Guidance Note #11: Market Conduct for Domestic Insurance Business – Insurers and Intermediaries (March 2005)

Summary

This is Guidance Note #11 from the Bermuda Monetary Authority's Insurance Department, setting out market conduct expectations for insurers and intermediaries writing domestic insurance business in or from Bermuda. It applies only to domestic business as defined under the Insurance Act 1978, not to business that falls outside that definition, and covers integrity, disclosure, complaints handling, advertising and oversight of authorized intermediaries.

• Conduct standards: Insurers and intermediaries must act with high standards of integrity and fair dealing, avoid misleading or deceptive acts, manage conflicts of interest, and act with due skill, care and diligence.
• Customer information and disclosure: Must gather appropriate information about customers before advising or exercising discretion, keep documentary evidence, and give timely, clear, comprehensive disclosure of benefits, risks, obligations, commission arrangements and complaints procedures.
• Customer assets: Must properly safeguard, segregate and identify any customer assets they control.
• Complaints handling: Must maintain effective, well disclosed complaints procedures and keep records of complaints, responses and actions taken.
• Compliance officer: Each insurer or intermediary with domestic business is expected to appoint a Market Conduct Compliance Officer who reports at least annually to the Board on compliance with the Guidance.
• Advertising rules: Advertisements must not be untrue, misleading or deceptively designed, must be clearly recognizable as advertisements, and must properly qualify statements on taxation benefits and past performance.
• Authorized intermediaries: Insurers must ensure authorized intermediaries are registered with the Authority, disclose the insurer represented and products authorized, complete signed terms of business agreements, and monitor intermediary performance and complaints.
• Policy statement and training: Insurers and intermediaries must have a written policy on fair customer treatment and Guidance compliance, communicate it to staff, and provide training and systems to ensure adherence.
• Systems and controls: Must establish and maintain documented systems and controls for ongoing monitoring of compliance with the Guidance, which the Authority may review during on-site inspections.

Where full compliance is not possible, the entity must give the Authority full details and reasons and obtain a written exemption. Insurers must come into immediate compliance with changes stemming from the Insurance Amendment Act 2004, while general compliance with the rest of the Guidance was expected by 31 December 2005 or a later date agreed with the Authority.

Key obligations

• Insurers and intermediaries writing domestic business must act with integrity, fair dealing, and due skill, care and diligence in all customer dealings.
• Must obtain appropriate customer information before providing advice or exercising discretion, and retain documentary evidence of this.
• Must provide clear, timely, comprehensive disclosure to customers of benefits, risks, contractual obligations, commission arrangements, and complaints procedures.
• Must safeguard and segregate any customer assets under their control.
• Must maintain documented, accessible complaints handling procedures and keep records of complaints and resolutions.
• Should appoint a Market Conduct Compliance Officer who reports at least annually to the Board on compliance with the Guidance.
• Advertisements must not be misleading, must be clearly identifiable as advertisements, and must properly qualify statements about tax benefits and past performance.
• Insurers must ensure authorized intermediaries are registered with the Authority and disclose the insurer and authorized products to prospective customers.
• Insurers must execute signed terms of business agreements with authorized intermediaries and monitor their performance and complaints.
• Intermediaries must disclose to customers whether they are independent or associated with particular insurers and whether they can conclude contracts on the insurer's behalf.
• Must have a written policy statement on fair customer treatment and provide staff training to ensure compliance.
• Must establish and maintain documented systems and controls for ongoing monitoring of compliance with the Guidance.
• Entities unable to comply with any part of the Guidance must notify the Authority with reasons and obtain a written exemption.
• Insurers must achieve immediate compliance with market conduct changes arising from the Insurance Amendment Act 2004, and general compliance with the Guidance by 31 December 2005 or a later agreed date.

Applies to

insurers licensed to write domestic business in or from Bermuda, intermediaries (insurance agents, insurance brokers, insurance salesmen), authorized intermediaries

Deadlines

• 31st December 2005: Deadline for insurers and intermediaries to come into compliance with the Guidance generally (other than Insurance Amendment Act 2004 related changes), unless a later date is agreed with the Authority.
• immediate: Insurers must take immediate steps to comply with changes stemming from the Insurance Amendment Act 2004.
• at least annually: Market Conduct Compliance Officer must report to the Board (or a sub-committee) on compliance with the Guidance.