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In its Policy Statement (PS15/22) following the publication of the General Insurance Add-ons Market Study – Proposed Remedies consultation document, the Financial Conduct Authority (FCA) expressed some concerns about firms’ understanding of the application of its guidance for appropriate and timely information in relation to selling add-on products. Also there was concern that firms could do more, when selling add-ons, to provide the information in a way that would help customers to make an informed decision.
Arc Legal supports the FCA’s focus on improving customer understanding of add-ons. As part of our commitment, we work with clients to offer product training and marketing materials, which will help ensure that their customers receive the appropriate information and the key product benefits of their legal expenses cover.
While the regulator has not provided specific guidance on how to improve add-on communication, The Insurance: Conduct of Business sourcebook (ICOBS) indicates the principles behind ensuring the information provided helps consumers make informed decisions about the products they purchase.
The ICOBS handbook states that “A firm must take reasonable steps to ensure a customer is given appropriate information about a policy in good time and in a comprehensible form so that the customer can make an informed decision about the arrangements proposed.”
Defining what is appropriate and timely will, like a lot of FCA guidance, depend on a number of specific factors relating to your business. This subjective approach could mean that the appropriate level of information requirements for a business customer is unlikely to be as onerous as those for a private individual.
In section 6.1.7 of the ICOBS it indicates that the definition of an appropriate level of information required will vary according to matters such as the policy’s typical customer knowledge, experience and ability, whether the policy is purchased in connection with other goods and services, the policy’s terms covering areas such as benefits, exclusions, limitations, conditions and duration and its overall complexity. There are also factors such as the level of information required based on the distance communication rules where less information can be given during certain kinds of telephone sales, compared to written sales materials and whether and when the information has been provided to the customer previously.
The training that we provide to our clients allows them to clearly understand key policy exclusions and conditions that could ultimately impact on the customer’s purchasing decision. This enables a transparent sales process and gives the customer ‘appropriate’ information on the products they are buying.
In relation to determining what is timely, section 6.1.8 of the handbook states that a firm should consider the importance of the information to the customer’s decision-making process and the point at which the information may be most useful. Distance communication timing requirements are also relevant where rules enable certain information to be provided post-conclusion in telephone and certain other sales.
The handbook guidance on the provision of information on add-ons to customers becomes effective from 1 April 2016. For more information and for details on the training and fulfilment materials we can provide, please contact your account manager.