PROD 4.4 Additional expectations for manufacturers and distributors of insurance products

In addition to PROD 4.1, PROD 4.2 and PROD 4.3, firms should also consider what needs to be done to comply with obligations found elsewhere in the FCA Handbook, including under the Principles and in SYSC. In considering this firms should consider any relevant guidance.

PROD 1.4.10G provides that, where PROD 4 applies, a firm need not apply the guidance in RPPD for matters covered by PROD, if that firm has complied with PROD 4. However, PROD 4 and the IDD POG Regulation does not cover all parts of the RPPD or wider obligations in the FCA Handbook and the following guidance, some of which is reproduced from the RPPD, remains relevant.

Manufacturers should consider whether the design of an insurance product is driven by features that benefit the customer and not by a business model which relies on poor customer outcomes to be profitable.

When providing information to distributors, a manufacturer should:

1. (1)

   make it clear if that information is not intended for customer use;

2. (2)

   ensure the information is sufficient, appropriate and comprehensible in substance and form, including considering whether it will enable distributors to understand it enough to give suitable advice (where advice is given) and to extract any relevant information and communicate it to the end customer. As part of meeting this standard, the manufacturer may wish to consider, with regard to each distribution channel or type of distributor what information distributors of that type already have, their likely level of knowledge and understanding, their information needs and what form or medium would best meet those needs (which could include discussions, written material or training as appropriate).

When reviewing the insurance products it manufactures, a firm should communicate to the customer and/or distributor contractual “breakpoints” such as the end of a long tie-in period that may have a material impact on a customer that the customer cannot reasonably be expected to recall or know about already.

Manufacturers should act fairly and promptly when handling claims or when paying out on an insurance product that has been surrendered or reached maturity. In doing this, the manufacturer should meet any reasonable customer expectations that it may have created with regard to the outcomes or how the process would be handled.

In ensuring that they have obtained sufficient information about the insurance products they distribute and in ensuring they understand the insurance products distributed, distributors:

1. (1)

   should consider whether they understand the materials provided by the manufacturer or distributor earlier in the sales chain;

2. (2)

   should ask the manufacturer to supply additional information or training where this seems necessary to understand the insurance product adequately;

3. (3)

   should not distribute the insurance product if they do not understand it sufficiently; and

4. (4)

   when providing information to another distributor in a distribution chain, should consider how the further distributor will use the information, such as whether it will be given to customers. Firms should consider what information the further distributor requires and the likely level of knowledge and understanding of the further distributor and what medium may suit it best for the transmission of information.