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  2. Point in time
    2007-10-05

ICOB 4.3 Suitability

Requirement for suitability

ICOB 4.3.1R
  1. (1)

    An insurance intermediary must take reasonable steps to ensure that, if in the course of insurance mediation activities it makes any personal recommendation to a customer to buy or sell a non-investment insurance contract, the personal recommendation is suitable for the customer's demands and needs at the time the personal recommendation is made.

  2. (2)

    The personal recommendation in (1) must be based on the scope of the service disclosed in accordance with ICOB 4.2.8 R(6).

  3. (3)

    An insurance intermediary may make a personal recommendation of a non-investment insurance contract that does not meet all of the customer's demands and needs, provided that:

    1. (a)

      there is no non-investment insurance contract within the insurance intermediary's scope, as determined by ICOB 4.2.8 R(6), that meets all of the customer's demands and needs; and

    2. (b)

      the insurance intermediary identifies to the customer, at the point at which the personal recommendation is made, the demands and needs that are not met by the contract that it personally recommends.

Information about the customer's demands and needs

ICOB 4.3.2R

In assessing the customer's demands and needs, the insurance intermediary must:

  1. (1)

    seek such information about the customer's circumstances and objectives as might reasonably be expected to be relevant in enabling the insurance intermediary to identify the customer's requirements. This must include any facts that would affect the type of insurance recommended, such as any relevant existing insurance;

  2. (2)

    have regard to any relevant details about the customer that are readily available and accessible to the insurance intermediary, for example, in respect of other contracts of insurance on which the insurance intermediary has provided advice or information; and

  3. (3)

    explain to the customer his duty to disclose all circumstances material to the insurance and the consequences of any failure to make such a disclosure, both before the non-investment insurance contract commences and throughout the duration of the contract; and take account of the information that the customer discloses.

ICOB 4.3.3G

In relation to ICOB 4.3.2 R(3), an insurance intermediary should make clear to the customer what the customer needs to disclose. For example, in relation to private medical insurance, this could include any existing medical condition where relevant, or in relation to motor insurance, any modifications carried out to the vehicle.

ICOB 4.3.4G

An insurance intermediary should base his personal recommendation on what the customer tells him. Provided it complies with the rules in this section1, the insurance intermediary is not required to take into account the customer's existing insurance cover (or, in the case of a personal recommendation relating to a pension term assurance policy, existing pension arrangements)1, or details of that cover (or those arrangements)1, if the customer is not able to provide this information.

1
ICOB 4.3.5R

If the insurance intermediary is aware that the customer's existing insurance cover is likely to significantly affect the suitability of any personal recommendation that the insurance intermediary might make, the insurance intermediary must either:

  1. (1)

    not make a personal recommendation until details of the insurance cover are made available to him; or

  2. (2)

    if it makes a personal recommendation, make clear to the customer that this may not be suitable because the insurance intermediary has not taken into account full details of the customer's existing insurance cover.

Assessing the suitability of a contract against the customer's demands and needs

ICOB 4.3.6R

In assessing whether a non-investment insurance contract is suitable to meet a customer's demands and needs, an insurance intermediary must take into account at least the following matters:

  1. (1)

    whether the level of cover is sufficient for the risks that the customer wishes to insure;

  2. (2)

    the cost of the contract, where this is relevant to the customer's demands and needs; and

  3. (3)

    the relevance of any exclusions, excesses, limitations or conditions in the contract.

ICOB 4.3.7G
  1. (1)

    Where ICOB 4.3.6 R(2) applies, an insurance intermediary should take into account the cost of the contract when compared to other non-investment insurance contracts that cover a similar range of demands and needs on which the insurance intermediary can provide advice or information.

  2. (2)

    In meeting the requirements of ICOB 4.3.6 R, an insurance intermediary need not consider the following:

    1. (a)

      alternatives to non-investment insurance contracts; and

    2. (b)

      the needs of the customer that are not relevant to the type of contract in which the customer is interested.

1Pension term assurance policies

ICOB 4.3.8R

1Unless the insurance intermediary has sufficient information to conclude whether or not the customer's existing pension arrangements are likely to significantly affect the suitability of any personal recommendation of a pension term assurance policy that it might make, it must either:

  1. (1)

    not make a personal recommendation until details of the pension arrangements are made available to it; or

  2. (2)

    make clear to the customer that the personal recommendation may not be suitable because it has not taken into account full details of the customer's existing pension arrangements.