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IF1 2022 > Chapter 10 part 5 > Flashcards

Chapter 10 part 5 Flashcards

1
Q

The FCA requires the reporting of certain information for what reason?

A

so it can monitor a firm’s regulatory position

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2
Q

The focus of this monitoring relies upon the completion by firms of what?

A

Retail Mediation Activities Return (RMAR)

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3
Q

What does RMAR stand for?

A

Retail Mediation Activities Return (RMAR)

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4
Q

How is a Retail Mediation Activities Return (RMAR) submitted?

A

via an online system named GABRIEL

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5
Q

What is the purpose of RMAR?

A

So the FCA can collect information to supervise the firm

To help the FCA monitor capital adequacy and financial soundness

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6
Q

Other the the RMAR what do firms need to submit to the FCA?

A

Complaints return

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7
Q

How is a complains return submitted and when?

A

via an online form
within 30 days of their accounting reference date and
half year accounting reference date

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8
Q

What information is required for the Retail Mediation Activities Return (RMAR)?

A

Generally depending on the size of the firm:

  1. details of its profit and loss and balance sheet
  2. its assets and liabilities.
  3. regulatory capital as a buffer against difficult trading conditions
  4. professional indemnity insurance, including details of the insurer, policy number and excess
  5. confirmation that a firm continues to meet the Threshold Conditions
  6. a statement as to the number of individuals that give advice, the number of supervisors, those that have left and the number currently assessed as competent.
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9
Q

What must be disclosed in the return in relation to product sales?

A

• the types of policies sold:
• the volume of policies;
• areas where a firm is part of a chain of supply; and
• where a particular product type formed a significant part of the firm’s business

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10
Q

Firms must provide details of the type of product they have received complaints about and
the nature of the complaint, whether the complaint relates to what?

A

• advising, selling and arranging;
• information, sums/charges or product performance;
• general admin/customer service;
• arrears; or
• another consideration.

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11
Q

Firms must also provide details of how long it has taken them to handle their complaints What are the three categories of time they must disclose?

A

complaints were closed within three days,
within eight weeks
or took longer than eight weeks to close.

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12
Q

What does ICOBS stand for?

A

Insurance: Conduct of Business
Sourcebook (ICOBS)

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13
Q

What does Insurance: Conduct of Business Sourcebook (ICOBS) apply to?

A

the sales and administration process for general insurance

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14
Q

What type of insurance has the FCA introduced stricter rules governing the sale of?

A

guaranteed asset
protection (GAP) policies

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15
Q

How many chapters are in the ICOBS?

A

8

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16
Q

What activitys does the ICOBS apply to?

A

• insurance distribution activity;
• effecting and carrying out contracts of insurance (including claims management);
• managing the underwriting capacity of a Lloyd’s syndicate as a managing agent at Lloyd’s; and
• communicating or approving financial promotions.

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17
Q

Where there is a chain of intermediaries between the insurer and the customer - who does the ICOBS rules apply to?

A

the intermediary who is in contact with the customer

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18
Q

Different rules apply, depending on the category of customer. What are the two catagorys?

A

A consumer
A commercial customer

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19
Q

What category should you treat a customer whos capacity is unclear?

A

Consumer

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20
Q

What catagory should you treat a customer acting in the capacity of both a consumer and comercial customer?

A

a commercial customer unless the customer is acting mainly for the purposes unrelated to their trade or profession in relation to a
particular contract of insurance, in which case the customer is a consumer.

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21
Q

In general - what do is different between how a consumer and commercial customer is treated?

A

On the whole, consumers receive more detailed protection.

22
Q

A financial promotion is the phrase the FCA uses to describe what?

A

advertising of any kind intended to encourage a person to buy insurance or make an investment

23
Q

What must firms demonstrate when they have created a financial promotion?

A

that they have taken reasonable steps to ensure that promotions are clear, fair and not misleading.

24
Q

Explain the Inducements rule?

A

As a firm’s first duty is to its customers.
It has to take care that payments it receives, including commission or hospitality from insurers,

don’t lead (induce) it to favour one insurer above another.

25
Q

Explain the Record-keeping rule?

A

Records have to be kept to demonstrate compliance with the rules, particularly how sales
were made, the reason for any advice given, and why it meets the customer’s demands
and needs.

SODAN

26
Q

What does UTCCRs stand for?

A

Unfair Terms in Consumer
Contracts Regulations 1999 (UTCCRs)

27
Q

Explain the Exclusion of liability rule?

A

A firm cant pick and choose what dutys it is required to do. For example if they outsource the claims managment process they are still liable to ensure this is done promptly for the client.

28
Q

Explain the Distance communications rule?

A

Distance Marketing Directive applies rules to protect consumers who have entered into an insurance contract through a distance sale (e.g. over the telephone or through a website).

Esentially this give customers a cooling off period.

29
Q

Explain the Information about the firm, its services and remuneration rule?

A

Bascially whats in our SODAN

commision does not need to be disclosed unless a commercial customer asks

30
Q

Explain the Identifying client needs and advising rule?

A

An intermediary must provide a statement of the customer’s ‘demands and needs’ and give reasons for any advice given in relation to a policy.

31
Q

Explain the product information rule?

A

A firm must take reasonable steps to ensure a customer is given appropriate information about a policy
In goo time
and in a form the customer can understand

must also include things like, complains proceedure, cancelation terms, head office address, laws applicible, premium

32
Q

Firms distributing add-on GAP insurance in connection with the sale of a motor vehicle are required to do what?

A

• provide customers with prescribed information to help them shop around and be more engaged when making decisions about purchasing the product; and

• introduce a deferral period, which means GAP insurance cannot be introduced and sold on the same day.

33
Q

Except as specified in the rules, a GAP contract cannot be concluded by a firm until how many days have passed since the firm provided the information prescribed for this type of insurance?

A

at least two clear days

34
Q

Before a GAP contract is concluded, a firm must give the customer what information?

A

• the total premium of the GAP contract;
• significant features and benefits;
• significant and unusual exclusions or limitations, and cross references to the relevant
policy document provisions;
• duration of the policy;
• whether the GAP contract is optional or compulsory;
• when the GAP contract can be concluded by the firm; and
• the date the above information is provided to the customer.

35
Q

What policies do cancellation rules not apply to?

A

short-term policies or events (of less than one month’s duration)

36
Q

When else would cancellation rules not apply (other than STPs)?

A

where the terms of the contract have been met in full eg. total loss paid out

37
Q

What does ICOBS give customer in terms of a cooling of period for general insurance (not commercial customers)?

A

14 days for most general insurance contracts.

38
Q

Strictly speaking this is not a ‘cooling off’ period - why is this?

A

In certain circumstances, the rules allow insurers to charge for the services that they have provided when a policy is cancelled.

39
Q

What is the general principle of claims handling?

A

that an insurer is responsible for the handling of claims whether personally undertaken, delegated or outsourced

40
Q

The rules themselves relate to the fair and prompt handling of claims and the reasonable guidance that must be given.

A

Insurers must not unreasonably reject a claim and must settle promptly once the claim has been agreed.

41
Q

What must intermediaries do and not do in relation to claims handling?

A

Must - act with skill, care and due diligence

Must not - not put their own interests above those of their client

42
Q

Motor claims that occur abroad have separate prescriptive rules to ensure compliance with
the terms of EU motor insurance directives. These include the requirement for insurers to what?

A

appoint claims representatives in each Member State of the EU as required by the Fourth
EU Motor Insurance Directive

43
Q

What does IDD stand for?

A

Insurance Distribution Directive

44
Q

What is the aim of the IDD?

A

to make it easier for firms to trade across borders, strengthen policyholder protection and provide a level playing field. (EU applicable)

45
Q

The key provisions of the IDD Directive are:

A

Professionalism
• Commission disclosure (nature not ammount)
• Harmonisation
• New product governance requirements
• New duties applicable to insurance companies that are selling products through companies that are not authorised by the FCA.
• A requirement for all general insurance firms in the retail and small corporate market to provide customers with
- Insurance Product Information Document (similar to key fact documents)

46
Q

A new category of insurance settler called Ancillary Insurance Intermediaries. What does this connect?

A

travel insurance providers that don’t sell or introduce insurance as their main business, but still do so and therefore are subject to selling rules.

47
Q

The IDD introduces general principles that apply to all insurance distributors. These are overarching requirements, which apply in a similar way to the UK’s Principles for Businesses. In summary, these are:

A

• Distributors must act honestly, fairly and professionally in the best interests of their customers.

• Distributors must communicate in a way which is clear, fair and not misleading, including ensuring that marketing materials are clearly identifiable as such.

• Remuneration of a distributor or its employees, and performance management of employees, must not conflict with the duty to act in the customer’s best interests.

48
Q

The IDD definition of ‘remuneration’ includes what?

A

commission, fee, charge or other payment, including an economic benefit of any kind or any other financial advantage or incentive
offered or given in respect of the insurance distribution activity.

49
Q

Does general insurance come under money laundering regularions?

A

No but it does come under the Proceeds of Crime Act 2002 (POCA) which includes some aspects of money laundering.

50
Q

What is money laundering?

A

the process by which criminals and terrorists convert money that has been obtained illegally into legitimate funds.

51
Q

What are the three stages of money laundering?

A

Placement, Layering, Integration

IF1 2022 (19 decks)

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