Feedback on the Consultation Paper on the Code of Conduct for Authorised Insurance Representatives (2017-03-07)

Summary

This is the Guernsey Financial Services Commission's feedback paper following its December 2016 consultation on revisions to the Code of Conduct for Authorised Insurance Representatives. It summarises the ten responses received, explains which consultation proposals were amended or dropped, and attaches the final marked-up Code as an Annex. The revised Code replaces the previous version (effective from 1 January 2015) and comes into force on 1 April 2017.

• Switching representative: The proposed customer right to switch authorised insurance representative within a firm was removed, as this is a matter for the licensee, not the representative.
• Disclosure of authorisation scope: Representatives no longer need to disclose every class/product they are authorised on, but must still disclose the range, scope and limitations of insurers/products they can advise on or arrange; licensees remain responsible for ensuring representatives only advise within their authorisation.
• Bundled policies: A guidance note was added clarifying that where an insurance policy is bundled into a non-insurance product, its features, benefits and limitations must still be explained.
• Compliance with licensee procedures: A new requirement (moved to section 3.5) makes clear representatives must comply with their licensee's policies and procedures on timescales and service standards.
• Prior year premium disclosure: Personal lines and smaller commercial customers must be shown their prior year premium at renewal; larger, sophisticated commercial customers are exempt, and a knowledgeable customer may agree to opt out of this disclosure.
• Commission disclosure removed: The requirement to disclose commission on long term pure protection products was deleted, to avoid disadvantaging local brokers versus online UK providers.
• Add-on policy transition: On first renewal after the Code takes effect, customers with add-on policies must positively choose to continue each add-on policy; future renewals may then offer opt-in/opt-out.

The final Code applies to all Authorised Insurance Representatives (subject to any written derogation granted by the Commission) and imposes related oversight duties on their licensees under the Insurance Intermediaries (Conduct of Business) Rules 2014, including training and competency schemes, conflicts of interest policies, and systems to ensure representatives comply with the Code.

Key obligations

• Authorised insurance representatives must disclose to customers the range, scope and any limitations of the insurers and/or products they can advise on or arrange.
• Authorised insurance representatives must comply with their licensee's policies and procedures on timescales and service standards.
• Authorised insurance representatives must explain the features, benefits and limitations of an insurance policy that forms part of another, non-insurance product.
• Licensees/representatives must include prior year premium on personal lines (and non-sophisticated commercial) renewal documents, unless a knowledgeable customer has agreed otherwise.
• Long term pure protection product representatives must comply with the additional requirements in section 9.1, including assessing legislative and taxation knowledge, not advising conversion/lapse/cancellation/surrender unless in the customer's best interest, and confirming in writing when a customer requests execution-only arrangement without advice.
• Following introduction of the Code, at first renewal customers with add-on policies must positively choose to continue each add-on policy.
• Licensees must make any necessary software/system changes to display prior year premium as soon as reasonably possible and by no later than the first anniversary of the Code's introduction.
• Representatives must not use the term 'authorised insurance representative' unless authorised to do so by their licensee.
• Licensees must maintain training and competency schemes, conflicts of interest policies, and systems of control to ensure representatives comply with the Code, per the Insurance Intermediaries (Conduct of Business) Rules 2014.

Applies to

Authorised Insurance Representatives, insurance intermediary licensees

Deadlines

• 1 April 2017: The revised Code of Conduct for Authorised Insurance Representatives comes into operation, revoking the prior Code effective from 1 January 2015.
• first anniversary of the introduction of this code: Deadline by which licensees must have made any necessary changes to display prior year premium to customers upon renewal.
• upon first renewal following introduction of the Code: Customers with add-on policies must positively choose to continue each add-on policy at their first renewal after the Code takes effect.