COB 8A.3 Duties of firms acting on behalf of policyholders

COB 8A.3 will usually apply to a firm that is not an insurer, but it may also apply to an insurer, for example, if it were dealing with a claim on a policy insured by another insurer.

The rules and guidance in COB 8A.3 do not seek to set out the full extent of the duties owed by firms to any person for whom they act, nor do they displace the general law on the duties of agents.

COB 8A.3.5 R imposes a requirement on a firm to avoid conflicts of interest in relation to claims where it acts on behalf of a policyholder unless it can manage them by disclosure to, and the obtaining of consent from, the policyholder.

A firm should consider whether it is possible to manage the conflict by disclosing the conflict to the policyholder and obtaining his consent. Where a firm acts for a policyholder in arranging a policy, it is likely to be the agent for the policyholder in connection with the preparation and handling of any claim against the insurer. If the firm intends to be the agent of an insurer in relation to claims under that policy, it will need to consider whether it is at risk of putting itself in the position where it cannot act without some breach of duty either to the insurer or the policyholder. The firm should consider whether disclosure and consent are sufficient to reconcile the conflicting obligations. An example of a circumstance in which disclosure and consent are unlikely to be sufficient and when a firm may well consider it should not act for the insurer or the policyholder or either, is where the firm knows that the policyholder will, to obtain a quick payment, accept a low amount in settlement of a claim and also knows the insurer is willing to settle for a higher amount.

COB 8A.3.8 R would apply, for example, where a firm has delegated authority for claims handling and deals with a claim in relation to a contract that is sold to a policyholder, if the firm is not acting on behalf of that policyholder in relation to the claim.