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ICOB 4.1 Application and purpose

Application: who and what?

ICOB 4.1.1 R 14/01/2005

(1)
Subject to ICOB 4.1.4 R, this chapter applies to an insurance intermediary in accordance with ICOB 4.1.3 R.
(2)
ICOB 4.7 (Unsolicited services) also applies to an insurer or managing agent when acting as a product provider.
(3)
Throughout this chapter, references to an insurer apply equally to a managing agent.

ICOB 4.1.2 G 14/01/2005

(1)
The definition of insurance intermediary includes an insurer when the insurer is carrying on insurance mediation activities, for example when, through its sales force, it advises on or arranges its own non-investment insurance contracts or those of another insurer.
(2)
For the limited application of this chapter to authorised professional firms in respect of their non-mainstream regulated activities, see ICOB 1.2.10 R(3) and ICOB 1.2.10 R(4).

ICOB 4.1.3 R 06/03/2006

Application of ICOB 4 by activity and customer type

This table belongs to ICOB 4.1.1 R.

Insurance mediation activity	Type of customer	Applicable section
arranging except introducing	retail customer	Whole chapter except ICOB 4.3 and ICOB 4.6
arranging except introducing	commercial customer	Whole chapter except ICOB 4.2.19 R, ICOB 4.3 and ICOB 4.71
advising	retail customer	Whole chapter except ICOB 4.6
advising	commercial customer	Whole chapter except ICOB 4.2.19 R and ICOB 4.71
introducing	retail customer and commercial customer	ICOB 4.2.9 R and ICOB 4.2.10 G only

ICOB 4.1.4 R 06/03/2006

The following provisions in ICOB do not apply to an insurance intermediary that is an insurer:

(1)
ICOB 4.2 (Status disclosure) except ICOB 4.2.4 G to ICOB 4.2.7 R (permitting use of the initial disclosure document and combined initial disclosure document) and ICOB 4.2.19 R (overseas business for UK retail customers), provided that when providing the service on the telephone to a retail customer wishing to enter into a non-investment insurance contract, the insurer proceeds on the basis of providing at least the following information:
1
1. (a)
  its name;1
2. (b)
  (if it initiated the call) the commercial purpose of the call; and1
3. (c)
  the identity of the person in contact with the customer and his link with the insurer;1
(2)
1ICOB 4.4.1R (1) (Statement of demands and needs), in accordance with ICOB 4.4.2R (1) and (1A) (commercial customers and non-advised sales to retail customers)1; and
(3)
ICOB 4.6 (Commission disclosure for commercial customers).

1However, an insurer must ensure that its appointed representative nevertheless complies with the requirements of this chapter (unless acting as the insurer's third party processor).

Renewals

ICOB 4.1.5 G 14/01/2005

When a contract of insurance is renewed, the parties enter into a new contract of insurance, even if the terms and conditions of the new contract are identical to the old one. ICOB 4 therefore applies to the renewed contract of insurance as it would to the original contract of insurance, unless stated otherwise in ICOB 4.2.20 R.

Purpose

ICOB 4.1.6 G 14/01/2005

(1)
This chapter amplifies Principle 6 (Customer's interests), Principle 7 (Communications with clients) and Principle 9 (Customers: relationships of trust). Principle 6 requires a firm to pay due regard to the interests of its customers and treat them fairly. Principle 7 requires a firm to pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading. Principle 9 requires a firm to take reasonable care to ensure the suitability of its advice.
(2)
This chapter also implements articles 12 and 13 of the Insurance Mediation Directive for non-investment insurance contracts (which means that, in respect of communications by telephone, it follows the approach in article 3 of the Distance Marketing Directive).
(3)
This chapter also implements article 9 of the DMD for non-investment insurance contracts concluded by distance means.

ICOB 4.1.7 G 06/03/2006

The purpose of this chapter is to ensure that:

(1)
customers are adequately informed about the nature of the service that they have received from an insurance intermediary in relation to non-investment insurance contracts. In particular, insurance intermediaries need to make clear to customers the scope and type of the products and insurance undertakings on which their service is based;
(2)
where a personal recommendation is made it is suitable for a customer's demands and needs. The nature of the steps an insurance intermediary will need to take to ensure that the customer receives a personal recommendation that is suitable will vary depending on the demands and needs of the customer, the type of non-investment insurance contract being offered, and the type of customer (retail customer or commercial customer);
(3)
customers receive a statement of their demands and needs and the reasons for any personal recommendation made by an insurance intermediary;
(4)
[deleted]1
1
(5)
if requested by a commercial customer, the insurance intermediary discloses its commission; and
(6)
retail customers are not charged for non-investment insurance contracts concluded by distance means without their prior consent.

ICOB 4.2 Status disclosure

Retail and commercial customers: disclosure before or immediately after conclusion of the contract

ICOB 4.2.1 G 06/04/2007

(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 IMD.
(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 IMD and the DMD. 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 document 5.
5
(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)
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
5

ICOB 4.2.2 R 06/03/2006

(1)
An insurance intermediary must provide the information in ICOB 4.2.8 R to the customer in a durable medium at any time before conclusion of a non-investment insurance contract, unless an exemption in (2) or (3) applies.
(2)
Exemption: oral disclosureThe information in ICOB 4.2.8 R need not be provided in a durable medium before conclusion of the contract but may be provided orally before the conclusion of the contract if:
1. (a)
  the customer requests this; or
2. (b)
  the customer requires immediate cover.
(3)
Exemption: telephone sales
1. (a)
  This exemption applies if the service is being provided on the telephone and the customer wishes to enter into a non-investment insurance contract.
2. (aa)
  The insurance intermediary must provide its name and (if it initiated the call) the commercial purpose of the call.6
3. (b)
  Provided the customer gives his explicit consent to receiving only limited information, the insurance intermediary may proceed on the basis of at least the following information:1
  1. (i)
    the identity of the person in contact with the customer and his link with the insurance intermediary; and6
    6
  2. (ii)
    that other information is available on request, and the nature of the information.6
    6
4. (c)
  If the customer does not give his explicit consent to receiving limited information, and the parties wish to proceed by telephone, the insurance intermediary must prior to the conclusion of the contract provide all of the information required by ICOB 4.2.8 R orally to the customer.1
(4)
Where (2) or (3) applies, the customer must be provided with the information in ICOB 4.2.8 R in a durable medium immediately after the conclusion of the contract.

ICOB 4.2.3 G 14/01/2005

(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)
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.

Use of the initial disclosure document and combined initial disclosure document

ICOB 4.2.4 G 06/04/2007

(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 document 5.
5
(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)
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.

ICOB 4.2.5 R 14/01/2005

If an insurance intermediary chooses to use the initial disclosure document at ICOB 4 Annex 1 G, it must not include the key facts logo and the heading and text in Section 1 unless it uses the document in full and makes no changes to the text other than changes allowed by the notes to the document.

ICOB 4.2.6 R 14/01/2005

If an insurance intermediary uses the initial disclosure document and includes the key facts logo, the key facts logo:

(1)
must be positioned as shown in ICOB 4 Annex 1 G;
(2)
must be accompanied by the words 'about our insurance services' as shown in ICOB 4 Annex 1 G;
(3)
may be a different size from that in ICOB 4 Annex 1 G, but it must be reasonably prominent and its proportions must not be distorted; and
(4)
may be in colour, but this must not diminish its prominence.

ICOB 4.2.7 R 06/04/2007

If an insurance intermediary chooses to use the combined initial disclosure document 5, it must use the document in full and make no change to the text other than changes allowed by the notes to the document.

ICOB 4.2.8 R 06/03/2006

Information to be provided before conclusion of the contract or immediately after conclusion of the contract

This table belongs to ICOB 4.2.2 R

(1)	The name and address of the insurance intermediary.
(2)	The insurance intermediary's statutory status (in accordance with GEN 4 Annex 1 (Statutory status disclosure)).
(3)	That items 1 and 2 can be checked on the FSA's Register by visiting the FSA's website http://www.fsa.gov.uk/register or by contacting the FSA on 0845 606 1234.
(4)	Details of any holding, direct or indirect, that an insurance intermediary has that represents more than 10 per cent of the voting rights or of the capital in an insurance undertaking.6 6
(5)	Details of any holding, direct or indirect, that an insurance undertaking or parent of an insurance undertaking has that represents more than 10 per cent of the voting rights or of the capital in the insurance intermediary 6 6
(6)	In relation to the non-investment insurance contract provided, whether the insurance intermediary has provided, or will provide, advice or information:
	(a)	on the basis of a fair analysis of the market; or
	(b)	from a limited number of insurance undertakings; or
	(c)	from a single insurance undertaking.
	If (b) or (c) applies, the insurance intermediary must also disclose whether it is contractually obliged to conduct insurance mediation activity in this way.
(7)	If the contract provided has not been selected on the basis of a fair analysis of the market, that the customer can request a copy of the list of the insurance undertakings the insurance intermediary selects from or deals with in relation to the contract provided.
(8)	How to complain to the insurance intermediary and that complaints may subsequently be referred to the Financial Ombudsman Service or any other applicable named complaints scheme.
(9)	The compensation arrangements should the insurance intermediary be unable to meet its liabilities.1
Notes
(1)	If the customer is dealing with an appointed representative of an insurance intermediary, the insurance intermediary is responsible for ensuring that the appointed representative makes the appropriate disclosures (see ICOB 1.6). In that case, the insurance intermediary must ensure that:
	(a)	for item 1, the appointed representative provides its own name and address;
	(b)	for item 2, the appointed representative makes the disclosure required by GEN 4 Annex 1(4);
	(c)	for item 4, the appointed representative discloses its own holding and not the holding of the insurance intermediary;
	(d)	for item 5, the holding disclosed is the holding in the appointed representative and not in the insurance intermediary;
	(e)	for item 6, the appointed representative discloses the basis on which it provides advice or information; and
	(f)	for item 8, the details provided are details of how to complain to the appointed representative.
(2)	Under item 1, where the insurance intermediary trades under a different name from that under which it is authorised, it must disclose the name under which it is authorised and listed on the FSA Register. For an appointed representative, the same applies in relation to the name under which it is registered and listed on the FSA Register.
(3)	Under item 1, the address should be the head office address or, if more appropriate, the principal place of business from which the insurance intermediary or appointed representative expects to conduct business with the customer.
(4)	In addition to the disclosure required by item 9, the insurance intermediary must ensure that, where relevant, it describes the extent and level of compensation cover and how further information can be obtained, after the conclusion of the contract and in a durable medium. The insurance intermediary may provide this information before the contract is concluded, along with the information required by item 9, if it so chooses.

Disclosure by insurance intermediaries when introducing

ICOB 4.2.9 R 01/01/2006

Where contact by the insurance intermediary with the customer is limited to introducing the customer to another insurance intermediary (or to an insurer as product provider), the insurance intermediary making the introduction must give4the customer the following information about itself 4in good time before making 4the introduction4:

(1)
the information in ICOB 4.2.8 R (1) and (2);
(2)
details of fees, if any, that the customer will be charged for the service being provided; and
(3)
whether the insurance intermediary introducing the customer is a member of the same group as the firm to whom the introduction is to be made.

ICOB 4.2.10 G 14/01/2005

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.

Fair analysis

ICOB 4.2.11 R 14/01/2005

An insurance intermediary cannot hold itself out as giving information or advice to customers on non-investment insurance contracts on the basis of a fair analysis of the market in accordance with ICOB 4.2.8 R(6)(a) unless:

(1)
it has considered a sufficiently large number of non-investment insurance contracts available in the relevant sector or sectors of the market; and
(2)
the consideration in (1) is based on criteria which reflect adequate knowledge of non-investment insurance contracts in the relevant sector or sectors of the market.

ICOB 4.2.12 G 14/01/2005

(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)
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.

ICOB 4.2.13 G 31/12/2006

(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)
INSPRU 1.5.13 R7 (Restriction of business to insurance) in practice restricts the business which an insurer can carry on.2
7

Information to be provided to customers on request

ICOB 4.2.14 R 14/01/2005

(1)
An insurance intermediary that provides a service under ICOB 4.2.8 R(6)(b) or (c) must maintain, and keep up-to-date, for each type of non-investment insurance contract it deals with, a list of insurance undertakings it selects from or deals with.
(2)
An insurance intermediary must provide a copy of the list in (1) in a durable medium to a customer on request, in accordance with ICOB 4.2.8 R(7).

Retail customers and commercial customers: information on fees

ICOB 4.2.15 R 14/01/2005

An insurance intermediary must provide a customer with details of the amount of any fees (or where an actual fee cannot be given the basis for calculating any fees, enabling the customer to verify them) for an insurance mediation activity before the customer incurs liability to pay the fee, or before conclusion of the contract, whichever is earlier.

ICOB 4.2.16 G 14/01/2005

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.

ICOB 4.2.17 R 14/01/2005

The information in ICOB 4.2.15 R can be provided in any medium before the conclusion of the contract but must be provided in a durable medium immediately after the conclusion of the contract.

ICOB 4.2.18 G 14/01/2005

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

Overseas business for UK retail customers

ICOB 4.2.19 R 01/06/2005

(1)
Unless (3) applies, an3 insurance intermediary must not conduct insurance mediation activities in respect of non-investment insurance contracts:
3
1. (a)
  from an office of its own (or of any appointed representative) outside the United Kingdom;
2. (b)
  with or for a retail customer who is in the United Kingdom;
unless it has, where relevant, made a disclosure in accordance with (2) to the retail customer.
(2)
The required disclosure in (1) means a written statement making it clear that in some or all respects the regulatory system applying, including any complaints handling or compensation arrangements, will be different from that of the United Kingdom. The statement may also indicate the protections or compensation available under another system of regulation.
(3)
(1) does not apply to an insurance intermediary when acting as a third party processor.3

Application for renewals and amendments where information has already been provided

ICOB 4.2.20 R 14/01/2005

(1)
ICOB 4.2 does not apply in relation to any insurance mediation activity that an insurance intermediary carries on with a customer in the course of renewing or amending a contract of insurance, if the information required by ICOB 4.2 has already been given to the customer in relation to the initial contract and is still accurate and up-to-date.
(2)
If the information in relation to the initial contract that the insurance intermediary has previously disclosed to the customer in accordance with ICOB 4.2 has changed, the insurance intermediary must give the customer the updated information in accordance with the provisions of ICOB 4.2, but does not need to provide the other information required by ICOB 4.2.

ICOB 4.2.21 G 14/01/2005

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.

ICOB 4.3 Suitability

Requirement for suitability

ICOB 4.3.1 R 14/01/2005

(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)
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)
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 4.3.2 R 14/01/2005

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

(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)
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)
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 4.3.3 G 14/01/2005

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 4.3.4 G 06/04/2006

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.

ICOB 4.3.5 R 14/01/2005

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)
not make a personal recommendation until details of the insurance cover are made available to him; or
(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 4.3.6 R 14/01/2005

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)
whether the level of cover is sufficient for the risks that the customer wishes to insure;
(2)
the cost of the contract, where this is relevant to the customer's demands and needs; and
(3)
the relevance of any exclusions, excesses, limitations or conditions in the contract.

ICOB 4.3.7 G 14/01/2005

(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)
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 4.3.8 R 06/04/2006

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

ICOB 4.4 Statement of demands and needs

ICOB 4.4.1 R 14/01/2005

(1)
Unless ICOB 4.4.2 R applies, where an insurance intermediary arranges for a customer to enter into a non-investment insurance contract (including at renewal), it must, before the conclusion of that contract, provide the customer with a statement that:
1. (a)
  sets out the customer's demands and needs;
2. (b)
  confirms whether or not the insurance intermediary has personally recommended that contract; and
3. (c)
  where a personal recommendation has been made, explains the reasons for personally recommending that contract.
(2)
The statement in (1) must reflect the complexity of the contract of insurance proposed.
(3)
Unless (4) applies, the statement in (1) must be provided in a durable medium.
(4)
An insurance intermediary may provide the statement in (1) orally if:
1. (a)
  the customer requests it; or
2. (b)
  the customer requires immediate cover;
but in both cases the insurance intermediary must provide the information in (1) immediately after the conclusion of the contract, in a durable medium.

Exemptions

ICOB 4.4.2 R 06/03/2006

(1)
Commercial customers
1. (a)
  ICOB 4.4.1 R(1) does not apply to an insurance intermediary that is an insurer when dealing with a commercial customer, unless the insurer makes a personal recommendation to that commercial customer.
2. (b)
  If an insurance intermediary that is an insurer makes a personal recommendation to a commercial customer, it need not provide the commercial customer with a statement of demands and needs, provided that:
  1. (i)
    it has obtained the consent of the commercial customer not to receive the statement of demands and needs; and
  2. (ii)
    it has explained to the commercial customer the consequences of giving that consent before it is given.
(1A)
2Non-advised sales by insurers to retail customers
1. (a)
  ICOB 4.4.1R (1) does not apply to an insurance intermediary that is an insurer when dealing with a retail customer, unless the insurer makes a personal recommendation to that retail customer.
2. (b)
  Where ICOB 4.4.1R (1) does not apply under (a), the insurer must provide the retail customer with a statement that confirms the insurer has not personally recommended that contract.
3. (c)
  Unless (d) or (e) applies, the statement in (b) must be provided in a durable medium before the conclusion of the contract (including at renewal).
4. (d)
  If the customer requests the statement in (b) orally or requires immediate cover, the insurer may provide the statement orally provided that it does so before the conclusion of the contract and provides the statement in a durable medium immediately after the conclusion of the contract.
5. (e)
  Where a contract is concluded by telephone, the statement in (b) must be provided immediately after the conclusion of the contract in a durable medium.
(2)
Telephone salesWhere a contract is concluded by telephone with a customer, the statement of demands and needs:
1. (a)
  must be provided immediately after the conclusion of the contract in a durable medium;
2. (b)
  may also be provided orally before the contract is concluded.
(3)
Notwithstanding (1) and (1A), an insurer must ensure that its appointed representative complies with the requirements of this section (unless acting as the insurer's third party processor).

ICOB 4.4.3 G 14/01/2005

(1)
An insurance intermediary may provide the demands and needs statement as part of another document, such as an application form.
(2)
For quick quotes (see ICOB 4.2.1 G(3)), there is no requirement for the insurance intermediary to provide a demands and needs statement, but one must be provided before contract conclusion.
(3)
A statement of demands and needs is, by definition, relevant to (and generated by) the specific circumstances of the customer. However, the degree of knowledge of the customer's circumstances that is required will vary from case to case.

Demands and needs statement for non-advised sales

ICOB 4.4.4 G 14/01/2005

ICOB 4.4.3 G gives an insurance intermediary flexibility as to the format of the demands and needs statement. Some examples of approaches that may be appropriate where the insurance intermediary has not made a personal recommendation include:

(1)
providing a demands and needs statement as part of an application form, so that the demands and needs statement is made dependent upon the customer providing personal information on the application form. For instance, the application form might include a statement along the lines of:'If you answer 'yes' to questions a, b and c your demands and needs are those of a pet owner who wishes and needs to ensure that the veterinary needs of your pet are met now and in the future';
(2)
producing a demands and needs statement in product documentation that will be appropriate for anyone wishing to buy the product. For example, 'This product meets the demands and needs of those who wish to ensure that the veterinary needs of their pet are met now and in the future'; and
(3)
giving a customer a record of all his demands and needs that have been discussed.

ICOB 4.4.4A G 14/01/2005

1Where a firm has not made a personal recommendation and provides key features as an alternative to a policy summary under ICOB 5.5.4 R, that constitutes provision of a statement of demands and needs.

Demands and needs statement when a personal recommendation is made

ICOB 4.4.5 G 14/01/2005

(1)
Where a personal recommendation has been made the demands and needs statement will need to record the reasons for the personal recommendation as well as the customer's demands and needs.
(2)
In accordance with ICOB 4.4.7 R, the demands and needs statement is the record that the insurance intermediary must maintain to demonstrate that he has given a suitable personal recommendation. Accordingly, the statement will need to contain sufficient information to act as this record.
(3)
ICOB 4.4.6 G contains guidance on the content of the statement of demands and needs required by ICOB 4.4.1 R(1).

ICOB 4.4.6 G 14/01/2005

Guidance on the content of the statement of demands and needs required by ICOB 4.4.1 R(1)

This table belongs to ICOB 4.4.5 G(3).

	Introduction
(1)	Where relevant, the statement should explain simply and clearly why the personal recommendation is viewed as suitable, having regard to the customer's demands and needs.
	Style and Presentation
(2)	The style and presentation of the statement is left for the insurance intermediary to decide, so that he can design a statement which works best for the market in which he transacts business. A statement is more likely to be effective if it demonstrates these features:
	(a)	simplicity and plain English: when technical terms need to be incorporated, they should be explained, if the customer is unlikely to understand their meaning; and
	(b)	concise and clear messages: lengthy explanations and extensive statements are likely to reduce the effectiveness of the statement, and make the customer less likely to read the statement properly.
(3)	An insurance intermediary should take the following into account when constructing a statement following a personal recommendation:
	(a)	the statement should explain why the customer's demands and needs combine to make the recommended contract suitable for the customer. It should not merely state what contract is being recommended with no link to the customer's demands and needs; and
	(b)	an insurance intermediary that offers contracts from more than one insurance undertaking should include a statement of why a particular insurance undertaking has been recommended; reasons may include contract features not available anywhere else, price, or service levels.

Record keeping where a personal recommendation is made

ICOB 4.4.7 R 14/01/2005

(1)
An insurance intermediary that makes a personal recommendation to a customer must, if the customer acts on the personal recommendation by concluding the non-investment insurance contract with that insurance intermediary:
1. (a)
  unless ICOB 4.4.2 R(1)(b) applies, retain a copy of the statement required by ICOB 4.4.1 R(1); or
2. (b)
  if ICOB 4.4.2 R(1)(b) applies, make and retain, in a durable medium, a record of the reasons for the personal recommendation.
(2)
Both the copy of the statement in (1)(a) and the record in (1)(b) must be retained for a minimum period of three years from the date on which the personal recommendation was made.

ICOB 4.4.8 G 14/01/2005

The effect of ICOB 4.4.7 R(1) is that if the customer does not act on the personal recommendation, the insurance intermediary need not retain a copy of the statement.

ICOB 4.6 Commission disclosure for commercial customers

ICOB 4.6.1 R 14/01/2005

Before the conclusion of a non-investment insurance contract, or at any other time, an insurance intermediary that conducts insurance mediation activities for a commercial customer must, if that commercial customer asks, promptly disclose the commission that he and any associate of his receives in connection with the non-investment insurance contract in question, in cash terms or, to the extent it cannot be indicated in cash terms, the basis for the calculation of the commission, in a durable medium.1

ICOB 4.6.2 G 14/01/2005

ICOB 4.6.1 R does not replace the general law on the fiduciary obligations of an agent. In relation to contracts of insurance the essence of these obligations is generally a duty on the agent to account to his principal. However, in certain circumstances, the duty is one only of disclosure. Where a customer employs an insurance intermediary by way of business and does not remunerate him, and where it is usual for the insurance intermediary to be remunerated by way of commission paid by the insurer out of premium payable by the customer, then if the customer asks what the insurance intermediary's remuneration is, the insurance intermediary must tell him. ICOB 4.6.1 R is additional to this requirement in that it applies whether or not the insurance intermediary is an agent of the commercial customer.

ICOB 4.6.3 G 14/01/2005

ICOB 4.1.4 R (3) states that ICOB 4.6 does not apply to an insurance intermediary that is an insurer. This means that there is no obligation on an insurer to disclose a commission equivalent to a commercial customer on request.

ICOB 4.6.4 G 14/01/2005

The disclosures required by ICOB 4.6.1 R should be made in a manner that is clear, fair and not misleading, as required by ICOB 2.2.3 R (Clear, fair and not misleading communication).

ICOB 4.6.5 G 14/01/2005

If the precise value of commission is not known in advance, the insurance intermediary should estimate the rate likely to apply in relation to the contract of insurance in question.

ICOB 4.6.6 G 14/01/2005

ICOB 4.6.1 R does not require the disclosure of commission throughout the distribution chain between the insurer and commercial customer; but it does require disclosure of commission paid to any associate, regardless of whether the associate is part of the distribution chain.

ICOB 4.6.7 G 14/01/2005

1In considering any disclosure of commission under ICOB 4.6.1 R, an insurance intermediary should include all forms of remuneration from any arrangements he may have for remuneration in connection with the non-investment insurance contract (including arrangements for sharing profits, for payments relating to the volume of sales, and for payments from premium finance companies in connection with arranging finance for a non-investment insurance contract).

ICOB 4.6.8 G 14/01/2005

1An example of a situation where the commission could not be stated in cash terms under ICOB 4.6.1 R is where the insurance intermediary is remunerated under a profit share arrangement or any other similar arrangement under which the insurance intermediary may receive a non-fixed amount not specific to any particular non-investment insurance contract. The commission, to the extent it cannot be indicated in cash terms, should instead be indicated by showing the basis of its calculation.

ICOB 4.7 Unsolicited services

ICOB 4.7.1 R 14/01/2005

(1)
Subject to ICOB 4.7.2 R, an insurance intermediary or an insurer must not:1 2
1. (a)
  supply a service to a retail customer without a prior request on his part, when the supply of such service includes a request for immediate or deferred payment; or2
2. (b)
  enforce any obligation against a retail customer in the event of unsolicited supplies of such services, the absence of a reply not constituting consent.2
(2)
Paragraph (1) applies in relation to insurance mediation activities and insurance business, in relation to non-investment insurance contracts under an organised distance sales or service provision scheme run by the firm or by an intermediary, who, for the purpose of that supply, makes exclusive use of one or more means of distance communication up to and including the time at which the services are supplied.2

ICOB 4.7.2 R 14/01/2005

ICOB 4.7.1 R does not apply for a tacit renewal of a distance contract.1

ICOB 4.7.3 G 14/01/2005

The prohibition in ICOB 4.7.1 R includes the continuation of insurance after a specified period where the insurance has been free of charge to the retail customer during that period unless the retail customer has agreed before the period expires to pay for the insurance once the period has expired.1

ICOB 4.8 Language of the information provided to customers

ICOB 4.8.1 R 14/01/2005

(1)
Except as provided in (2), the information provided to customers in accordance with this chapter by a firm must:1
1. (a)
  (if the customer is in the United Kingdom) be in English; or1
2. (b)
  (if the customer is in another EEA State) be in an official language of that EEA State.1
(2)
If a customer requests all the information provided to him in accordance with this chapter to be, and the firm agrees to it being, in another language then the information may be in that language.1

ICOB 4 Annex 1 Initial disclosure document ("IDD")

G 06/11/2006

This Annex belongs to ICOB 4.2.4 G (1).

This annex consists only of one or more forms or templates. Forms and templates are to be found through the 'Forms' link under Useful Links section at www.fsahandbook.info or on the Handbook CD-ROM.1 2 3

Select a Version: