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GIGI 3.1 Introduction

What does ICOB cover?

GIGI 3.1.1 G

This chapter provides a guide to the rules in the Insurance: Conduct of Business sourcebook (ICOB). These rules govern a firm's relationship with its customers before, during and after the sale of a non-investment insurance contract. They aim to ensure that firms treat customers fairly.

GIGI 3.1.2 G

The table below summarises the content of each chapter of ICOB. Not all of ICOB will be relevant to you and not all the content of any given chapter will be relevant - it will depend on the business you do. For example, some of our rules will apply only when you deal with a retail customer and others will apply only when you deal with a commercial customer. Some rules apply to insurance companies in their capacity as product providers and these are generally not covered in this Guide. At the beginning of each chapter of ICOB you will find a section titled 'Application'. This will tell you if all or part of that chapter applies to you.

GIGI 3.1.3 G

This Guide does not cover the rules on distance non-investment mediation contracts in ICOB 8 as we think these contracts rarely exist. You should check the guidance at ICOB 1.7.3 G (4) to see if you provide distance non-investment mediation contracts.

GIGI 3.1.4 G

Summary of the content of ICOB

Chapter

Title

Does it apply to you?

What does it include?

ICOB 1

Application and purpose

Yes

•Sets out the scope of ICOB, including to which firms the rules apply, to what activities and where the rules apply

•A summary of which parts of the ICOB rules apply to firms

•Guidance on other parts of the Handbook

ICOB 2

General rules including unfair inducements

Yes

•General requirements that apply throughout ICOB

•Communications to customers must be clear, fair and not misleading

•Rules on inducements

ICOB 3

Financial promotion

Yes

•Requirement for financial promotions to be clear, fair and not misleading

•Rules on comparative advertising

•Rules on the approval of promotions

ICOB 4

Advising and selling standards

Yes

•Information on the status of the firm

•Suitability of advice

•Provision of a demands and needs statement

•Prohibition on excessive charges for retail customers

•Provision of commission information for commercial customers

•Restrictions on unsolicited services (including tacit renewals)

ICOB 5

Product disclosure

Yes - partially

•Responsibilities of insurance companies and intermediaries

•Content of product information and when it must be provided

ICOB 6

Cancellation

No - although the rules will be of interest to insurance intermediaries (see paragraph 3.5.2)

•Cancellation rights for retail customers in relation to non-investment insurance contracts

ICOB 7

Claims handling

Yes - partially

•Obligations on insurance companies

•Obligations on intermediaries to act with due care, skill and diligence and to avoid conflicts of interest

ICOB 8

Distance non-investment mediation contracts

Yes - if you arrange these contracts

•Information to be given to customers

•Restrictions on unsolicited services (including tacit renewals)

•Cancellation requirements

What activities does ICOB apply to?

GIGI 3.1.5 G

ICOB applies only to intermediaries who sell and administer 'non-investment insurance contracts' or who communicate and approve 'non-investment financial promotions'. The terms 'non-investment insurance contract' and 'non-investment financial promotion' have a special meaning in the rules - see Appendix A. The defined term 'insurance intermediary' (see Appendix A) includes an insurance company when selling directly, but, as explained in Chapter 1, this Guide does not cover the application of the rules to insurance companies.Where there is a chain of intermediaries between the insurance company and the customer, ICOB applies only to the intermediary in contact with the customer (ICOB 1.2.3 R (2)).

Which customers does ICOB apply to?

GIGI 3.1.6 G

ICOB uses the defined terms 'retail customer' and 'commercial customer' (these terms have a special meaning in the rules - see Appendix A for details).

GIGI 3.1.7 G

If it is not clear whether your customer is a retail or commercial one, he should be treated as a retail customer (ICOB 1.2.6 R). Guidance on when a customer is a retail customer or a commercial customer is given in ICOB 1.7.3 G (1). Where a customer who is an individual buys a policy that covers him in both a private capacity and for his business, he must be treated as a retail customer (ICOB 1.2.6A R). For example, a driving instructor taking out motor insurance to cover both his business and private use of the vehicle should be treated as a retail customer.

How does ICOB apply to group policies?

GIGI 3.1.8 G

ICOB contains separate provisions for 'group policies' (see ICOB 1.2.15 R ), which are defined as non-investment insurance contracts that someone enters into as legal holder of the policy on his own behalf and for other persons who are, or will become, policyholders (group policy is a defined term - see the Handbook Glossary for the full definition). A policyholder includes anyone who could expect to have a claim, made by him directly to the insurance company, accepted by the insurance company (ICOB 1.2.16 G (2)). ICOB applies in full in respect of the legal holder of the policy, but only the following requirements must be met by intermediaries as regards the other persons who are, or will become, policyholders:

  1. (1)

    if one of these persons receives a personal recommendation from an intermediary about joining a group scheme, the intermediary must ensure that the recommendation is suitable and give the person a demands and needs statement (see paragraphs 3.3.15to 3.3.22of this Guide); and

  2. (2)

    a commercial customer who is the legal holder of the policy must be given product information to pass on to the other persons (ICOB 5.4.8 R to ICOB 5.4.9 G ).

General requirements

GIGI 3.1.9 G

There are several general rules that apply in ICOB (set out in ICOB 2) covering:

  1. (1)

    clear, fair and not misleading communication (ICOB 2.2.3 R);

  2. (2)

    unfair inducements (ICOB 2.3);

  3. (3)

    when you can rely on information provided to you by another person (ICOB 2.4);

  4. (4)

    preventing you from avoiding or limiting any duty or liability you have to a customer under regulation (ICOB 2.5);

  5. (5)

    general requirements related to distance contracts (ICOB 2.7); and

  6. (6)

    general requirements on record keeping (ICOB 2.8).

Key Facts logo

GIGI 3.1.10 G

The key facts logo is a logo that has been developed by us following consumer research to highlight key information that customers should read. The ICOB rules say that it can be used on the initial disclosure document (IDD) and that it must be used on the combined initial disclosure document (CIDD) and policy summary (see paragraphs 3.3.7 to 3.3.11 and 3.4.16 respectively). You will find the logo on our website at: www.fsa.gov.uk/pubs/other/Key facts_logo. We also require the logo to be used on certain documents required by our rules in the investment and mortgage markets. The ICOB rules also prevent firms using the key facts logo on other documents (ICOB 2.2.2 R and ICOB 3.8.1 R (3)).

GIGI 3.2 Financial promotion (ICOB 3)

Introduction

GIGI 3.2.1 G

Financial promotions include but are not limited to advertisements. A financial promotion is an invitation or inducement to engage in an investment activity (which includes insurance). They can be solicited or unsolicited and can take a variety of forms, such as mailshots and newspaper or TV advertisements. The financial promotion rules relating to non-investment insurance contracts (which we call 'non-investment financial promotions') are in ICOB 3.

What is the scope of the financial promotion rules?

GIGI 3.2.2 G

Financial promotions are prohibited unlessthey are communicated by an authorised person; or an authorised person has approved the content of the promotion; or an exemption applies. There is a wide range of exemptions from the financial promotion rules. The scope of the rules, including a full list of the exemptions, is set out in ICOB 3.1 to ICOB 3.6.

GIGI 3.2.3 G

Even if the rules in ICOB 3 do not apply, because your promotion falls within an exemption, other rules in ICOB still apply. For example, you would still need to comply with ICOB 2.2.3 R, which says that communications must be clear, fair and not misleading. You may also need to give the information required by ICOB 4 (advising and selling standards) and ICOB 5 (product information) as part of the promotion e.g. if that is the only way to ensure that the customer receives this information before the conclusion of the contract.

What rules apply to regulated non-investment financial promotions?

GIGI 3.2.4 G

Where ICOB 3 applies, you must be able to show that you have taken reasonable steps to ensure that the non-investment financial promotion is clear, fair and not misleading (ICOB 3.8.1 R). ICOB 3.8.2 E contains a 'checklist' of matters you should bear in mind when communicating or approving a non-investment financial promotion.

What rules apply to regulated non-investment financial promotions?

GIGI 3.2.5 G

In addition, ICOB 3.8.3 G contains guidance on the clear, fair and non-misleading obligation which includes the following points:

  1. (1)

    if a promotion is directed at a particular group of recipients who are expected to have particular knowledge of the contract being promoted, this should be clear;

  2. (2)

    any quotations of opinion should be a fair representation and it should be made clear if there is a connection between the person expressing the opinion and the firm;

  3. (3)

    price quotations, if they are not precise, should be representative, and it should be stated clearly if a quote is an estimate only; and

  4. (4)

    if the promotion says that you can reduce a premium, give the cheapest premium or reduce other costs, the promotion should give equal prominence to explaining how this will be achieved, and should explain with equal prominence any significant limitations on the availability of the savings offered.

GIGI 3.3 Advising and Selling Standards (ICOB 4)

Introduction

GIGI 3.3.1 G

This section of the Guide explains the advising and selling rules in ICOB 4. The rules in ICOB 4 cover:

  1. (1)

    information on the status of your firm (ICOB 4.2);

  2. (2)

    suitability of advice (ICOB 4.3);

  3. (3)

    statement of demands and needs (ICOB 4.4);

  4. (4)

    excessive charges to retail customers (ICOB 4.5);

  5. (5)

    telling commercial customers about your commission (ICOB 4.6);

  6. (6)

    unsolicited services (ICOB 4.7); and

  7. (7)

    the language in which information should be provided (ICOB 4.8).

None of these rules apply when you are dealing with a commercial customer insuring a 'large risk' (a contract of large risks has a special meaning in the rules - see Appendix A).

What information do you need to give customers about your firm and the services you provide?

GIGI 3.3.2 G

Summarised below is the information you need to disclose to your retail and commercial customers unless you are introducing (ICOB 4.2.8 R provides a more detailed explanation):

  1. (1)

    Name and address of your firm.

  2. (2)

    Your firm's statutory status, using the appropriate wording required by the General Provisions sourcebook (see GEN 4 Annex 1), for example, that you are authorised and regulated by the Financial Services Authority.

  3. (3)

    That (1) and (2) can be checked on the FSA's Register.

  4. (4)

    Any holdings you have in an insurance company and that an insurance company or its parent has in your firm that represent more than 10 per cent of the voting rights or the capital of the insurance company or your firm.

  5. (5)

    The range of insurance companies you are selecting products from in a sale to a particular customer. This can be from a wide range of insurance companies (which is referred to in the rules as providing a service on the basis of a 'fair analysis' of the market), or from just one or a limited number of insurance companies. You must also tell the customer that he can request a list of the insurance companies you deal with, unless the service you provide is on the basis of a 'fair analysis' of the market.

  6. (6)

    How the customer can complain to you and that complaints may subsequently be referred to the Financial Ombudsman Service (FOS).

  7. (7)

    That the customer may be entitled to compensation from the Financial Services Compensation Scheme (FSCS) if you are unable to meet your liabilities.

When do you have to give this information?

GIGI 3.3.3 G

You must provide the information above before conclusion of the non-investment insurance contract in a durable medium unless one of the following situations, set out in ICOB 4.2.2 R, applies:

  1. (1)

    the customer asks for the information to be provided orally;

  2. (2)

    immediate cover is required; or

  3. (3)

    the contract is concluded by telephone and the customer agrees to receiving more limited information.

GIGI 3.3.4 G

Where immediate cover is required or the customer requests information orally, the information at paragraph 3.3.2 must be given orally before the conclusion of the non-investment insurance contract. However, if the contract is concluded over the telephone, in line with ICOB 4.2.2 R (3), the customer can agree to the limited information listed below being provided:

  1. (1)

    the name of your firm;

  2. (2)

    if you initiated contact, the purpose of the contact;

  3. (3)

    the name of the person in contact with the customer and his link with your firm; and

  4. (4)

    that other information is available on request, and the nature of the information.

GIGI 3.3.5 G

In these cases, you must give the customer all the information required in a durable medium immediately after conclusion of the contract.

GIGI 3.3.6 G

The information above does not need to be given when contracts are renewed if the information given out at inception of the contract remains up-to-date. If certain elements have changed then you must update the customer on these particular elements but you do not need to send out a whole new set of information (ICOB 4.2.20 R).

Do you have to use the template documents in the rules when giving information about your status?

GIGI 3.3.7 G

We have included two template documents in Annexes 1 and 2 to ICOB 4 that you can use to give the status information in paragraph 3.3.2 to your customers. We call these the initial disclosure document (IDD) and the combined initial disclosure document (CIDD). These documents have been developed by us and tested using consumer research. Use of these documents is optional; you can choose to present the information in a different format if you wish.

GIGI 3.3.8 G

Where you are selling just non-investment insurance contracts, you can use the IDD to provide the status information above. You can use all or part of the IDD, but in all cases you must ensure that all the status information required by the rules is given to the customer. However, if you choose not to use the full IDD then you must not include the key facts logo or the heading and text in Section 1 of the IDD.

GIGI 3.3.9 G

Where you use the full IDD, there are certain rules on the use of the key facts logo, for example, on its size, prominence and positioning (ICOB 4.2.6 R).

GIGI 3.3.10 G

Where you are arranging mortgages and/or packaged products and also non-investment insurance contracts, you can give the customer a CIDD. This means you can describe the service you are providing in relation to all these products in one document. If you choose to use the CIDD, you must use the document in full and make no changes to the text other than those allowed by the notes that accompany the form. Also, unlike the insurance rules, the rules in the Mortgage: Conduct of Business sourcebook (MCOB) and Conduct of Business sourcebook (COB) require you to give the IDD or CIDD on initial contact with the customer.

GIGI 3.3.11 G

There are examples of completed IDDs and CIDDs on our website: www.fsa.gov.uk/mgi.

What do you have to disclose about your firm when you are only introducing?

GIGI 3.3.12 G

Where you are only introducing a customer to another intermediary (or to an insurance company) you are not required to give the information at paragraph 3.3.2. Instead you must give the customer the following information in good time before the introduction is made (see ICOB 4.2.9 R):

  1. (1)

    the name and address of your firm;

  2. (2)

    your statutory status using the appropriate wording required by the General Provisions sourcebook (see GEN 4 Annex 1);

  3. (3)

    details of any fees you will charge for the introduction; and

  4. (4)

    whether you and the firm you are introducing to are members of the same group.

When can you tell the customer that you are providing a service on a fair analysis basis?

GIGI 3.3.13 G

As noted above, one of the options is that you provide a service on a fair analysis basis. You cannot state that you offer a fair analysis service - that is, that you consider a representative sample of the market when selecting products - unless you have considered a sufficiently large number of insurance contracts in the relevant sector for that particular customer and that consideration is based on adequate knowledge of that sector. There is guidance on how this requirement can be satisfied, including the selection and use of panels and the frequency with which panel arrangements should be reviewed, in ICOB 4.2.12 G to ICOB 4.2.13.

What information do you have to give on fees?

GIGI 3.3.14 G

You must disclose any fees (actual fees or, where actual fees cannot be given, the basis for calculating fees) you charge to retail and commercial customers for mediation services (ICOB 4.2.15 R to ICOB 4.2.18 G). The information must be given to the customer before they become liable to pay the fee, or before conclusion of the contract, whichever is earlier. So, for example, fees that will be charged for mid-term adjustments must be disclosed before conclusion of the contract. The information can be provided in any medium before conclusion of the contract, and must be given in a durable medium immediately after conclusion of the contract. Fees do not include premiums or commission that forms part of premium.

What are the requirements for advised sales?

GIGI 3.3.15 G

The rules on advised sales are in ICOB 4.3 (Suitability). These rules apply when you make a 'personal recommendation' (this term has a special meaning - see Appendix A for further details) to a customer to buy or sell a non-investment insurance contract. The personal recommendation must be based on the scope of the service you provide (selection of insurance contracts on a fair analysis basis or from one or a limited number of insurance companies).

GIGI 3.3.16 G

A personal recommendation has three elements:

  1. (1)

    you must give advice describing the merits of buying or selling the insurance contract;

  2. (2)

    the advice must relate to a specific contract e.g. "I recommend ABC's contents insurance"; and

  3. (3)

    the advice must be to a specific person or specific group of people.

GIGI 3.3.17 G

There is guidance on the regulated activity of 'advising on contracts of insurance' in the perimeter guidance in the Authorisation manual (see AUTH App 5.8).

GIGI 3.3.18 G

If your sale involves a personal recommendation, you must ensure that the contract is suitable for the customer's demands and needs. To do this you should first assess the customer's demands and needs and then assess the suitability of the contract against these.

What is the statement of demands and needs and when do you have to give it to the customer?

GIGI 3.3.19 G

You must give all your customers a demands and needs statement when you sell them a non-investment insurance contract, including at renewal (ICOB 4.4.1 R). The statement must contain:

  1. (1)

    details of your customer's demands and needs;

  2. (2)

    a statement of whether a personal recommendation has, or has not, been provided; and

  3. (3)

    where a personal recommendation is made the reasons for making the recommendation.

GIGI 3.3.20 G

The statement must also reflect the complexity of the contract. ICOB 4.4.3 Gto ICOB 4.4.6 G includes guidance on the style and presentation of the demands and needs statement. If the contract is straightforward, and you have not made a personal recommendation, this guidance says that you may be able to satisfy the rule by including a generic statement in your product information, for example.

  1. (3)
GIGI 3.3.21 G

The demands and needs statement must be given before conclusion of the contract, unless the contract is concluded over the telephone. For telephone sales it must be provided immediately after the conclusion of the contract in a durable medium.

GIGI 3.3.22 G

The demands and needs statement can be provided orally if the customer requests it or if immediate cover is necessary, but in both cases it must be provided in a durable medium immediately after contract conclusion.

Do you need to keep records of the advice you give?

GIGI 3.3.23 G

Where a personal recommendation is made and the customer acts on that recommendation by buying from you the contract you recommended, you must keep a copy of the demands and needs statement. You must keep this for at least three years from the date on which you made the personal recommendation (see ICOB 4.4.7 R). You do not need to keep a copy if the customer does not act on your recommendation.

What do the rules say on excessive charges and when do they apply?

GIGI 3.3.24 G

You need to ensure that your charges to retail customers for insurance mediation services are not excessive (see ICOB 4.5). In determining whether or not your charges are excessive you should consider:

  1. (1)

    the level of your charges compared to charges for similar services or products in the market;

  2. (2)

    the degree to which the charges are an abuse of the trust put in you by your retail customer; and

  3. (3)

    the nature and extent of information provided to your customer on charges.

Do you need to disclose the commission you receive?

GIGI 3.3.25 G

ICOB 4.6 requires you to disclose commission to commercial customers on request. If asked, you must disclose any commission earned by you plus any commission earned by any associate. The commission has to be disclosed in cash terms, in a durable medium.

GIGI 3.3.26 G

By associate, we mean any company in the same group, any appointed representative of your firm or a firm in the same group or any other person or firm connected to your firm. You do not need to give information on the commission earned throughout the distribution chain.

GIGI 3.3.27 G

There are no rules requiring you to tell retail customers about your commission although normal agency law requirements apply.

What do the rules on unsolicited services mean?

GIGI 3.3.28 G

ICOB 4.7.1 R prevents you from providing services to retail customers in connection with non-investment insurance contracts, where this involves a request for immediate or deferred payment, unless you have obtained the customer's prior consent. This includes entering into or renewing these contracts. For example, this means that the common practice of rolling forward insurance contracts at renewal and continuing to take direct debit payments cannot continue unless you have the customer's prior consent to this. This rule only applies to distance contracts.

GIGI 3.3.29 G

The rule does not apply to cases where you have a right to renew a contract without the prior request of the customer (ICOB 4.7.2 R). Where you do not have this right, you will need to obtain the prior consent of the customer before supplying the contract. Such consent will need to be express. So you cannot assume that, because a customer has not responded to your request, he has given his consent to the supply of the insurance.

GIGI 3.4 Product disclosure (ICOB 5)

Introduction

GIGI 3.4.1 G

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

GIGI 3.4.2 G

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).

What are the responsibilities of insurance companies and intermediaries?

GIGI 3.4.3 G

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.

GIGI 3.4.4 G

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).

What information do you have to give retail customers when selling insurance?

GIGI 3.4.5 G

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.

GIGI 3.4.6 G

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).

GIGI 3.4.7 G

Product information requirements for different mediums of sale with retail customers:

What information do you have to give a retail customer on renewal of his policy?

GIGI 3.4.8 G

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.

What do you have to do if there is a mid-term change?

GIGI 3.4.9 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.

Information for commercial customers

What information do you have to give commercial customers when selling insurance?

GIGI 3.4.10 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).

GIGI 3.4.11 G

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.

GIGI 3.4.12 G

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

What happens with group policies sold to commercial customers?

GIGI 3.4.13 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.

What do you have to do when renewing a commercial customer's policy?

GIGI 3.4.14 G

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.

Other aspects of the rules

What does the policy summary have to contain and who do you have to give it to?

GIGI 3.4.15 G

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).

GIGI 3.4.16 G

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.

What directive information do you have to give to retail and commercial customers?

GIGI 3.4.17 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.

What does the policy document consist of?

GIGI 3.4.18 G

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.

What rules are there on white labelling?

GIGI 3.4.19 G

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.

GIGI 3.4.20 G

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.

GIGI 3.5 Cancellation (ICOB 6)

Introduction

GIGI 3.5.1 G

This section briefly sets out the cancellation rights that an insurance company must offer retail customers when they purchase or renew certain non-investment insurance contracts. The requirements do not apply to contracts with commercial customers.

GIGI 3.5.2 G

The cancellation rules do not apply to insurance intermediaries directly. As such, this Guide does not set out the detail of the cancellation rules, which are in ICOB 6. However, you will find it useful to understand the rules because:

  1. (1)

    under the product information rules in ICOB 5, you, as an insurance intermediary, must provide information to retail customers about cancellation rights; and

  2. (2)

    the cancellation rules might affect the arrangements you have in place with the insurance company for payment of commission.

Which contracts do cancellation rights apply to?

GIGI 3.5.3 G

In general, cancellation rights apply to non-investment insurance contracts taken out by retail customers. There are, however, a number of exemptions, which are set out in ICOB 6.1.5 R to ICOB 6.1.10 G.

What must you tell the customer about cancellation?

GIGI 3.5.4 G

Before conclusion of the contract, you must inform your retail customers of their cancellation rights. These requirements are in ICOB 5.3.12 R. See also Chapter 3.4 above.

How long does the customer have to cancel the contract?

GIGI 3.5.5 G

For general insurance contracts insurance companies must give a cancellation period of 14 days and for pure protection contracts the cancellation period must be 30 days. For mixed contracts which include both pure protection and general insurance policies, the cancellation period is 30 days (ICOB 6.2.1 R to ICOB 6.2.4 R).

GIGI 3.5.6 G

For pure protection contracts, the cancellation period starts on the day on which the customer is informed that the contract has been concluded, or the day he receives the terms and conditions, whichever is the later. For general insurance contracts, the period starts on the day on which the contract is concluded or the day the customer receives the terms and conditions, whichever is the later (ICOB 6.2.5 R).

What happens to attached insurance contracts when the financial services contracts to which they are attached are cancelled?

GIGI 3.5.7 G

The Financial Services (Distance Marketing) Regulations 2004 require that when a distance financial services contract is cancelled, any attached contracts are automatically cancelled. This is referred to in guidance at ICOB 6.4.2 G. Broadly an attached contract is one which is subsidiary to the main contract. For example, creditor insurance taken out to protect a loan would be an attached contract and the loan would be the main contract. This means that if the loan (the main contract) is cancelled, then the creditor insurance (the attached contract) would also be cancelled automatically. The reverse, however, does not apply - i.e. the loan (the main contract) would not be automatically cancelled if the creditor insurance (the attached contract) was cancelled.

Can an insurance company make a charge for contracts that are cancelled?

GIGI 3.5.8 G

Where a customer cancels a contract, an insurance company must return to the customer any sums paid to it without delay, and no later than 30 days from the date of cancellation, though it may charge for any costs incurred in connection with a general insurance contract (ICOB 6.4.3 R). This might include administrative costs for intermediaries and/or a time on risk charge for insurance companies. The charge for costs incurred must not exceed an amount that is in proportion to the service provided and must not be capable of being construed as a penalty. So the insurance company must not profit from cancellation by a customer and may only retain an amount that accurately reflects its costs. An insurance company is not permitted to make a charge to a retail customer for a cancelled pure protection contract.

GIGI 3.5.9 G

As well as returning any sums paid to the insurance company by the customer, the customer must return any sums and property the customer received from the insurance company (such as a motor insurance certificate) within 30 days of cancellation (ICOB 6.4.3 R (4)).

GIGI 3.5.10 G

Under ICOB 6.4.9 R, where the insurance company has made a charge, the sums and property returned by the customer under ICOB 6.4.3 R (4) must not include any claims money that itpaid out in the cancellation period. This does not mean, however, that if the insurance company chooses not to charge, that it has the right to refuse claims made during the cancellation period if cover commenced during the cancellation period.

Can an intermediary charge for its selling costs if the contract is cancelled?

GIGI 3.5.11 G

As mentioned above, the insurance company can recover the administrative costs that intermediaries incur in the charges it makes for cancelled general insurance contracts. In addition, where you charge the customer a separate fee for the mediation service you have provided this is unaffected by the cancellation rules in ICOB 6 (although the cancellation rules in ICOB 8 may apply if you have a distance mediation contract and this will affect what fees you can recover. If you charge a fee you will need to disclose it to the customer (see paragraph 3.3.14) and you should make clear that it will not be refundable if the non-investment contract is cancelled if this is the case.

GIGI 3.5.12 G

If you charge a fee and also receive commission, then the insurance company is restricted in the amount of commission it can recover from the retail customer when a general insurance contract is cancelled to an amount which, when added to your fee, is sufficient to cover your costs (see ICOB 6.4.5 G(3)).

GIGI 3.6 Claims handling (ICOB 7)

GIGI 3.6.1 G

This section sets out the rules that apply to intermediaries when handling claims on behalf of a customer. These rules are in ICOB 7. ICOB 7 sets out the rules applicable to insurance companies and intermediaries. This section of the Guide deals with the obligations of intermediaries only.

What are an intermediary's obligations in relation to a claim?

GIGI 3.6.2 G

Most of the obligations relating to claims handling fall on insurance companies and if you act on behalf of an insurance company in relation to a claim (e.g. you have delegated authority for claims handling) then the insurance company is responsible for ensuring that the rules are complied with. But if you act for the customer in relation to a claim, there are certain rules that you must comply with. These rules are set out in ICOB 7.4. In particular, you must:

  1. (1)

    act with due care, skill and diligence when acting for a customer in relation to a claim; and

  2. (2)

    avoid conflicts of interest.

GIGI 3.6.3 G

You could have a conflict of interest if, for example, you were acting for both a customer and an insurance company in relation to a claim; or you were acting for two customers that were parties to a dispute over liability. If you face a potential conflict of interest, you must tell the customer(s) of the conflict and ask their consent to continue to act for them. However, if it is not possible to manage the conflict by disclosing it the customer(s), you will need to withdraw from acting for one or both parties.

GIGI 3.6.4 G

You may have arranged a policy for a customer, but when it comes to a claim, you act for the insurance company and not for the customer. In these cases, you must tell the customer that you are acting for the insurance company and not for him in relation to the claim.

GIGI 3.6.5 G

If you are notified of a claim by a customer, but do not have the insurance company's authority to handle the claim, you must tell the customer immediately or, if able to do so, forward the notification to the insurance company promptly.