ICOB 6.1 Application and purpose
Application: who?
This chapter applies to:
- (1)
an insurer;
- (2)
- (1)
Throughout this chapter references to an insurer apply equally to a managing agent.
- (2)
A managing agent must give effect to the policy in ICOB 6 that a retail customer must be offered cancellation rights.
This chapter sets out the cancellation rights that a firm must offer to a retail customer upon inception or renewal of specified contracts. A renewal only occurs if a further policy is entered into at the expiry of an existing policy. For example, a creditor policy that remains in existence from month to month until the policyholder attains a certain age, until cancelled by either party, or until lapse because of non-payment of premiums would not be considered as a policy with monthlyrenewal under the ICOBrules.
Application: what?
Apart from the exemptions set out in ICOB 6.1.5 R, this chapter applies to all non-investment insurance contracts.
This chapter does not apply to the following contracts:
- (1)
a travel and baggage insurance policy or similar short-term insurance policy of less than one month's duration;
- (2)
a non-investment insurance contract, the performance of which has been fully completed by both parties at the retail customer's express request before the retail customer exercises his right to cancel;
- (3)
a non-investment insurance contract that is a pure protection contract of six months' duration or less that is not a distance contract;
- (4)
a pure protection contract effected by the trustees of an occupational pension scheme, an employer or a partnership to secure benefits for the employees or the partners in the partnership;
- (5)
a general insurance contract that is not a distance contract sold by an intermediary who is an unauthorised person (except where the intermediary is an appointed representative); and1
- (6)
a connected contract that is not a distance contract.
In ICOB 6.1.5 R(1) the 'similar short-term insurance policy' referred to is any contract of insurance where the event or activity being insured is less than one month's duration. The reference to 'duration' is to the period of the cover rather than the period of the contract. So the exemption will cover travel insurance for a fortnight's holiday, even if the insurance was taken out two months before the holiday began. However, if the period of cover includes cancellation of the holiday from the point at which the contract is taken out, the policy will not benefit from the exemption.
In relation to ICOB 6.1.5 R(2):
- (1)
a contract is not fully completed simply because an event has occurred which allows a claim to be made under the contract (for example, a claim for a cancelled flight or lost baggage); and
- (2)
a contract is fully completed where a claim has been made that leads to the contract being terminated. This could include a total loss claim (for example, a motor claim where the vehicle is written off and this results in termination of the contract).
The cancellation rights described in this chapter apply to all renewals and not just those where there have been significant changes.
Where ICOB 6.1.5 R applies and there is no cancellation right, a firm should inform the retail customer of that fact in accordance with ICOB 5.3.12 R(1).
Purpose
- (1)
This chapter reinforces Principle 6 (Customers' interests) which requires a firm to pay due regard to the interests of its customers and treat them fairly. In certain circumstances, retail customers who have entered into a non-investment insurance contract will be entitled to a period of reflection during which they can decide whether to proceed with their purchase.
- (2)
This chapter also implements, where relevant, elements of the DMD and the Consolidated Life Directive relating to the cancellation of distance contracts and non-investment insurance contracts that are pure protection contracts.