Revised rules for selling general insurance products
We have published our new Insurance: Conduct of Business sourcebook (ICOBS). This updates the standards and requirements on how you deal with general insurance customers.
We have simplified our rules in areas where outcomes for consumers are generally good. In a few areas, like payment protection insurance (PPI), we have responded to continuing market failures and consumer detriment by introducing carefully targeted rules to help ensure that consumers achieve a fair deal.
The new general insurance regime will come into effect on 6 January 2008. There will be a six month transitional period and we therefore expect you to meet the required standards by 6 July 2008.
Below is a summary of the changes. For a full explanation, please see our Policy Statement (PS 07/24), which also gives feedback on the responses we received to our Consultation Paper and the decisions we have made in the light of those responses.
Summary of changes
'Other' general insurance products
For products such as household, motor, pet and private medical insurance where markets are generally working well the emphasis is on high-level rules, except where detailed provisions are required by EU Directives or are the only practicable way to protect consumers. While this will mean more flexibility for you, we will require the same standards of conduct and essential consumer safeguards remain. For example, we no longer require firms to disclose information using a policy summary in a specified format. Instead there is a new high-level product disclosure rule requiring you to provide customers with appropriate information in good time, allowing them to make an informed decision.
Protection products
The new ICOBS targets additional rules at areas of consumer detriment, in particular improving selling practices for protection products (critical illness, income protection, term assurance and PPI). Some of these new measures will apply to all protection products including a new standard to ensure better oral disclosure of key information about policies to help consumers make informed purchasing decisions.
Payment protection insurance
There will be a stronger framework of rules to back the FSA's drive to improve selling standards in PPI markets. As well as oral disclosure, we have increased the existing cancellation period of 14 days to 30 days for all PPI policies and a new rule requiring firms to take reasonable steps to establish that customers would be eligible to claim under the terms of the protection offered.
At-a-glance guide
See our at-a-glance guide if you want a printable summary of the main changes in ICOBS. We have one page on the rules for all insurance sales, and one page on protection products.
At-a-glance guide [PDF]
More detail on the changes
If your firm sells only general insurance products
- You will not need to make any changes if you are already complying with the current ICOB rules and the Principles for Businesses.
- You will be able to make changes at your own pace if you wish to take advantage of the flexibility permitted by our move to a more principles-based approach and removal of detailed rules. If you decide to make such changes, you will need to consider your sales processes against the new high-level standards.
If your firms sells PPI and pure protection contracts (term, income protection and critical illness insurance) you will have to:
- Tell your customers in non-advised sales that they are solely responsible for deciding whether the policy is suitable for their needs.
- Tell your customers orally about the main characteristics of a policy (significant benefits, limitations and exclusions, duration and price) during sales conversations before the customer makes a decision on whether to buy the cover.
If your firm sells PPI you will also have to amend your sales process to:
- Take reasonable steps to check that customers are eligible to claim under the policy before you sell the insurance, and tell customers if they would not be able to claim under one or more elements of a policy.
- Remind customers of their right to cancel the policy within 30 days and that they should check the policy documentation within the cancellation period.
- For single premium PPI, tell customers during any sales discussion of the monthly and total price of the cover and that they will pay interest on the premium.
There are tables in the Policy Statement to help you better understand what you need to do to meet the ICOBS requirements.
We also have frequently asked questions on ICOBs.
