PROD 1.4 Application of PROD 4

1 PROD 4 applies to:

1. (1)

   an insurance intermediary; and

2. (2)

   an insurer,

with respect to:

1. (3)

   manufacturing insurance products; 8

2. (3A)

   product governance and distribution arrangements for legacy non-investment insurance products (see PROD 4.6); and8

3. (4)

   distributing insurance products.

[Note: articles 1(2) and 25 of the IDD]

6A TP firm and a Gibraltar-based firm8 must also comply with the provisions in:

1. (1)

   PROD 1.4 and PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures data);8

2. (2)

   7PROD 1.4 and PROD 4 in relation to a pathway investment;8

3. (3)

   PROD 1.4, PROD 4 and (where applicable) PROD TP 1 in relation to non-investment insurance products (including legacy non-investment insurance products) that are, or will be, marketed or distributed, or there are policies under the product that remain in force, in the United Kingdom.8

5 PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures data) applies regardless of when the product was first manufactured.

1 PROD 4 does not apply in relation to an insurance product that is:8

1. (1)

   a contract of large risks where the insurance product meets the conditions in PROD 1.4.-3AR;11 or

2. (2)

   a reinsurance contract.

[Note: article 25(4) of the IDD]

11The conditions in PROD 1.4.3R(1) are that the insurance product is used exclusively for effecting contracts of large risks where there are no:

1. (1)

   policyholder(s); or

2. (2)

   (where relevant) policy stakeholders, including, in relation to a multi-occupancy building insurance contract, any leaseholder,

who in that context are natural persons acting for purposes outside of their trade, business or profession.

3 4Where a firm:

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)

   is not otherwise within the scope of the rules in PROD in relation to that manufacturing or distribution activity, then PROD 4, PROD 1.4.4R and PROD 1.4.10G12 apply7 with respect to that manufacturing or distribution activity.

   7

1. (1)

   12For the purposes of PROD 4, an insurance intermediary will be considered a manufacturer where an overall analysis of their activity shows that it has a decision-making role in designing and developing an insurance product for the market.

2. (2)

   For the purposes of (1), a decision-making role must be assumed, in particular, where an insurance intermediary autonomously determines the essential features and main elements of an insurance product, including its coverage, price, costs, risk, target market and compensation and guarantee rights, which are not substantially modified by the insurance undertaking providing coverage for the insurance product.

3. (3)

   Personalisation of and adaptation of an existing insurance product in the context of insurance distribution activities for an individual customer, as well as the design of tailor-made contracts at the request of a single customer, will not be considered manufacturing.

[Note: article 3 of the IDD POG Regulation]

1 PROD 4 applies to a firm with respect to activities carried on from an establishment maintained by it, or its appointed representative:8

1. (1)

   (for all insurance products and pathway investments) in the United Kingdom; and8

2. (2)

   (in addition, for non-investment insurance products) overseas, in relation to an insurance product that is, or will be, marketed or distributed, or there are policies under the product that remain in force, in the United Kingdom8.

[Note: in respect of (1),8 article 7(2) of the IDD]

10 PROD 4 applies in relation to an overseas non-investment insurance product with the following modifications:

1. (1)

   The changes made to PROD 4.2 and PROD 4.3 in Annex E of the Non-Investment Insurance: Product Governance, Premium Finance, General Insurance Auto-renewal and Home and Motor Insurance Pricing Instrument 2021 do not apply, unless otherwise specified in (2).

2. (2)

   The following rules and guidance in Annex E of the Non-Investment Insurance: Product Governance, Premium Finance, General Insurance Auto-renewal and Home and Motor Insurance Pricing Instrument 2021 continue to apply:

   1. (a)

      PROD 4.2.1AG;

   2. (b)

      PROD 4.2.21AG;

   3. (c)

      PROD 4.2.34AG; and

   4. (d)

      PROD 4.2.36BR.

[Note: the Non-Investment Insurance: Product Governance, Premium Finance, General Insurance Auto-renewal and Home and Motor Insurance Pricing Instrument 2021 can be found at [https://www.handbook.fca.org.uk/instrument/2021/FCA_2021_19.pdf]]