Topic 19: Protection Advice Flashcards
What is a Pure Protection Product?
Provides protection against one or more perils but does not contain an investment element. Examples include term assurance, IPI, CIC, ASU and MPPI. The rules for advice and sales are contained in the Insurance Conduct of Business Sourcebook (ICOBS).
What is the Insurance Conduct of Business Sourcebook (ICOBS)?
The Financial Conduct Authority (FCA) sourcebook containing the rules for advice and sales on pure protection products. Buildings and contents insurance policies are also regulated under ICOBS. A firm must be authorised to offer insurance advice, and those individuals involved must have the appropriate knowledge and abilities.
What is Suitability?
Under ICOBS, the adviser/firm must take reasonable care to ensure that advice given is suitable for the customer, based on their identified demands and needs and other relevant information, including details of existing cover. An adviser’s recommendations should be flexible enough to copy with changes in the future.
What is Disclosure?
Revealing relevant facts at the right time, especially before entering into the insurance contract.
What is Misrepresentation?
A failure to disclose relevant facts. The duty to take reasonable care not to make a misrepresentation is known as fair representation. Remedies are available to the insurer for deliberate, reckless or careless misrepresentation, but not for honest and reasonable misrepresentation.
What is Illustration?
Information setting out the key features of the specific protection plan for the customer, usually in the form of a key features document (KFD) or a policy document depending on the product.
What is a Cooling off period?
A short period under ICOBS 7 during which the customer can cancel a protection policy without penalty. This is generally 30 days for life assurance, CIC or IPI, and 14 days for home insurance.
What is Statement of demands and needs?
Under ICOBS 5, before an insurance contract is put in place, the insurer must specify and communicate the customer’s demands and needs based on information from the customer.
What is the Key Features Document (KFD)?
Also known as an illustration, normally
issued when the recommendations are presented to the customer. It sets out
the key features of the specific plan and may be in the form of a brochure. For a pure protection contract, a policy summary can be used instead to serve a similar purpose.
What is the Acceptance letter?
Issued after the application is underwritten, confirming the exact terms and conditions under which the insurance is offered. These terms may differ from those specified on the KFD, eg if health issues are discovered during the underwriting process that lead to an increased premium.
What is the Cancellation notice?
sent to the customer around the same time as the acceptance letter. It sets out their rights should they decide to cancel the plan.
What is the Policy document?
Also known as an illustration, confirming the details of the plan, the cover provided and the terms under which the cover is provided. It serves as a certificate of insurance and the client should keep it safe.
What is honest and reasonable misrepresentation?
The consumer took reasonable care but made an honest mistake
What is deliberate or reckless misrepresentation?
- deliberate misrepresentation, where the consumer knew they should
disclose information but did not; - reckless misrepresentation, where the consumer acted without care or
regard for the truth of an answer;
What is careless misrepresentation?
careless misrepresentation, where the consumer made a statement they
believed to be true but without sufficient care to check the facts.
What is ICOB 5: Statement of demands and needs?
ICOBS 5 states that before an insurance contract is put in place, the insurer
must specify the customer’s demands and needs based on information from
the customer (FCA, no date).
What is ICOB 6: Product information?
ICOBS 6 states that a firm must take reasonable steps to ensure a customer
is given appropriate information about a policy so that they can make an informed choice about the arrangements proposed. Information that must be
provided pre-contract includes the term, the definition of each benefit and option, means of payment and duration of premiums, tax arrangements of
benefits, cancellation information, and complaints-handling procedures.
Name 7 issues to consider in assessing protection needs?
- Requirements
in the event of
death - Requirements
in the event of
illness/disability - Requirements if
unable to work - Capital needs and
income needs - Respective needs
of partners in a
relationship - Whether the
applicant has a
partner and/or
dependants - Current and likely
future needs
