Quarterly Consultation No.1
The ABI’s response to CP 13/3
The Association of British Insurers (ABI) is the voice of the insurance and investment
industry. Its members constitute over 90 per cent of the insurance market in the UK
and 20 per cent across the EU. Employing more than 300,000 people in the UK alone,
it is an important contributor to the UK economy and manages investments of £1.5
trillion, over 20% of the UK’s total net worth.
The ABI welcomes the opportunity to respond to the FSA’s June 2013 quarterly
consultation.
Chapter 2 – The Consumer Insurance (Disclosure and Representations) Act 2012
Q2.1) Do you agree with the changes to ICOBS 2, ICOBS 5 and ICOBS 8 to align
with Act?
In general, yes, as the FCA does not intend to add anything to current requirements
and we welcome the alignment of ICOBS rules with the Act. We do, however, have the
following suggestions regarding changes to wording of the rules:
1. The proposed change to the heading is from 'Disclosure of material facts' to
‘Disclosure’ - we suggest this is extended to 'Disclosure and misrepresentation',
in light of terms referred to within this item and in the Act.
2. We recognise that the definition of “consumer” in the Act is different from the FCA’s
definition of ‘consumer’, and indeed the definitions found in EU legislation. This
creates a complex situation for firms, consumers and regulatory bodies, particularly
where certain commercial insurance contracts are concerned. For example, a
policyholder who insures a van or other commercial vehicle purely for social
domestic & pleasure purposes is a consumer for these purposes; however the
application of the amended rules in respect of insurance for “buy to let” properties
does not appear as straightforward. We suggest the FCA should work with the
Government to move towards a common definition of consumer for all regulations
impacting upon financial services. The FCA may be aware that the Government is
introducing a Consumer Rights Bill that uses the same definition of ‘consumer’ as
found under the Act. We also urge the FCA to provide guidance on the treatment of
certain commercial insurance policies and we would be keen to work with the FCA
on that.
3. We are concerned that the proposed new ICOBS 5.1.4 (3) G could be interpreted
too literally and be understood to suggest that firms should explain to customers
the differences between carelessly, recklessly or deliberately making a
misrepresentation. This could cause confusion for customers, so we propose below
an alternative wording which would have the same effect while making the position
clearer for firms and customers:
“A firm should bear in mind the restriction on rejecting claims (ICOBS
8.1.1R(3)). Ways of ensuring a customer knows what he must disclose
include:…
(3) notifying the customer of the responsibility of consumers to take
reasonable care not to make a misrepresentation and that there may be
consequences if a consumer makes a misrepresentation for which the
insurer has a remedy under the Consumer Insurance (Disclosure and
Representations) Act 2012; and…”
4. With regards to ICOBS 8.1.2 R subparagraph (2), we suggest it would be clearer if
the drafting mirrored the intention of the Act without referencing misrepresentations
and qualifying misrepresentations. We propose an alternative wording below:
(2) In relation to contracts entered into or variations agreed on or after 6
April 2013, if the claim has not been determined in a manner consistent
with the provisions of the Consumer Insurance (Disclosure and
Representations) Act 2012.
5. Finally, we suggest that the definition of qualifying misrepresentation as found in
the glossary be amended to include more information. For example:
A misrepresentation for which an insurer is entitled to a remedy against
the consumer, such as cancelling their policy and not paying any claims,
or only paying a proportion of the claim. The remedies are specified in
Schedule 1 of the Consumer Insurance (Disclosure and Representations)
Act 2012.
Q2.2) Do you have any comments in relation to our cost benefit analysis?
We agree with the FCA position.
Chapter 3 - Mortgage Market Review: Perimeter Guidance, Professional
Standards and Pipeline
Q3.1) Do you have any comments on the proposed amendments?
The ABI is very surprised that this chapter includes changes to the Perimeter Guidance
for advice for general insurance, despite its title focusing on the mortgage market
review. We are disappointed that the FCA did not highlight these changes in their
overview of the Quarterly CP - even the introduction to Chapter 3 refers only to
mortgages and home finance firms. There is no analysis of the potential implications of
the proposed changes for general insurance providers and intermediaries, so we are
concerned that they may bring some activities within the remit of regulated advice. We
urge the FCA to provide reassurance that it has given due consideration to the impact
of these proposed amendments on general insurance markets.
ABI – 5 August 2013
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