The Isle of Man Financial Services Authority Conduct of Business Code
10 July 2019
In December last year, we contacted all our intermediaries with details of the Isle of Man Financial Services Authority’s Insurance (Conduct of Business) (Long Term Business) Code 2018 – otherwise known as the COBs code - which became effective on 1 January 2019.
The COBs Code covers conduct in such areas as fair treatment of policyholders, product development, product promotion, pre- and post-sale product disclosure, cancellation rights and administrative procedures. As a reminder, the key changes for Friends Provident International Limited (FPIL) are as follows:
Processes to ensure our FPIL company policies and procedures continue to meet the principles for the fair treatment of customers:
- A clear end to end process around the development and promotion of insurance products;
- The introduction of a standardised Key Information Document (KID) & Summary Information Document (SID) for Rest of World products;
- Illustrations which include additional information, including an additional 0% growth rate;
- Valuation statements which include additional information on surrender values;
- A 30 day cancellation right for policyholders, for both new business and subsequent top-ups;
- New, clearer procedures for both claims and complaints.
As an Isle of Man Financial Services Authority (IOMFSA) regulated company, FPIL is required to comply with the COBs Code. This is why for example, since 1 January 2019, we have required customers to complete an addendum to the application form for any new business, top-ups or assignments (resulting in a change of policyholder) in relation to our open architecture products. At the same time we introduced revised forms for submitting open architecture dealing instructions.
The next stage
The next stage of the implementation of the COBs Code will take effect from 1 July 2019. From this date, customers must be provided with a Key Information Document (KID) for investment plans and a Summary Information Document (SID) for protection plans, along with their illustration. Among other things, the mandatory requirements of these disclosure documents describe the main features of the product, including the risks to the customer, the amount of commission paid, the procedure for withdrawing money or cancelling the plan, and how to make a complaint.
NB. The requirement for FPIL to provide a KID or SID does not currently apply in the UAE, provided the adviser is appropriately regulated in the UAE.
Investor status: Unless identified as a Non-Retail Investor, we will assume policyholders are Retail investors.
A key part of ensuring the fair treatment of policyholders is to identify that they meet the criteria for investing in the assets that they choose to hold through their FPIL Reserve portfolio bond, and to ensure there is informed consent prior to acting.
Policyholders are, therefore, classified as either 'Retail' or 'Non-Retail' investors. Non-Retail investors are usually qualified or professional investors with expertise in investment markets, who possess the specialist knowledge and experience to understand how complex assets operate and who have the net worth to stand the risk to capital consistent with investing in such assets. Typically their net worth excluding their main residence will be at least GBP 1,000,000 and their annual salary will exceed GBP 250,000.
FPIL has taken steps to ensure that the unit-linked funds available to customers of its unit-linked products are suitable for retail investors and has not allowed investments of regular premiums or switches into unit-linked funds that could be deemed suitable for non-retail investors since 1 January 2019.
Literature updates
Our product materials have been enhanced where necessary to make them COBs compliant and will all be updated before 1 July. Application forms are being updated with investor status information and questions which means that after 1 July 2019 there is no longer a requirement for completion of the addendum we have been using since 01 January 2019 (as all applications should be submitted on the new forms).
What this means for you – new business
UAE-based advisers
If you are based in the UAE, there is currently no requirement for your UAE clients to sign a KID or SID. When preparing illustrations for our wealth management products, you will notice changes to the layout and additional wording to cover COBs-specific disclosures of our proposition. Apart from that there is no change and you should continue to submit business in the usual way with an illustration.
In the application forms, you will see updated sections that cover the investor status explanations and questions, and the declarations have also been updated. Please note that after 1 July 2019 we are unable to accept business submitted on the current application forms, so please request new stock of Premier Advance, Reserve and Summit literature via your regional sales manager.
While FPIL is not currently obliged to provide customers with a KID or SID for UAE business as mentioned above, it is important for you to note that illustrations prepared on or after 1 July 2019 will incorporate the following IOMFSA-prescribed wording:
The Isle of Man Financial Services Authority’s Insurance (Conduct of Business) (Long Term Business) Code 2018 requires Isle of Man authorised insurers to put in place measures to ensure the fair treatment of its customers, including providing you with information about this insurance product to help you understand the nature, risks and cost of this product. As this product is being sold to you through your intermediary in the United Arab Emirates, the insurer is not obliged under local regulations to provide you with the same information.
If you have any questions about the information that has been provided to you in deciding to purchase this product, you should raise them with your adviser. In the event of any issues or concerns regarding the sale of the product, complaints should be directed to your adviser.
Qatar and South Africa based advisers
Each piece of business you submit to FPIL after 1 July 2019 must be accompanied by a signed KID or a SID as appropriate. The FPIL illustration system is being updated so that any illustrations produced after 1 July 2019 will include the relevant information as outlined above. The clients then needs to sign the KID/SID to confirm they have been provided with the disclosures that it contains and are fully aware of the commitment they are making. The signed KID/SID should be submitted with the application form and other new business documentation.
Any applications submitted on or after 1 July 2019 must be on the new application form. Any applications received without the requisite KID/SID documentation will not be processed and will be subject to a delay until the correct documents are provided.
New documentation
A list of the literature items enhanced by the COBs disclosures follows – enhanced versions of these documents will be available on our website before 1 July 2019.
UAE material
| Trustee Application Form | https://advisers.fpinternational.ae/documents/xua_ta.pdf |
| Pension Trustee Application Form | https://advisers.fpinternational.ae/documents/xua_ta_pension.pdf |
| Reserve Application Form | https://advisers.fpinternational.ae/documents/GE_RME_AP.pdf |
| Premier Advance (UAE) Application Form | https://advisers.fpinternational.ae/documents/xua16a.pdf |
| Premier Advance (UAE + RoW) Brochure | https://advisers.fpinternational.ae/documents/xim16b.pdf |
| Premier Advance (UAE) Product Guide | https://advisers.fpinternational.ae/documents/xua16d.pdf |
| Summit (UAE) Application Form | https://advisers.fpinternational.ae/documents/summit-uae-app.pdf |
| Additional single premium (topup) open architecture products | https://advisers.fpinternational.ae/documents/xim-asp-client.pdf |
| Additional single premium (topup) – unit linked products | https://advisers.fpinternational.ae/documents/xim-asp-client-ul.pdf |
Rest of World material
Pensions and Trusts look through
If your customer’s policy is written in trust or is a pension arrangement, the customer declaration should be completed by your customer, rather than by the pension scheme administrators or trustees. The following warning about potential delays in dealing will apply:
"We acknowledge the purchase of our investments may be delayed if Friends Provident International requires a signed declaration in respect of our chosen investments. In the event that a declaration is required, this must be signed by the underlying client(s) and reflect their knowledge and circumstances, rather than that of the appointed Pension Trustees."
Top ups
With regards to top up business, no action is required from you, as FPIL will generate the KID/SID for information purposes only. It does not need to be signed and we will send a copy to you and your customer by e-mail when the business is completed.
You can find out more on the COBs Code by visiting the IOMFSA website.
Steve Weston
Interim CEO
Friends Provident International
11 June 2019