GIGI 3.4 Product disclosure (ICOB 5)

This section explains the rules on product information which are in ICOB 5.

The rules differentiate between the information to be provided to commercial customers and to retail customers. The rules cover:

1. (1)

   the responsibilities of insurance companies and intermediaries in terms of producing and delivering product information (ICOB 5.2);

2. (2)

   providing information to retail and commercial customers (ICOB 5.3 and ICOB 5.4);

3. (3)

   the form and content of the information provided (ICOB 5.5);

4. (4)

   white labelling (ICOB 5.6); and

5. (5)

   record keeping (ICOB 5.7).

If both the insurance company and intermediary are authorised and are operating from a permanent place of business in the UK, the insurance company will normally produce most of the product information and the intermediary will be required to give it to the customer (ICOB 5.2.2 R). However, if the insurance company whose contract you are selling does not operate from a permanent place of business in the UK, you will be responsible for producing the information and giving it to the customer.

An insurance company we regulate must enable you to comply with our rules (e.g. to provide information before the conclusion of the contract) by giving you the information that it prepares in good time to allow you to meet those standards (ICOB 5.2.12 R).

ICOB 5.3 sets out the information that you have to give to a retail customer before and after conclusion of a contract, mid-term and on renewal. This includes information about the terms of the contract, price, cancellation rights and claims handling. ICOB 5.3 needs to be read with ICOB 5.5, which gives more details about the content of such information, in particular the policy summary and price information.

We distinguish between different types of sale. The information that needs to be given in each case is shown in the table below. The types of sale are:

1. (1)

   non-distance sales - where there is some face-to-face contact between you and the customer, even if some of the negotiations take place by telephone, fax etc (see ICOB 5.3.1 R to ICOB 5.3.5 G);

2. (2)

   distance sales where you are able to provide information to the customer in a durable medium before the contract is concluded, for example, post and e-mail (see ICOB 5.3.6 R (1)); and

3. (3)

   distance sales where you are unable to provide information to the customer in a durable medium before the contract is concluded, for example, by telephone (see ICOB 5.3.6 R (2) to ICOB 5.3.8 R).

Before a policy is due for renewal, unless you have a good reason to believe that your retail customer will not want to renew the policy, you must give the retail customer information about changes to the policy, information on price and cancellation and tell him that he can ask for a new policy document if he wishes.

This information has to be given to the customer 21 days before his policy expires, or you must tell the customer 21 days before expiry that you no longer deal with the insurance company or it is not willing to renew. Examples of situations when you could assume the customer would not want to renew are short term travel policies and creditor insurance tied to a loan, where the insurance ends at the same time as the loan. The rules on renewals for retail customers are covered in ICOB 5.3.15 R to ICOB 5.3.23 G.

A retail customer must be told about changes to any term or condition of the contract before the change takes effect, and you must explain to him the implications of any change. This includes changes to the premium, unless the change is in line with previously agreed terms of the contract, for example, a periodic percentage increase. The information must usually be given to the retail customer in a durable medium before the changes takes effect, but if the change has been requested by the retail customer himself, you can if necessary just explain the implications orally and give him the information in a durable medium promptly afterwards. These rules are in ICOB 5.3.24 R and ICOB 5.3.28 G.

You must always give your commercial customer information about a contract before the conclusion of that contract, unless the contract relates to a large risk. The amount of detail given can vary depending on the customer's knowledge, experience and ability - the rules simply say that it must be sufficient to allow the customer to make an informed decision. In addition, you must tell your commercial customer the amount of the premium and any fees and certain additional information required under various European directives (ICOB 5.4.1 R).

After the contract is concluded you must give the commercial customer the policy document promptly (ICOB 5.4.5 R) (as previously mentioned, the rules require insurance companies to give you documents in time for you to comply with rules such as this one). The requirement to give the commercial customer a policy document promptly after conclusion also applies (unlike the pre-conclusion requirements) to commercial customers insuring large risks.

These rules are set out in ICOB 5.4.1 R to ICOB 5.4.7 G.

If you sell a group policy to a commercial customer and members of the group have a direct right to claim under that policy, you must give the commercial customer a policy summary once the contract is concluded, and tell him that he should pass that information to those people with a direct right to claim under the policy (ICOB 5.4.8 R to ICOB 5.4.9 G). The information can be given in any form which is in writing - examples include a booklet or an employer's intranet.

A commercial customer must be given renewal terms 'in good time' before expiry of his policy, or be told that you no longer deal with the insurance company or it is not willing to renew, unless you have reason to believe that the customer does not want to renew the policy (ICOB 5.4.10 R to ICOB 5.4.14 R). As explained in ICOB 5.2.13 G, we consider 'in good time' to mean that the customer should receive the information early enough to be useful to him.

You will need to give a policy summary to all retail customers and also to a commercial customer who takes out a group policy. The policy summary will usually be produced by the insurance company. The policy summary contains key information a retail customer should read before deciding whether or not to take out a policy, so it needs to be a separate document or (if it is part of another document) clearly visible as important information for the customer. It must also include the key facts logo (ICOB 5.5.5 R).

The policy summary can only include the information set out in our rules. This includes the key facts logo, the main features of the policy, and significant and unusual exclusions or limitations. It also has to include signposting from the significant and unusual exclusions or limitations to the policy document, in case the customer wants more information. These rules are in ICOB 5.5.1 R to ICOB 5.5.13 G.

The information that you must give the customer as required under various European directives is summarised in ICOB 5.5.20 R. This sometimes duplicates information you have to give customers under other rules in ICOB 5 or in ICOB 4 (Advising and selling standards). ICOB 5.5.17 G explains that you do not have to give information twice unless this is required by a specific rule.

The policy document is all the contract terms and conditions, including the terms specific to a particular customer. As explained in ICOB 5.5.27 R to ICOB 5.5.28 G, the terms and conditions can be set out in more than one document, but must be given to the customer at the same time.

You may want to make your own brand the main one on documents you give the customer, and to have prominence over the insurance company's name. This is known as white labelling. ICOB 5.6 gives guidance on what is acceptable under our rules.

Our rules do not allow you to give the customer only your firm's name and not that of the insurance company. ICOB 4.2 (status information) and the product information rules in ICOB 5 require the customer to be told of the identity of both the insurance company and the intermediary, and the policy summary must give only the name of the insurance company, and not your firm's name. However, as long as you comply with the rules on financial promotions (ICOB 3) and the general rule that communications with customers must be clear, fair and not misleading (ICOB 2.2.3 R), the way that information is presented to the customer is not regulated.