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.

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.

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.

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. However, as we explained in Chapter 1, this Guide is not designed for insurance companies and does not cover all the rules that apply to them. 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)).

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

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. A waiver is available until 31 July 2005 that allows such a customer to be treated as a commercial customer, if the firm complies with certain retail customer rules - see www.fsa.gov.uk/waivers/consent_icob.html

ICOB contains separate provisions for 'group policies' (see ICOB 1.2.15 R and ICOB 1.2.16 G), which are defined as non-investment insurance contracts that someone (either a commercial or a retail customer) 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 under a group policy:

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 3.3.18 to 3.3.25 of this Guide); and

2. (2)

   a commercial or retail customer who is the legal holder of the policy must be given product information to pass on to the other persons (see ICOB 5.4.8 R to ICOB 5.4.9 G - commercial customers, and ICOB 5.3.29 R to ICOB 5.3.30 G - retail customers).

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 the regulatory system (ICOB 2.5);

5. (5)

   general requirements related to distance contracts (ICOB 2.7);

6. (6)

   general requirements on record keeping (ICOB 2.8); and

7. (7)

   general provision allowing information to be sent only to the first-named customer where a contract is effected jointly (ICOB 2.9).

We developed the key facts logo 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 3.4.19 - 3.4.20 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)).

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.

There is a wide range of exemptions from the financial promotion rules. The scope of the rules, including a list of the exemptions likely to be of interest to you, is set out in ICOB 3.1 to ICOB 3.6.

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.

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.

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 made 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)

   you should avoid using small print to qualify prominent claims;

4. (4)

   price quotations, if they are not precise, should be representative of the premium that would be charged for someone in a similar position to the customer;

5. (5)

   if a quote is an estimate only, you should make that clear, together with the fact that the actual premium will depend upon individual circumstances; and

6. (6)

   if the promotion says 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.

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

1. (1)

   information about your firm ('status disclosure') (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).

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)

   The compensation arrangements if you are unable to meet your liabilities.

You must provide all 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 with the intermediary is by telephone and the customer agrees to receiving more limited information.

In the first two cases you must give the information at paragraph 3.3.2 orally before the conclusion of the non-investment insurance contract. However, if the contract is concluded over the telephone and the customer agrees to receiving limited information, at least the details listed below must be provided before conclusion of the contract:

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.

You must then give the customer all the information in paragraph 3.3.2 in a durable medium immediately after conclusion of the contract.

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).

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. You can download templates of these documents from our website: www.fsa.gov.uk/disclosure. Using these documents is optional; you can choose to present the status disclosure information in a different format if you wish.

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.

Where you use the full IDD, it must be a standalone document and 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). You cannot make changes (including adding, altering or removing text) to the full IDD unless allowed by the notes that accompany the form.

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.

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

A waiver and modification by consent has been in force for firms (third party processors) who undertake regulated activities on behalf of another authorised firm. This waiver and modification affected MCOB 1.2.1 R, ICOB 1.2.1 R and GEN 4.3.1 R. This has now been replaced by permanent rule amendments, which came into force on 1 June 2005. See the Third Party Processors Instrument 2005 - 2005/25 - www.fsahandbook.info/FSA/handbook/LI/2005/2005_25.pdf

The rule amendments allow a third party processor (Firm A) undertaking regulated mortgage activities or insurance mediation activities (in relation to non-investment insurance contracts) on behalf of another authorised firm (Firm B) under an outsourcing contract to disclose to customers that it is B where our rules would otherwise require A to disclose its real identity. The outsourcing agreement between the two firms must acknowledge that the firm outsourcing the activities (Firm B) accepts responsibility for the activities carried on by the other firm (Firm A) on its behalf.

The rules also cater for cases where an AR acts as third party processor for its principal, or where an authorised firm acts as third party processor for an AR.

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 1R);

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.

As noted above, one of your options is to disclose 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 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.

If you choose to use the full IDD (see paragraph 3.3.9), section 4 requires you to state the amount of the fee you charge for your services, if any, together with an explanation of what the fee is for and when it is payable. If you do not know the exact amount of the fee you may give the basis of calculating it (e.g. £X per hour). If the fee is only payable in certain circumstances then you may state this and cross refer to another document for details of the circumstances. If you use the full IDD you cannot add words to describe what other remuneration you might receive, e.g. commission.

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).

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.

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).

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.

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.

The statement must also reflect the complexity of the contract. ICOB 4.4.3 G to 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.

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.

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.

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.

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.

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 a durable medium and in cash terms. If you cannot indicate it in cash terms, you must give the basis of its calculation, also in a durable medium.

Commission includes remuneration arrangements for sharing profits and payments relating to volume of sales (see ICOB 4.6.7 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. Where an associate is part of a distribution chain, you still need to disclose any commission paid to it. But you do not need to give information on the commission earned throughout the distribution chain.

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

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 these contracts but does not prevent the tacit renewal of these contracts (ICOB 4.7.2 R). For example, this means that the common practice of rolling forward insurance contracts at renewal and continuing to take direct debit payments can continue without breaching this rule. This rule only applies to distance contracts.

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 to the customer 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).

Where our rules require you to give the name of the insurance undertaking, you only need to disclose the first-named undertaking before conclusion of a coinsured policy. If the policy is insured at Lloyd's, it is sufficient to use 'The association of underwriters known as Lloyd's' or similar wording. You need to give details of all the insurers after conclusion. For Lloyd's syndicates it is sufficient detail to identify the syndicates - for example, the Lloyd's agreed abbreviation.

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.

The situation is different for a policy with monthly renewal - see ICOB 5.3.16 R. See also ICOB 6.1.3 G for guidance on when such a policy exists.

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 to 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 or retail customer and members of the group have a direct right to claim under that policy, you must, promptly after the conclusion of the contract, give:

1. (1)

   the retail customer in all cases; and

2. (2)

   the commercial customer, where there are members of the group policy who are capable of being retail customers;

a policy document and policy summary. And you must inform the customer that they should provide the policy summary to each policyholder who is capable of being a retail customer and tell them a copy of the policy document is available on request.

The information can be given in any form which is in writing - examples include a booklet or an employer's intranet.

ICOB 5.3.29 R to ICOB 5.3.30 G apply where a retail customer takes out a group policy, and ICOB 5.4.8 R to ICOB 5.4.9 G where a commercial customer takes out a group policy.

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 where there are members of the group policy who are capable of being retail customers. 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 we require it to be a separate document or - if it is part of another document - to be in a prominent place and clearly identifiable 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. It is defined as "a policy in a durable medium", and a policy is "a contract of insurance ... or any instrument evidencing such a contract". 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. Our rules require a policy document to be given to the customer before the contract is concluded in the case of distance contracts falling under ICOB 5.3.6 R (1). Provided the full terms and conditions are given to the retail customer before conclusion in or with a document providing evidence of the contract, for example, a cover note, the policy booklet can be provided after conclusion.

The statement of price rule requires you to identify separately certain components of the total price as well as the total price that the customer will pay (see ICOB 5.5.14 R). For example, you must disclose the amount of premium and fees separately.

You will need to give an exact amount for the components of the total price and for the total price as well. You may show the basis of calculation of the amount instead, but only if it is not possible to give an exact amount. For example, if a creditor insurance policy is financed by a loan agreement and it is possible to state the total amount payable in line with the Consumer Credit Act 1974 requirements to show the total price, you will need to state the total price as well as the interest amount payable on the premium.

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 specifically regulated by us.

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.

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.

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.

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.

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).

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 in a durable medium, 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 in a durable medium, whichever is the later (ICOB 6.2.5 R).

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 unless the customer gives notice that cancelling the main contract does not cancel the attached contract. 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.

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.

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)).

Under ICOB 6.4.9 R, if cover started during the cancellation period and 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 the insurer paid 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.

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 3.3.16) and you should make clear that it will not be refundable if the non-investment contract is cancelled if this is the case.

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)).

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.

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.

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.

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.

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 forward the notification to the insurance company promptly or tell the customer immediately that you cannot deal with the notification.