1Different provisions in this sourcebook may apply depending on the type of person with whom a firm is dealing:

1. (1)

   A policyholder includes anyone who, upon the occurrence of the contingency insured against, is entitled to make a claim directly to the insurance undertaking.

2. (2)

   Only a policyholder or a prospective policyholder who makes the arrangements preparatory to him concluding a contract of insurance (directly or through an agent) is a customer. In this sourcebook, customers are either consumers or commercial customers.

3. (3)

   A consumer is any natural person who is acting for purposes which are outside his trade or profession.

4. (4)

   A commercial customer is a customer who is not a consumer.

1. (1)

   Except where paragraph (2) applies, if a customer is acting in the capacity of both a consumer and a commercial customer in relation to a particular contract of insurance, the customer is a commercial customer.

   2
2. (2)

   For the purposes of ICOBS 5.1.4 G and ICOBS 8.1.2 R, if, in relation to a particular contract of insurance, the customer entered into it mainly for purposes unrelated to his trade or profession, the customer is a consumer.

   2

1. (1)

   This guidance applies in relation to a financial promotion that makes pricing claims, including financial promotions that indicate or imply that a firm can reduce the premium, provide the cheapest premium or reduce a customer's costs.

2. (2)

   Such a financial promotion should:

   1. (a)

      be consistent with the result reasonably expected to be achieved by the majority of customers who respond, unless the proportion of those customers who are likely to achieve the pricing claims is stated prominently;

   2. (b)

      state prominently the basis for any claimed benefits and any significant limitations; and

   3. (c)

      comply with other relevant legislative requirements, including the Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection from Misleading Marketing Regulations 2008.1

      1

1. (1)

   Principle 8 requires a firm to manage conflicts of interest fairly, both between itself and its customers and between a customer and another client. This principle extends to soliciting or accepting inducements where this would conflict with a firm's duties to its customers. A firm that offers such inducements should consider whether doing so conflicts with its obligations under:1

   1. (a)

      Principles 1 and 6 to act with integrity and treat customers fairly; and1

   2. (b)

      the customer’s best interests rule.1

2. (2)

   An inducement is a benefit offered to a firm, or any person acting on its behalf, with a view to that firm, or that person, adopting a particular course of action. This can include, but is not limited to, cash, cash equivalents, commission, goods, hospitality or training programmes.

1. (1)

   The Senior Management Arrangements, Systems and Controls sourcebook (SYSC) 2 contains high-level record-keeping requirements (see SYSC 3.2.20 R, 2SYSC 9.1.1 R and SYSC 9.1.1 AR2).

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2. (2)

   This sourcebook does not generally have detailed record-keeping requirements: firms will need to decide what records they need to keep in line with the high-level record-keeping requirements and their own business needs.

3. (3)

   Firms should bear in mind the need to deal with requests for information from the FCA as well as queries and complaints from customers which may require evidence of matters such as:

   1. (a)

      the reasons for personal recommendations;

   2. (b)

      what documentation has been provided to a customer; and

   3. (c)

      how claims have been settled and why.

The general law, including the Unfair Terms Regulations (for contracts entered into before 1 October 2015) and the CRA, 2also limits the scope for a firm to exclude or restrict any duty or liability to a consumer.

3An insurer may choose to draft its conditions and warranties so that they clearly state the particular types of crystallised risks covered by the policy to which they are connected, for the purposes of ICOBS 2.5.2AR(1). Alternatively the insurer may in practice have systems and controls which operate the conditions and warranties in a way that has the same effect.

1. (1)

   Where it is compatible with the nature of the obligation imposed by a particular rule, including the customer’s best interests rule,4 and with the Principles, in particular Principles 1 (Integrity), 2 (Skill, care and diligence) and 3 (Management and control), firms may rely on third parties in order to comply with the rules in this sourcebook.

2. (2)

   For example, where a rule requires a firm to take reasonable steps to achieve an outcome, it will generally be reasonable for a firm to rely on information provided to it in writing by an unconnected authorised person or a professional firm, unless it is aware or ought reasonably to be aware of any fact that would give reasonable grounds to question the accuracy of that information. However, a firm cannot delegate its responsibility under the regulatory system. For example, where a rule imposes an absolute obligation (such as the requirement for an insurer to handle claims promptly and fairly) although a firm could use outsourcing arrangements to fulfil its obligation, it retains regulatory responsibility for achieving the outcome required.

4 Firms are reminded of their obligations in SYSC 19F.2 to ensure remuneration arrangements do not conflict with their duty to act in the customer’s best interests.

1To comply with the relevant chapter of SYSC or Principle 3, an insurance distributor will need to have appropriate arrangements in place to ensure compliance with ICOBS 2.6.1R.