An insurer is responsible for claims handling. A managing agent is responsible for claims handling for policies underwritten at Lloyd's. An insurer or a managing agent remains responsible for claims handling if it outsources any of its claims-related activities, including where it gives an intermediary authority to handle claims on its behalf. An insurer or a managing agent is not responsible for the administration and performance activities that a firm carries out on behalf of a policyholder in connection with a claim. In relation to these activities, a firm which acts on behalf of policyholders should refer to COB 8A.3.

An insurer should refer to the rules and guidance set out in SUP 2.3.5 R to SUP 2.3.10 G in respect of any person to whom it outsources its claims handling functions.

This chapter applies to claims made by or on behalf of policyholders.

1. (1)

   The purpose of this chapter is to ensure that:

   1. (a)

      claims are handled fairly;

   2. (b)

      claims are settled promptly;

   3. (c)

      policyholders are provided with information on the claims handling process and with an explanation of why a claim is rejected or not settled in full, where relevant; and

   4. (d)

      firms acting on behalf of policyholders disclose and manage any conflicts of interest that may exist.

2. (2)

   This chapter reinforces:

   1. (a)

      Principle 3 (Management and control), which requires a firm to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems;

   2. (b)

      Principle 6 (Customers' interests), which requires a firm to pay due regard to the interests of its policyholders and treat them fairly; and

   3. (c)

      Principle 8 (Conflicts of interest), which requires a firm to manage conflicts of interest fairly, both between itself and its policyholders and between a policyholder and another client.

When handling the claim of a policyholder, an insurer should comply with the rules and guidance in COB 8A.4.

An insurer should refer to the guidance in SYSC 3.2 (Areas covered by systems and controls) in its procedures for claims handling. For example, an insurer should have in place systems and controls which take account of reasonably foreseeable peaks in demand, to allow it to deal with claims promptly in such circumstances.

An insurer should refer to the guidance set out in TC 1 (Commitments) in respect of the competence of any person who carries out claims handling on its behalf.

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.

Notification of a claim is a demand of the insurer to pay or provide a benefit insured under the policy, for example, by submitting a claim form or giving the equivalent information orally, where permitted by the policy. An enquiry that precedes such a demand, for example, as to whether a particular loss is covered, and therefore whether a claim could be made under the terms of the policy, is not notification of a claim.

COB 8A.4.1 R requires an insurer to respond promptly once it has received notification of a claim. Generally a prompt response would be one within five business days of a policyholder making a claim, although in some circumstances a prompt response could be less than five business days, such as where the policyholder would expect a swifter response because of the nature of the claim or the terms of the policy.

The purpose of the rules and guidance in COB 8A.4.1 R to COB 8A.4.5 R is to provide the policyholder at an early stage with information in relation to the processing and settlement of his claim by the insurer. COB 8A.4.5R (1) is intended to prevent a policyholder pursuing a claim for which he is clearly not covered. It is not intended to pre-empt the outcome of an investigation of a claim.

The purpose of COB 8A.4.5R (3) is to ensure that a policyholder knows the name and function of any party who will contact him in relation to a claim as a representative of the insurer, for example, an outsourced claims handling company. An insurer would not be expected to notify the policyholder of other parties who are appointed to investigate the validity of a claim if this would limit or prevent an effective investigation. However, if a third party is appointed to liaise with the policyholder on the insurer's behalf, as well as assess the validity of the claim, the insurer would be expected to disclose the information in COB 8A.4.5R (3) unless it would limit or prevent an effective investigation.

Where the investigation of a claim is likely to be protracted, an insurer should provide periodic progress or status reports, when appropriate, to a policyholder, including providing the policyholder with any relevant update in relation to the information provided under COB 8A.4.4 R. The insurer should also respond without undue delay to any reasonable request by the credit union for information.

1. (1)

   Settlement terms are agreed when:

   1. (a)

      the insurer accepts the policyholder's claim; and

   2. (b)

      the policyholder accepts the insurer's offer of settlement.

2. (2)

   When the insurer settles the claim by paying the policyholder, the insurer should aim to make payment within five business days after the insurer and the policyholder have agreed settlement terms, subject to any pre-conditions laid down by the insurer or in law being met by the policyholder. This does not prevent the insurer paying a claim before the policyholder has finally agreed settlement terms.

3. (3)

   The guidance in (2) will not apply if the insurer settles the claim by:

   1. (a)

      payment against a liability due on a future date;

   2. (b)

      the provision of goods or services;

   3. (c)

      making payments on a date specified by the policyholder;

   4. (d)

      payment of the claim through another party (eg a care home) on a monthly or some other basis;

   and in the case of (a) or (b) the insurer should make prompt payment or arrange for prompt provision of the goods or services after the insurer and the policyholder have agreed settlement terms.

The arrangements for settlement set out in COB 8A.4.16G (3)(b) apply to arrangements to supply goods or services to the policyholder. In such situations, the goods or services should be provided promptly but where they cannot be, the insurer should inform the policyholder when to expect them.

An insurer should note that unless it has previously informed a policyholder that a claim will not be met in full or in part until premiums have been paid, the insurer may not delay the payment of a claim on the grounds that premiums are outstanding.

A policyholder who does not accept an insurer's rejection of his claim (or part of it) may challenge that rejection. If he chooses to do so through the courts, firms should be aware that, in England and Wales, there are pre-action protocols which lay down certain requirements as to the steps to be taken before proceedings are issued. This chapter does not displace these requirements, to which firms should have regard in the event that a rejection of a claim moves towards litigation.