UK: Insurance Law - ICOB – Are You Ready?

Last Updated: 2 July 2004
Article by Stephen Browning

The Authorisation Requirement

As all "primary" insurance intermediaries and direct-selling insurers should be aware, firms which wish to undertake regulated activities in respect of the sale of general insurance after 14 January 2005 will need to be authorised by the FSA to do so. The extent to which the "secondary market" is aware of this fact and of its implications has a huge question mark against it – particularly given the extremely broad interpretation of the law concerning the boundaries of regulation which the FSA has adopted – but that is another story!

Regulated Activities

The regulated activities for which authorisation will be required include:

  • dealing in general insurance contracts as agent;
  • arranging (ie bringing about) deals in general insurance contracts;
  • making arrangements with a view to transactions in general insurance contracts;
  • assisting in the administration and performance of general insurance contracts;
  • advising on general insurance contracts;
  • agreeing to carry on any of the above activities.

High-Level And Prudential Rules

Any person who carries on any of these activities in the United Kingdom by way of business after 14 January 2005 must either be exempt from the need for authorisation (for example, if the firm is an "appointed representative" of an authorised insurer or an authorised intermediary) or authorised by the FSA. Authorised firms will be required to comply in full with the FSA’s sourcebooks concerning Principles for Businesses (PRIN), Senior Management Arrangements, Systems and Controls (SYSC) and Threshold Conditions (COND). Individuals within authorised firms performing "significant influence functions" will need to be approved by the FSA as fit and proper to do so and firms will therefore be subject also to the FSA’s Statements of Principle and Code of Practice for Approved Persons (APER) and Fit and Proper Test for Approved Persons (FIT) sourcebooks. And authorised firms will be subject to regulations concerning financial safeguards, including requirements to maintain professional indemnity insurance and a prescribed minimum level of financial resources and to be a member of the Financial Services Compensation Scheme (rules providing for segregation of client money from monies belonging to the firm or to insurers for which the firm acts will also apply, although for a transitional 12 month period firms will be able to "co-mingle" insurers’ money and client money pending further review by the FSA of the practical implications of the segregation rules).

Conduct Of Business Rules

Following consultation during the course of last year the FSA published in January its final conduct business rules concerning the selling and administration of general insurance. The rules are to be contained in a new sourcebook within the FSA Handbook, entitled "Insurance: Conduct of Business" (ICOB).


The application of the rules depends upon whether a firm is dealing with a "retail customer" or a "commercial customer". A retail customer is defined as someone acting outside their trade, business or profession; anyone else is a commercial customer. (Where it is not clear whether a customer is retail or commercial, a firm must comply with the commercial customer rules).

The rules apply to intermediaries (including direct-selling insurers) and to insurers in their role as product providers. They apply only to intermediaries in contact with the customer and not those elsewhere in a distribution chain (although intermediaries elsewhere in a chain are likely to carry on regulated activities and therefore to require authorisation). They do not apply in respect of reinsurance contracts or so-called "large risks" (including marine and aviation, certain credit and suretyship risks and certain other risks where the policyholder exceeds certain thresholds relating to size) where the risk is located outside the EEA, and they apply only in a limited way to transactions involving commercial customers and large risks where the risk is located within the EEA.

General Rules (Icob 2)

ICOB 2 contains a variety of rules dealing principally with:

  • communications (including a requirement on firms to communicate information to customers in a way that is clear, fair and not misleading);
  • unfair inducements;
  • reliance on others;
  • exclusion of liability;
  • application to electronic media;
  • general provisions concerning "distance contracts";
  • recordkeeping.

Financial Promotion (Icob 3)

ICOB 3 concerns financial promotions (such as product brochures, advertising websites etc). The central requirement is to ensure that the financial promotion is clear, fair and not misleading. ICOB 3 contains guidance on what this means, plus (amongst other things) a requirement for a firm to carry out a "confirmation of compliance" exercise (by an individual with appropriate expertise) before a financial promotion is made. ICOB 3 does not apply in respect of financial promotions to commercial customers.

Advising And Selling Standards (Icob 4)

ICOB 4 contains rules dealing with:

  • status disclosure (information which intermediaries must provide about themselves and their fees, mainly at the pre-contract stage although for telephone sales the rules are slightly different);
  • advising and selling (including suitability rules applying when a firm makes a personal recommendation to buy a specific policy which require the firm to assess the customer’s demands and needs through obtaining and having regard to all relevant information about the customer, and rules requiring that a customer be provided with a "statement of demands and needs" confirming whether or not a contract has been personally recommended and containing the reasons for the personal recommendation if one has been made. Insurers who make a personal recommendation to a commercial customer do not need to provide a demands and needs statement if the customer gives its informed consent not to have one);
  • excessive charges (covering intermediaries’ fees but not premiums);
  • commission disclosure (requiring intermediaries dealing with commercial customers – but not retail customers – to disclose upon request their commission and any commission received by their affiliates);
  • unsolicited services (concerning tacit renewal arrangements).

Product Disclosure (Icob 5)

In general terms, insurers (in their role as product providers) must produce product disclosure information and intermediaries (including direct-selling insurers) must provide that information to their customers.

Product disclosure information required for retail customers encompasses (i) a policy summary (or key features document) containing information on various matters (including type of insurance and cover, significant features and benefits and significant and unusual exclusions); (ii) price information; (iii) certain information required by relevant European directives; (iv) information about cancellation; (v) information about the claims handling process; (vi) the policy document; and (vii) renewal information.

For commercial customers the requirements are rather less. Intermediaries must provide commercial customers only with (i) certain directive – required information, information on premium and fees and other information sufficient to enable the customer to make an informed decision about the contract pre-sale; (ii) the policy document "promptly" after conclusion of the contract; and (iii) renewal terms (or notification that the insurer does not intend to invite renewal) "in good time" before the policy expires.

ICOB 5 also contains rules concerning group policies sold to commercial customers, requiring that only the legal holder of the policy be provided with a policy summary and the policy document. The intermediary concerned must however advise the legal holder of the policy to provide a copy of the policy summary to each policyholder member and inform them that a copy of the policy document is available on request.

Cancellation (Icob 6)

ICOB 6 applies only to insurers and their retail customers. It requires retail customers to be given a cancellation period of 14 days for general insurance contracts, starting from the day the contract is made or, if later, the day the customer receives the full policy documentation.

Claims Handling (Icob 7)

Insurers are responsible under ICOB 7 for the prompt and fair handling of claims (if claims handling is outsourced, the insurer retains responsibility for compliance with the rules). For claims made by retail customers, insurers must:

  • handle claims fairly and promptly;
  • give the customer reasonable guidance to help him make the claim;
  • respond promptly to notification of a claim with information on how the claim will be handled;
  • keep the customer reasonably informed about the progress of his claim;
  • explain why a claim is being refused or why the amount offered was different from the amount claimed;
  • settle the claim promptly once settlement terms have been agreed. For claims made by commercial customers, insurers must:
  • handle claims fairly and promptly;
  • keep the customer reasonably informed about the progress of the claim;
  • settle the claim promptly once settlement terms have been agreed.

Some of the provisions of the ABI Statement of General Insurance Practice have been incorporated into ICOB 7, preventing insurers from refusing liability to retail customers on the grounds of:

  • non-disclosure of a material fact that the customer could not reasonably be expected to disclose;
  • misrepresentation, unless it was a deliberate or negligent misrepresentation of a material fact; or
  • breach of a warranty or condition, where the circumstances of the loss are unconnected to the breach (unless fraud is involved). 

As far as intermediaries are concerned, ICOB 7 requires them to act with due care and skill when acting for a customer in relation to a claim. They are also required to avoid conflicts of interest when acting for a customer in relation to a claim and, if acting for the insurer in relation to a claim on a policy which the intermediary sold to the customer, the intermediary must inform the customer that he is acting on behalf of the insurer and not the customer at the point of the claim.


The stage is set and the clock is ticking. Insurers and intermediaries alike should now be advancing their preparations (including undertaking necessary enhancements to their systems and controls) for the new sale of general insurance regime which is now only a matter of months away. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.