The Financial Conduct Authority (FCA) is removing a set of dedicated disclosure rules for advisers and insurers operating in the protection market, including around ensuring customers understand they are making the decision during a non-advised sale.
The regulator is proposing to remove section 4.2 of its Insurance Conduct of Business Sourcebook which applies to retail pure protection or payment protection contracts.
Its proposal is part of a major overhaul of insurance rules by the regulator which it believes will make the industry easier for consumers to understand.
Non-advised sales responsibility
At present, the rules compel intermediaries in a non-advised sale to “take reasonable steps to ensure a customer understands that [the customer] is responsible for deciding whether a policy meets [the customer’s] demands and needs.”
It adds: “If a firm anticipates providing, or provides, information on any main characteristic of a policy orally during a non-advised sale, taking reasonable steps includes explaining the customer’s responsibility orally.”
However, deleting this section would remove the explicit requirement for firms to do so during a non-advised sale.
The FCA said it believed other existing rules and the way the market had evolved mean these rules were now unnecessary.
In its CP26/22 Simplifying insurance rules consultation paper, the regulator said: “We propose to align pure protection business with the standard disclosure requirements in ICOBS 4 by removing ICOBS 4.2.
“ICOBS 4.2 provides more prescriptive safeguards for pure protection business.
“For example, in non‑advised sales firms are required to ensure customers understand that they are responsible for determining whether a policy meets their demands and needs.
“However, the broader ICOBS disclosure framework has since evolved, with a greater emphasis on ensuring that information is clear, relevant and supports effective customer decision making.
“Additionally, the Consumer Duty now places a strong, cross cutting obligation on firms to meet the information needs of retail customers and ensure they can make timely and properly informed decisions.
“In this context, we consider that the prescriptive requirements in ICOBS 4.2 are no longer necessary to achieve the intended policy outcomes.”
Sales process and disclosure changes
In other significant changes as part of the consultation process, the FCA is proposing just two categories of insurance sale – advised and non-advised.
It has also suggested all insurance intermediaries will no longer have to disclose to customers where they use only exclusive single-tie arrangements or a panel of insurers when selling products to retail customers.
Furthermore, intermediaries will no-longer need to declare where insurers own more than 10% of their firms, or vice-versa, or their remuneration process.
Two years ago, the regulator called on firms to suggest rules which could be eliminated or simplified if they are already covered by the Consumer Duty.
Responses for the consultation paper are open until 4 September 2026.