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COBS 7 – Insurance Distribution and Information Disclosure Rules

PostedJune 24, 2025
UpdatedJune 24, 2025
ByAndy

1. Chapter Summary

COBS 7 sets out the information disclosure requirements that apply when firms distribute insurance-based investment products (IBIPs) or other insurance contracts as part of investment business. Its core purpose is to ensure clients—particularly retail clients—receive clear, fair, and not misleading information before and during the life of the contract. This helps clients understand the product features, risks, costs, and their rights, enabling informed decisions and reinforcing consumer protection in insurance distribution.

2. Applicability

COBS 7 applies to firms carrying out insurance distribution activities, especially those distributing insurance-based investment products (IBIPs) to retail clients. It applies whether the firm is advising or not. Some parts specifically refer to MiFID firms, while others are broader and apply to firms under the Insurance Distribution Directive (IDD) framework. Professional clients are generally excluded from full disclosure requirements unless otherwise specified.

3. Key Rules and Their Meaning

COBS 7.1.1R – Providing Appropriate Information Before Conclusion

A firm must provide appropriate information in good time before the conclusion of a contract to enable the client to make an informed decision.

This requires firms to disclose product details (e.g. cover, exclusions, costs, term, risks) before the client commits. “Good time” means allowing sufficient time to consider the information—not just immediately before signature.

COBS 7.2.1R – Insurance Product Information Document (IPID)

Where required, firms must provide an IPID to the client.

The IPID is a standardised, pre-contractual document for non-IBIP insurance products, outlining core product facts like what is covered, what isn’t, and key features. Its purpose is to enable easy comparison between insurance offerings.

COBS 7.3.1R – Additional Requirements for IBIPs

When distributing IBIPs, firms must comply with additional disclosure requirements (under PRIIPs Regulation and IDD).

This includes providing a Key Information Document (KID) and disclosing the nature and risks of the investment, all associated costs, potential conflicts of interest, and information on how the product meets the client’s needs.

COBS 7.3.6R – Disclosure of Conflicts of Interest

Firms must disclose any conflict of interest that could adversely affect the client.

In practice, this might include disclosing commission structures, third-party incentives, or situations where the firm is both adviser and product provider.

4. Interpretation Notes / FCA Expectations

  • The FCA expects timely, client-centric disclosure, ensuring clients are not rushed or confused by jargon-heavy material.
  • The KID and IPID should be written in plain language, avoiding ambiguity.
  • For IBIPs, disclosures must align with the PRIIPs Regulation, and FCA guidance expects transparency on product complexity and investment risks.
  • The FCA highlights the need for individualised disclosures where a product is tailored or sold via advice.

5. Practical Considerations for Firms

  • Create and maintain template libraries for KIDs, IPIDs, and other disclosure documents.
  • Set up controls to ensure disclosure is given early in the sales process and updated as needed.
  • Develop and record procedures for identifying and disclosing conflicts of interest.
  • Implement training on IDD and PRIIPs requirements for frontline staff.
  • Maintain audit trails showing what documents were provided and when.

6. Related Handbook References

  • COBS 6 – Information about investments (general pre-contract disclosures)
  • COBS 5 – Suitability and appropriateness (particularly for advised IBIP sales)
  • PRIN 2A – Consumer Duty (cross-cutting rules on acting in good faith, avoiding foreseeable harm)
  • SYSC – Senior management controls over distribution and documentation
  • ICOBS – Insurance-specific conduct rules (for non-investment insurance products)
  • PERG – FCA guidance on what constitutes insurance distribution under IDD

7. Regulatory Focus / Enforcement Risk (optional, internal)

  • High FCA focus on non-compliance with KID/IPID requirements in retail insurance distribution, especially where products are complex or contain exclusions that weren’t clearly explained.
  • Failures to disclose commissions or other conflicts of interest have led to enforcement action.
  • Firms that combine insurance and investment products (e.g. structured life insurance) are under scrutiny for ensuring full compliance with both IDD and PRIIPs rules.