1. (1)

   1In line with Principle 6, a firm should take reasonable steps to ensure that a customer only buys a policy under which he is eligible to claim benefits.

2. (2)

   If, at any time while arranging a policy, a firm finds that parts of the cover apply, but others do not, it should inform the customer so he can take an informed decision on whether to buy the policy.

For a typical payment protection contract the reasonable steps required in the first part of the eligibility rule are likely to include checking that the customer meets any qualifying requirements for different parts of the policy.

A firm should bear in mind the restriction on rejecting claims for non-disclosure (). Ways of ensuring a customer knows what he must disclose include:

1. (1)

   explaining the duty to disclose all circumstances material to a policy, what needs to be disclosed, and the consequences of any failure to make such a disclosure; or

2. (2)

   ensuring that the customer is asked clear questions about any matter material to the insurance undertaking.

The format of a statement of demands and needs is flexible. Examples of approaches that may be appropriate where a personal recommendation has not been given include:

1. (1)

   providing a demands and needs statement as part of an application form, so that the demands and needs statement is made dependent upon the customer providing personal information on the application form. For instance, the application form might include a statement along the lines of: "If you answer 'yes' to questions a, b and c your demands and needs are those of a pet owner who wishes and needs to ensure that the veterinary needs of your pet are met now and in the future";

2. (2)

   producing a demands and needs statement in product documentation that will be appropriate for anyone wishing to buy the product. For example, "This product meets the demands and needs of those who wish to ensure that the veterinary needs of their pet are met now and in the future";

3. (3)

   giving a customer a record of all his demands and needs that have been discussed; and

4. (4)

   providing a key features document.

In taking reasonable care to ensure the suitability of advice on a payment protection contract or a pure protection contract a firm should:

1. (1)

   establish the customer's demands and needs. It should do this using information readily available and accessible 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 care to ensure that a policy 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; and

3. (3)

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