PROD 1.4 Application of PROD 4

1In PROD an insurance product may be read as being a reference to the product for distribution to customers generally and is not intended to refer to each individual contract of insurance being sold or underwritten (unless the context indicates otherwise).

3 4A firm that is within the scope of PROD 4 (Product governance: IDD) when it9manufactures pathway investments or default options9 other than in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme, is also subject to PROD 6 (Product governance: additional provisions for pathway investments and default options9) as guidance with respect to that manufacturing activity (see PROD 1.6.1R(2)).

3 4The effect of PROD 1.4.3BR is to apply PROD 4 to any firm, such as a SIPP operator, which:

1. (1)

   manufactures or distributes pathway investments or default options9 in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme; and

2. (2)

   before the entry into force of PROD 1.4.3BR, was not subject to the rules or onshored regulations in PROD.

1The effect of PROD 1.4.4UK2 and PROD 1.4.6R is that an insurance intermediary needs to consider if it is manufacturing an insurance product or if it would be a manufacturer for a legacy non-investment insurance product for PROD 4.6,8 and, if so, should comply with PROD 4.2 (Manufacture of insurance products).

1. (1)

   8PROD 4.2 applies to firms that manufacture insurance products. The terms ‘firm’ and ‘manufacturer’ are used in that section interchangeably to refer to such persons.

2. (2)

   The Glossary term ‘manufacture’ includes ‘designing, developing, creating and/or underwriting’ which cover activities prior to the insurance product being approved for marketing and distribution, and on a continuing basis after such approval.

1A firm to which PROD 4 applies need not apply the guidance in RPPD for matters covered by PROD if the firm has complied with PROD 4 (see also PROD 4.4.2G). PROD 4.4 includes guidance based on the RPPD which firms subject to PROD 4 should apply.

1. (1)

   10The effect of PROD 1.4.11R is that, for an overseas non-investment insurance product, including where this is a legacy non-investment insurance product subject to PROD 4.6, a firm’s product approval process (and arrangements for ongoing monitoring) need only comply with:

   1. (a)

      the requirements in PROD 4.2 or PROD 4.3 as they stood on 30 September 2021, except for those provisions in PROD 1.4.11R(2); and

   2. (b)

      any subsequent changes made by an instrument other than the Non-Investment Insurance: Product Governance, Premium Finance, General Insurance Auto-renewal and Home and Motor Insurance Pricing Instrument 2021.

   PROD 1.4 and PROD 4 as it stood on 30 September 2021 can be accessed by using the timeline on the FCA Handbook website. Firms will need to consider any further changes to PROD after this date to consider if they apply in relation to overseas non-investment insurance products.

2. (2)

   A non-investment insurance product:

   1. (a)

      that will be or is available for distribution or marketing to customers who are habitually resident or, if applicable, where the state of the risk is, in the United Kingdom; or

   2. (b)

      where, for any policy issued under the product, the policyholder is habitually resident in or, if applicable, the state of the risk is in, the United Kingdom,

   will not be an overseas non-investment insurance product and the firm will need to meet all applicable requirements in PROD 4 including PROD 4.2.14AR in relation to providing fair value.

3. (3)

   A firm should also consider in relation to any overseas non-investment insurance product what is required to meet obligations under other rules in the FCA Handbook including, for example, the Principles and SYSC.

11 Firms are reminded that in PROD 4, in relation to non-investment insurance contracts, as the context requires, ‘customer’ includes:

1. (1)

   a person who is a policyholder, or a prospective policyholder, whether or not they make the arrangements preparatory to the conclusion of the contract of insurance; and

2. (2)

   a policy stakeholder including a leaseholder.

11For a non-investment insurance product that is or will be used to effect a multi-occupancy building insurance contract, when meeting the requirements under PROD 4, including in particular whether the product provides fair value for the purposes of PROD 4.2.14AR, a firm should consider the interests of:

1. (1)

   any policyholder making the arrangements preparatory to the conclusion of the contract of insurance;

2. (2)

   the freeholder and any other policyholder of the product; and

3. (3)

   leaseholders.