Acting honestly, fairly and professionally, exclusion of liability, conditions and warranties (ICOBS 2.5)

The Customer’s Best Interest Rule

A firm must act honestly, fairly and professionally in accordance with the best interests of its customer. This includes ensuring that their remuneration structures do not conflict with their duty to act in the best interests of the customer.

The rule also applies to wholesale brokers where they conclude a contract of insurance placed with them by a retail broker. They will need to act in accordance with the customer’s best interests rule and also in activities beyond the sale of an individual policy e.g., in regards to product oversight and governance, remuneration structures, etc.

Restriction of liability; conditions and warranties

Some technical rules and guidance on imposing restrictive terms in policy wordings:

A firm must not seek to exclude or restrict, or rely on any exclusion or restriction, of any duty or liability it may have to a customer or other policyholder, unless it is reasonable for it to do so and the duty or liability arises other than under the regulatory system.

Reliance on Others

A firm can be compliant with ICOBS rules by relying on third parties, provided it can show that it is compatible to do so with the rule and with Principles for
Business and in particular, with Principles 1 (integrity), 2 (skill, care and diligence) and 3 (management and control).

Any information that ICOBS rules require to be sent to the customer may be sent to another person on the instruction of a customer, provided the recipient is not connected with the firm.

There is no need for a firm to supply information to a customer where it has taken reasonable steps to establish that this has been done or will be supplied
by another person e.g., policy documents being sent by an insurer.

However, a firm cannot delegate its responsibility under the regulatory system to a third party. For example, an insurer may use an outsource firm to handle claims promptly, however, it will still retain its regulatory responsibility for ensuring this happens.