ICOBS 5.3 Advised sales

A firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgement2.

1In taking reasonable care to ensure the suitability of advice on a policy included in a packaged bank account, a firm must:

1. (1)

   establish the customer's demands and needs by using information readily available to the firm and by obtaining further relevant information from the customer, including details of existing insurance cover; it need not consider alternatives to policies nor customer needs that are not relevant to the type of policy in which the customer is interested;

2. (2)

   take reasonable steps to establish whether each policy included in the packaged bank account is suitable for the customer's demands and needs, taking into account its level of cover and cost, and relevant exclusions, excesses, limitations, and conditions;

3. (3)

   inform the customer of any demands and needs that are not met; and

4. (4)

   explain to the customer its recommendation and the reasons for the recommendation.

1A firm must make a record of the suitability assessment, the recommendation given and the reasons for the recommendation and, if the customer proceeds with the recommendation, retain it for a minimum period of three years from the date on which the recommendation was made.

If an insurance intermediary informs a customer that it gives:2

1. (1)

   advice on the basis of a fair analysis, it must give that advice on the basis of an analysis of a sufficiently large number of contracts of insurance available on the market to enable it to make a recommendation; or2

2. (2)

   a personal recommendation on the basis of a fair and personal analysis, it must give that personal recommendation on the basis of an analysis of a sufficiently large number of insurance contracts available on the market to enable it to make a personal recommendation;2

and in each case, it must2 be in accordance with professional criteria, regarding which contract of insurance would be adequate to meet the customer’s needs.[Note: article 20(1) third paragraph of the IDD]2

2Where a firm provides a personal recommendation (other than in relation to a connected travel insurance contract) the firm must, in addition to the statement of demands and needs, provide the customer with a personalised explanation of why a particular contract of insurance would best meet the customer’s demands and needs.

[Note: article 20(1) third paragraph of the IDD]

2A firm must provide the information in this section in accordance with ICOBS 4.1A (Means of communication to customers).

[Note: article 23(1) of the IDD]