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FSA/PN/132/2007
18 December 2007

The Financial Services Authority (FSA) today published its new Insurance Conduct of Business sourcebook (ICOBS) which sets out the standards and requirements for general insurance firms on how they deal with their customers.

Dan Waters, FSA Director of Retail Policy and Themes, said:

"ICOB is another important achievement in more principles-based regulation. We have greatly simplified our rules in areas of general insurance markets where outcomes for consumers are generally good. In a few areas, however, 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."

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 firms the FSA will require the same standards of conduct and essential consumer safeguards remain.

The new rulebook 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.

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, this includes increasing the existing cancellation period of 14 days to 30 days and a new rule requiring firms to establish that customers would be eligible to claim benefits.

The new general insurance regime will come into effect on 6 January 2008 with firms being allowed a six month transitional period for implementation. All firms are expected to meet the required standards by 6 July 2008.

Notes for editors

1. Policy Statement 07/24 'Insurance Selling and administration' sets out the final ICOBS Rules and feeds back on responses received to Consultation Paper 07/11: 'Proposed amendments to the Insurance: Conduct of Business sourcebook' published in June 2007.
2. The ICOBS rules relating to PPI are in addition to supervisory work and thematic work being carried out by the FSA to ensure firms meet high-level standards in the sale of PPI. This includes treating customers fairly at the point of sale and ensuring products are appropriately designed to meet the needs of the target market.
3. Following consultation, the Treasury has confirmed its proposal to add the sale of travel insurance sold with a holiday or related travel to the FSA scope. At the moment the FSA does not regulate the sale of connected travel insurance, although insurers as product providers and intermediaries selling travel insurance on a standalone basis are already subject to regulation. The FSA has today published Consultation Paper 07/22 with proposals for regulating connected travel insurance. However the results of the consultation on connected travel insurance will not affect the ICOBS rules published today.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.