ICOB 7.5 Retail customers: performance standards for handling claims

Notification of a claim is a demand of the insurer to pay or provide a benefit insured under the policy, e.g. by submitting a claim form or giving the equivalent information orally, where permitted by the policy. An enquiry that precedes such a demand, for example, as to whether a particular loss is covered, and therefore whether a claim could be made under the terms of the policy, is not notification of a claim.

ICOB 7.5.1 R requires an insurer to respond promptly once it has received notification of a claim. Generally a prompt response would be one within five business days of a retail customer making a claim, although in some circumstances, a prompt response could be less than five business days, such as where the retail customer would expect a swifter response because of the nature of the claim or the terms of the policy (for example, a roadside assistance policy).

The purpose of the rules and guidance in ICOB 7.5.1 R to ICOB 7.5.5 R is to provide the retail customer at an early stage with information in relation to the processing and settlement of his claim by the insurer. ICOB 7.5.5 R(1) is intended to prevent a retail customer pursuing a claim for which he is clearly not covered, for example, making a claim on a contents insurance policy for possessions away from home, when the policy only covers possessions in the home. It is not intended to pre-empt the outcome of an investigation of a claim.

The purpose of ICOB 7.5.5 R(3) is to ensure that a retail customer knows the name and function of any party who will contact him in relation to a claim as a representative of the insurer e.g. an outsourcedclaims handling company or a loss adjuster. An insurer would not be expected to notify the retail customer of other parties who are appointed to investigate the validity of a claim, if this would limit or prevent an effective investigation. However, if a third party such as a loss adjuster is appointed to liaise with the retail customer on the insurer's behalf, as well as assess the validity of the claim, the insurer would be expected to disclose the information in ICOB 7.5.5 R(3) unless it would limit or prevent an effective investigation.

Where the investigation of a claim is likely to be protracted, an insurer should provide periodic progress or status reports, when appropriate, to a retail customer, including providing the retail customer with any relevant update in relation to the information provided under ICOB 7.5.5 R. The insurer should also respond without undue delay to any reasonable request by the retail customer for information.

Motor vehicle liability insurers should refer to the rules and guidance at ICOB 7.6.8 R to ICOB 7.6.11 G in respect of a claim for damages by an injured party in the circumstances set out in ICOB 7.6.11 G (1).

Examples of a payment to others for the provision of goods or services are: to a garage for repairs carried out to a vehicle, to a supplier for the provision of replacement electrical goods, or to a doctor for medical treatment.

1. (1)

   Settlement terms are agreed when:

   1. (a)

      the insurer accepts the retail customer's claim; and

   2. (b)

      the retail customer accepts the insurer's offer of settlement.

2. (2)

   When the insurer settles the claim by paying the retail customer, the insurer should aim to make payment within five business days after the insurer and the retail customer have agreed settlement terms, subject to any pre-conditions laid down by the insurer or in law being met by the retail customer. This does not prevent the insurer paying a claim before the retail customer has finally agreed settlement terms.

3. (3)

   The guidance in (2) would not apply if the non-investment insurance contract otherwise provides, or the insurer settles the claim by:

   1. (a)

      payment against a liability due on a future date;

   2. (b)

      the provision of goods or services;

   3. (c)

      making payments on a date specified by the retail customer; or

   4. (d)

      payment of the claim through an employer or other party on a monthly or some other basis;

   and in the case of (a) or (b) the insurer should make prompt payment or arrange for prompt provision of the goods or services after the insurer and the retail customer have agreed settlement terms.

The arrangements for settlement set out in ICOB 7.5.18 G(3)(a) are likely to apply, for example, when payments are made under a creditor insurance policy to meet periodic repayments due under a loan agreement.

The arrangements for settlement set out in ICOB 7.5.18 G(3)(b) apply to arrangements to supply goods or services to the retail customer. In such situations, the goods or services should be provided promptly, but where they cannot be the insurer should tell the retail customer when to expect them.

An insurer should note that unless it has previously informed a retail customer that a claim will not be met in full or in part until premiums have been paid, the insurer may not delay payment of a claim on the grounds that premiums are outstanding.

A customer who does not accept an insurer's rejection of his claim (or part of it) may challenge that rejection. If he chooses to do so through the courts, firms should be aware that in England and Wales there are pre-action protocols which lay down certain requirements as to the steps to be taken before proceedings are issued. This chapter does not displace these requirements, to which firms should have regard in the event that a rejection of a claim moves towards litigation.