Insurance sales process – ICOB jargon buster
ICOB is the FSA’s insurance conduct of business sourcebook which contains all the sales process rules
A non-investment insurance contract is a general insurance contract or a pure protection contract (but not a long-term care insurance contract, or an insurance contract which involves any investment element)
A retail customer is a person who is acting for purposes which are outside his trade or profession
A commercial customer is a company, or a private individual buying insurance in a professional capacity
A significant exclusion or limitation is one which would tend to influence the purchase decision of the consumer
An unusual exclusion or limitation is one which you would not expect to find in other polices of a similar type
Conclusion of the contract is when an offer to be bound by the insurance contract has been accepted by the customer and the insurer. The stages required before this point is reached will vary depending on the type of insurance, and the practices of the insurer in question.
Durable medium means paper, or any other medium which allows the customer to store the information and access it when needed for future reference. For example, CD-ROMS, the hard-drive of the customer’s computer for emailed documents…etc
When considering what providing information ‘in good time’ means in a given situation, you should consider the importance of the information to the customer in helping them to decide whether a policy meets their needs, and the point in the sales process at which the information would be most useful.
Client money is any money the adviser holds (e.g. in a bank account or in cash) on behalf of customers. Usually, this involves funds that are sent via your firm from the customer to the insurer, or vice versa. If you are not authorised to hold client money, you can forward cheques from customers made payable to the insurer, e.g. fees to carry out mid-term changes. But you can’t collect cash, or hold client money in a bank account. Money that is due to your firm, e.g. fees you charge the customer for your service, does not count as client money.
The directive-required information is information that must be sent to customers because of various EU Directives. It can be included within the policy summary, or as a standalone document. The list of information is contained in a table in ICOB 5.5.20R, and the content of the list varies depending on whether the policy being bought by the customer is a GI contract, a pure protection contract, a distance contract sold by a means other than telephone, or one sold over the phone to a customer who has consented to receiving limited oral information. You don’t need to worry about the list – it’s the insurer’s responsibility. All you need to do is pass it onto the customer.
Terms relating to the EU’s Distance Marketing Directive
A distance contract is sold through a systematic distance selling operation. This means you provide special facilities for the customer to complete the whole sales process without any face-to-face contact with you (the intermediary). For example, you might encourage customers to buy through a call centre, or from your website, or via a direct-offer-style postal operation. If you do most of your business face-to-face, and only the occasional sale involves no such contact, you will not be caught by the special rules applying to distance contracts. We think that only a small minority of firms will be affected by the ‘distance contract’ definition.
An example of a distance non-investment mediation contract is an ongoing service contract, which is arranged at a distance, and which probably involves some kind of retainer fee. For example a contract to provide ongoing advice on the customer’s insurance needs, which has a life of its own beyond arranging a particular insurance contract. It does not apply to the usual situation where an intermediary sells an insurance contract on a one-off basis and may later be involved in renewals and handling claims. There is a special chapter of ICOB (Chapter 8) devoted to rules around distance non-investment mediation contracts. The FSA comments that it expects this chapter to be irrelevant for most UK insurance intermediaries.
AP15/Dec 06/V2