in a way that conflicts with their duty to comply with the customer’s best interests rules (ICOBS 2.5.-1R, in relation to a non-investment insurance contract, or COBS 2.1.1R, in relation to a life policy).
In particular, an insurance distributor must not make any arrangements by way of remuneration, sales target or otherwise that could provide an incentive to itself or its employees to recommend a particular contract of insurance to a customer in contact with the firm5 when the insurance distributor could offer a different insurance contract which would better meet the customer’s needs.
[Note: article 17(3) of the IDD]
5In relation to a non-investment insurance contract, an insurance distributor must not make any arrangements by way of remuneration or incentive to any person, including itself, its employees or any third party, that could lead:
the customer to take out a particular insurance contract,
5When assessing whether it complies with SYSC 19F.2.2R, an insurance distributor should consider all of the remuneration it receives in connection with a non-investment insurance contract, whether or not it intends to retain that remuneration or make payments out of that amount to another person. A firm should consider whether the gross amount of any sum it receives by way of remuneration, whether in the form of commission or of any other type, is consistent with ICOBS 2.5.-1R, rather than the net amount that the firm intends to retain.
5Where a firm has arrangements to provide incentives, including partial premium refunds or commission-like payments, to third parties (including the customer taking out the policy), this may encourage those persons to use the services of the firm. Where that is the case, those arrangements would be expected to lead to the firm receiving a financial or non-financial benefit or other incentive in respect of the insurance distribution activities to which it relates and so would be remuneration to which SYSC 19F.2.2R(1) applies.