Financial promotions in ICOBS
This guide is based on UK law. It was last updated on
1st April 2008.
The provisions on financial promotions in the new Insurance
Conduct of Business Sourcebook are short and to the point.
All firms communicating information, including a financial
promotion, to a customer or other policyholder must take reasonable
steps to do so in a way that is clear, fair and not misleading
(2.2.2R).
This does little more than reiterate Principle 7. But by making
it a rule, the FSA has ensured that individuals can sue for damages
if the rule is breached.
Firms approving a financial promotion must meet the same
standard (2.2.3R). And if a firm gives its sanction but later finds
the promotion does not satisfy the clear, fair and not misleading
test, it must withdraw its approval and notify anyone known to be
relying on that approval as soon as reasonably practicable.
Pricing claims
ICOBS retains guidance on pricing claims made in financial
promotions (2.2.4G).
Claims that the firm can discount premium, provide the cheapest
premium or reduce the cost to the customer in some other way must
be consistent with the result "reasonably expected to be achieved
by the majority of customers who respond, unless the proportion of
those customers who are likely to achieve the pricing claims is
stated prominently".
In theory, therefore, a savings claim could be aimed at less
than half the target audience, provided it makes it clear what
percentage is likely to benefit.
Pricing claims must also state prominently the basis for any
claimed benefits and any significant limitations, as well as
complying with any other relevant legislation – specifically the
Control of Misleading Advertisements Regulations. These are
due to be repealed on 26th May 2008 and replaced by the Consumer
Protection from Unfair Trading Regulations 2008.
Other reading
Adopting a principles-based approach has enabled the FSA to
condense a whole chapter of ICOB into three rules and a guidance
note. But in order to keep up to date with the required standards,
firms will need to keep an eye out for more specific guidance and
surveys published by the FSA from time to time.
For instance, in November 2007, following a 12-month survey of
financial promotions on websites, the FSA published examples of
good and bad practices. And following a review of sponsored links
during October and November 2007, it is working with the OFT to
produce a guide for firms who pay to advertise on websites via such
links.
In order to make it easier for firms to monitor such
developments, the FSA has set up a special financial promotions
page on its website.
Contact: Liz Johnson (liz.johnson@pinsentmasons.com
/ 020 7667 0251)
See:
See also: The Consumer Protection from
Unfair Trading Regulations: an OUT-LAW guide
