An insurer is responsible for claims handling. A managing agent is responsible for claims handling for policies underwritten at Lloyd's. An insurer or managing agent remains responsible for claims handling if it outsources any of its claims related activities, including where it gives an intermediary authority to handle claims on its behalf. An insurer or a managing agent is not responsible for the administration and performance activities that an insurance intermediary carries out on behalf of a customer in connection with a claim. In relation to these activities, the insurance intermediary should refer to ICOB 7.4.

An insurer should refer to the rules and guidance set out in SUP 2.3.5 to SUP 2.3.10 in respect of any person to whom it outsources its claims handling functions.

All of this chapter, except ICOB 7.6, applies to claims made by retail customers. Part of ICOB 7.3, all of ICOB 7.4 and all of ICOB 7.7 apply to claims made by commercial customers. ICOB 7.6 applies to certain1claims by injured parties arising from accidents1 occurring in the EEA1 involving the use of vehicles.1

1. (1)

   The purpose of this chapter is to ensure that:

   1. (a)

      claims are handled fairly;

   2. (b)

      claims are settled promptly;

   3. (c)

      customers are provided with information on the claims handling process, and with an explanation of why a claim is rejected or not settled in full, where relevant; and

   4. (d)

      insurance intermediaries disclose and manage any conflicts of interest that may exist.

2. (2)

   This chapter reinforces:

   1. (a)

      Principle 3 (Management and control), which requires a firm to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems;

   2. (b)

      Principle 6 (Customers interests), which requires a firm to pay due regard to the interests of its customers and treat them fairly; and

   3. (c)

      Principle 8 (Conflicts of interest), which requires a firm to manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

3. (3)

   The purpose of ICOB 7.6 is to transpose certain requirements of the Fourth Motor Insurance Directive and the Fifth Motor Insurance Directive.1

   1

Any person who, under the terms of a policy, has a right to claim directly on the insurer, is a policyholder (see ICOB 1.2.15 R to ICOB 1.2.16 G). When dealing with claims under group policies, insurers should consider whether the person claiming is a commercial customer or a retail customer and should apply the rules in this chapter accordingly when dealing with a customer's claim.

When an insurer deals directly with a third party who claims against his customer because the third party has a legal right to bypass the customer and claim directly against the insurer (for example, certain motor claims or because of the insolvency of the customer), these rules do not require the insurer to treat the third party as a customer. However, the insurer should have regard to Principle 1 (Integrity), Principle 2 (Skill, care and diligence) and Principle 5 (Market conduct) in its dealings with the third party and should not deal with the claim in any way less favourably than it would have done had the claim been proceeded against its customer.

When handling the claim of a retail customer, an insurer should comply with the rules and guidance in ICOB 7.5. When handling the claim of a commercial customer, an insurer should ensure that:

1. (1)

   the commercial customer is kept reasonably informed of how his claim is progressing; and

2. (2)

   payment is made promptly once settlement terms have been agreed.

An insurer should refer to the guidance in SYSC 3.2 (Areas covered by systems and controls) in its procedures for claims handling. For example, an insurer should have in place systems and controls which take account of reasonably foreseeable peaks in demand, to allow it to deal with claims promptly in such circumstances.

An insurer should refer to the guidanceon the competent employees rule in SYSC 32 in respect of the competence of any person who carries out claims handling on its behalf.

ICOB 7.4 will usually apply to an insurance intermediary that is not an insurer, but it may also apply to an insurer, for example, if it were dealing with a claim on a policy insured by another insurance undertaking.

The rules and guidance in ICOB 7.4 do not seek to set out the full extent of the duties owed by the insurance intermediary to any person for whom it acts, nor do they displace the general law on the duties of an insurance intermediary.

ICOB 7.4.5 R imposes a requirement on an insurance intermediary to avoid conflicts of interest in relation to claims where it acts on behalf of a customer, unless it can manage them by disclosure to, and the obtaining of consent from, its customer.

An insurance intermediary should consider whether it is possible to manage the conflict by disclosing the conflict to the customer and obtaining his consent. Where an insurance intermediary acts for a customer in arranging a policy, it is likely to be the agent for that1customer and any other customers who are policyholders under that policy1 in connection with the preparation and handling of any claim against the insurance undertaking. If the insurance intermediary intends to be the agent of an insurance undertaking in relation to claims under that policy, it will need to consider whether it is at risk of putting itself in the position where it cannot act without some breach of duty either to the insurance undertaking or the customer making the claim1. The insurance intermediary should consider whether disclosure and consent are sufficient to reconcile the conflicting obligations. An example of a circumstance in which disclosure and consent are unlikely to be sufficient, and when an insurance intermediary may well consider that it should not act for the insurance undertaking or the customer (or both), is where the insurance intermediary knows that its customer will, to obtain a quick payment, accept a low amount in settlement of a claim and also knows the insurance undertaking is willing to settle for a higher amount.

ICOB 7.4.8 R would apply, for example, where an insurance intermediary has delegated authority for claims handling and deals with a claim in relation to a contract that it sold to a customer, if the insurance intermediary is not acting on behalf of that customer in relation to the claim.

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.

1. (1)

   Under threshold condition 2A (Appointment of claims representatives), if it appears to the FSA that any person is seeking to carry on, or is carrying on, motor vehicle liability insurance business, that person must have a claims representative in each EEA State other than the United Kingdom.

2. (2)

   If any person carrying on motor vehicle liability insurance business becomes aware, or has information which reasonably suggests, that that person has failed to satisfy, may have failed to satisfy or may not in the foreseeable future be able to satisfy, threshold condition 2A (or any threshold condition), that person must notify the FSA immediately (see SUP 15.3.1)

ICOB 7.6.4 R (3) does not prevent a claims representative from seeking additional authority or instructions from a motor vehicle liability insurer, if its existing authority or instructions are insufficient to allow it to handle and settle a claim. However, it does prevent a claims representative from purporting to decline to deal with, or transfer responsibility for, claims properly referred to that claims representative by an injured party, or an injured party's representative.

Nothing in the rules and guidance at ICOB 7.6 prevents, or is intended to prevent:

1. (1)

   a motor vehicle liability insurer from appointing more than one claims representative in one, or more than one, EEA State; or

2. (2)

   a claims representative from acting for more than one insurer or member; or

3. (3)

   a representative, appointed by a motor vehicle liability insurer under SUP 13.5.2 or regulation 3(d) of the EEA Passport Rights Regulations, from acting as that motor vehicle liability insurer's claims representatives as well.

The appointment of a claims representative does not in itself constitute the opening of a branch or the creation of an establishment (see article 4(8) of the Fourth Motor Insurance Directive).

The rules and guidance at ICOB 7.6.1 G to ICOB 7.6.10 R are not intended to, and do not, restrict any rights which the injured party, or its motor vehicle liability insurer, or any other insurer acting on its behalf, may have and which would enable any of them to begin legal proceedings against the person causing the accident or that person's, or the vehicle's, insurers.1