual fee cannot be given, a firm must give the basis for calculation.

ICOBS 4.3.2 G

The fee disclosure requirement extends to all such fees that may be charged during the life of a policy.

ICOBS 4.4 Commission disclosure for commercial customers

Commission disclosure rule

ICOBS 4.4.1 R
  1. (1)

    An insurance intermediary must, on a commercial customer's request, promptly disclose the commission that it and any associate receives in connection with a policy.

  2. (2)

    Disclosure must be in cash terms (estimated, if necessary) and in writing or another durable medium. To the extent this is not possible, the firm must give the basis for calculation.

ICOBS 4.4.2 G

An insurance intermediary should include all forms of remuneration from any arrangements it may have. This includes arrangements for sharing profits, for payments relating to the volume of sales, and for payments from premium finance companies in connection with arranging finance.

ICOBS 4.4.3 G
  1. (1)

    The commission disclosure rule is additional to the general law on the fiduciary obligations of an agent in that it applies whether or not the insurance intermediary is an agent of the commercial customer.

  2. (2)

    In relation to contracts of insurance, the essence of these fiduciary obligations is generally a duty to account to the agent’s principal. But where a customer employs an insurance intermediary by way of business and does not remunerate him, and where it is usual for the firm to be remunerated by way of commission paid by the insurer out of premium payable by the customer, then there is no duty to account but if the customer asks what the firm's remuneration is, it must tell him.

ICOBS 4.6 Commission disclosure for pure protection contracts sold with retail investment products

ICOBS 4.6.1 G

1The rules in this section:

  1. (1)

    address the risk that a consumer believes that a firm's remuneration for its pure protection service is included in its adviser charge, where this is not the case; and

  2. (2)

    enable the consumer to evaluate a firm'sadviser charge in the light of any additional remuneration received by the firm for the pure protection service it provides.

ICOBS 4.6.2 R

A firm which agrees an adviser charge with a consumer and provides an associated pure protection service to that consumer must:

  1. (1)

    in good time before the provision of its services, take reasonable steps to ensure that the consumer understands:

    1. (a)

      how the firm is remunerated for its pure protection service; and

    2. (b)

      if applicable, that the firm will receive commission in relation to its pure protection service in addition to the firm'sadviser charge;

  2. (2)

    as close as practicable to the time that it makes the personal recommendation or arranges the sale of the pure protection contract, comply with the following disclosure requirements, substituting pure protection contract for references to packaged product:

    1. (a)

      COBS 6.4.3 R, or COBS 6.4.4A R and COBS 6.4.4B R; and

    2. (b)

      COBS 6.4.5 R.

ICOBS 4.6.3 G

A pure protection service is unlikely to be associated with an adviser charge for the purposes of ICOBS 4.6.2 R if the firm agreed the adviser charge with the consumer 12 months or more before the provision of the pure protection service.

ICOBS 4.6.4 G

A pure protection service is not associated with an adviser charge for the purposes of ICOBS 4.6.2 R if the adviser charge is agreed with the consumer by a firm or an appointed representative and the pure protection service is provided to that consumer by another firm or appointed representative. However, if a firm or an appointed representative refers a consumer with whom it is agreeing an adviser charge to another firm or appointed representative for the provision of a pure protection service, it should consider its obligation to communicate with the consumer in a way that is clear, fair and not misleading in the context of the guidance in ICOBS 4.6.1 G.

ICOBS 4.6.5 R

If a firm expects to provide, or provides, information about its adviser charge orally, it must also provide the information required by ICOBS 4.6.2R (1)(a) and ICOBS 4.6.2R (1)(b) orally.

ICOBS 4 Annex 1 Initial disclosure document

G

This annex consists only of one or more forms. Forms are to be found through the following address:

Initial disclosure document - icobs4_annex_1.pdf