ICOB 4.2 Status disclosure

1. (1)

   ICOB 4.2.2 R to ICOB 4.2.14 R set out the status disclosure requirements that an insurance intermediary must meet to comply with the Insurance Mediation Directive8.

2. (2)

   The rules in ICOB 4.2 state the timing by which status disclosure information must be given to the customer, in accordance with the Insurance Mediation Directive8 and the Distance Marketing Directive8. The insurance intermediary may provide information to the customer earlier than the time specified in the rules. For example, an insurance intermediary who is also providing services in connection with packaged products or home finance transactions may wish to combine the information required by this section with the status disclosure requirements in the Conduct of Business and Mortgages and Home Finance: Conduct Business sourcebooks, and provide the information to the customer on initial contact, using the combined initial disclosure document5.

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3. (3)

   For certain types of general insurance contract, such as motor insurance, it is customary for a customer to contact various insurance intermediaries for quick quotes which he can then compare. In these circumstances, it is not necessary for the insurance intermediary to give the status disclosure information at the time that the quick quote is provided, if the quote cannot be accepted (and a contract cannot be formed) without the insurance intermediary obtaining further information from the customer.

4. (4)

   The rules in ICOB 4.2 do not specify the format in which information must be provided to the customer. An insurance intermediary may use the initial disclosure document, the combined initial disclosure document, a terms of business letter, or another document to provide information to the customer.5

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1. (1)

   The insurance intermediary may, if it so chooses, make the customer aware that he is able to receive the information in ICOB 4.2.8 R orally, in accordance with ICOB 4.2.2 R(2), or (in the case of telephone communications) that the more limited information requirements of ICOB 4.2.2 R(3) may apply.

2. (2)

   If the customer requires immediate cover and the non-investment insurance contract is concluded over the telephone, the insurance intermediary may take advantage of either of the exemptions in ICOB 4.2.2 R(2) or ICOB 4.2.2 R(3), subject to the customer giving his explicit consent.

1. (1)

   The requirement in ICOB 4.2.2 R(1) can be met by use of the initial disclosure document set out in ICOB 4 Annex 1 G. Alternatively, in circumstances where the insurance intermediary has reasonable grounds to be satisfied that the services which it is likely to provide will, in addition to relating to non-investment insurance contracts, also relate to home finance transactions or packaged products, the insurance intermediary may use the combined initial disclosure document5.

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2. (2)

   Subject to ICOB 4.2.5 R, an insurance intermediary may use all or part of the wording and format of the initial disclosure document at ICOB 4 Annex 1 G (though if it chooses to omit any of the information required by ICOB 4.2.8 R, the insurance intermediary must still provide this information to the customer in a durable medium before the conclusion of the non-investment insurance contract in accordance with ICOB 4.2.2 R). This flexibility does not apply if an insurance intermediary uses the combined initial disclosure document (see ICOB 4.2.7 R), because the COB and MCOB rules require that the wording and the format of the document must not be changed.

3. (3)

   The combined initial disclosure document must be given in accordance with the rules in COB and MCOB. In particular (and in contrast with the initial disclosure document set out in ICOB 4 Annex 1 G), it will need to be provided on initial contact.

As article 33 of the Regulated Activities Order makes clear, the activity of introducing falls within article 25(2) of the Regulated Activities Order (Arranging deals in investments). ICOB 4.2.9 R applies in the limited circumstances where the arrangements made are confined to putting the customer in contact with another person. If the insurance intermediary goes further, for example by advising the customer on a particular contract of insurance which can be obtained from that person, ICOB 4.2.2 R applies.

1. (1)

   If an insurance intermediary holds itself out as giving information or advice to customers on certain types of non-investment insurance contracts on the basis of a fair analysis of the market (or any sector of that market), the selection of insurance undertakings the insurance intermediary considers for this purpose will need to be sufficiently large to enable the insurance intermediary to satisfy the requirement in ICOB 4.2.11 R. One way in which this requirement may be satisfied is by the insurance intermediary using 'panels' of insurance undertakings which are sufficient to enable the insurance intermediary to give advice or information on a fair analysis basis and which are reviewed on a regular basis. An insurance intermediary which provides a service based on a fair analysis of the market (or from a sector of the market) should ensure that its analysis of the market and the available non-investment insurance contracts is kept adequately up-to-date. For example, an insurance intermediary would need to update its selection of non-investment insurance contracts if it became aware that a non-investment insurance contract had generally become available offering an improved product feature, or a better premium, when compared with the non-investment insurance contracts currently in the insurance intermediary's selection. The frequency with which the selection of contracts needs to be updated will depend on the extent to which new contracts are made available on the market.

2. (2)

   Where a 'panel' of insurance undertakings is used, the criteria the insurance intermediary uses to select the panel will be important in determining whether the panel is sufficient for the insurance intermediary to provide a service based on a fair analysis of the market. The selection should be based on the product features, premiums and services offered by insurance undertakings to customers, and not solely on the benefit that the insurance undertakings offer to the insurance intermediary.

1. (1)

   An insurance intermediary may provide advice or information on a different basis to the same customer for different types of non-investment insurance contracts. For example, an insurance intermediary may give advice or information on the basis of a fair analysis of the market in respect of motor insurance contracts, but give advice or information only on a single insurance undertaking's contract for home contents insurance. The disclosure at ICOB 4.2.8 R(6) should be based on the service that the insurance intermediaryis providing in relation to a particular non-investment insurance contract for that customer.

2. (2)

   INSPRU 1.5.13 R7 (Restriction of business to insurance) in practice restricts the business which an insurer can carry on.2

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ICOB 4.2.15 R means that fees charged over the life of the contract by the insurance intermediary, including fees for mid-term adjustments, must be disclosed before the non-investment insurance contract is concluded.

1. (1)

   The fees referred to in ICOB 4.2.15 R are fees for mediation services. Fees for non-investment insurance contracts are covered in ICOB 5.5.14 R(3).

2. (2)

   Fees do not include premiums, or commissions that are part of premiums.

An insurance intermediary will normally need to provide updated information within ICOB 4.2.20 R(2) to the customer in a durable medium before the conclusion of the contract, unless an exemption in ICOB 4.2.2 R(2) (oral disclosure) or ICOB 4.2.2 R(3) (telephone sales) applies.