SYSC 28 Insurance distribution: specific knowledge, ability and good repute requirements

1. (1)

    This chapter applies to a firm with Part 4A permission, including a TP firm, to carry on insurance distribution activities.

2. (2)

   SYSC 28.2 (except SYSC 28.2.1R(1)) does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

In this chapter, non-investment insurance personnel are employees or other persons:

1. (1)

    directly involved in the carrying on of the firm’s insurance distribution activities in relation to non-investment insurance contracts; or

2. (2)

    within the management structure responsible for the firm’s insurance distribution activities in relation to non-investment insurance contracts; or

3. (3)

    responsible for the supervision of a non-investment insurance employee (or other person) acting in the capacity as set out in (1).

[Note: article 10(1) and the fifth paragraph of article 10(2) of the IDD]

In this chapter, long-term insurance personnel are employees or other persons:

1. (1) directly involved in the carrying on of the firm's insurance distribution activities in relation to:
   1. (a) long-term insurance contracts (other than pure protection contracts);
   2. (b) long-term care insurance contracts; or
   3. (c) rights to or interests in a life policy;
2. (2) within the management structure responsible for the firm's insurance distribution activities in relation to:
   1. (a) long-term insurance contracts (other than pure protection contracts);
   2. (b) long-term care insurance contracts; or
   3. (c) rights to or interests in a life policy; or
3. (3) responsible for the supervision of a long-term insurance employee (or other person) acting in the capacity as set out in (1).

In this chapter ‘employee’:

1. (1)

   is not restricted to an individual working under a contract of employment; and

2. (2)

   includes (without limitation) any natural or legal person whose services are placed at the disposal of the firm, under an arrangement between the firm and a third party; and

3. (3)

   also includes appointed representatives and their employees.

1. (1)

    A firm must ensure that it and all non-investment insurance personnel (where the firm has non-investment insurance personnel) and all long-term insurance personnel (where the firm has long-term insurance personnel) possess appropriate knowledge and ability in order to complete their tasks and perform their duties adequately.

2. (2)

    Where a firm has long-term insurance personnel, the firm must ensure that it and each long-term insurance employee (or person) complies with continued professional training and development requirements in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market.

3. (3)

    Where a firm has long-term insurance personnel, the firm must ensure that each long-term insurance employee (or other person) completes a minimum of 15 hours of professional training or development in each 12 month period.

4. (4)

    For the purposes of (3), a firm must take into account the:

   1. (a)

       role and activity carried out by the long-term insurance employee (or other person) within the firm; and

   2. (b)

       type of distribution and the nature of the products sold.

[Note: article 10(1) and the first, second and fourth paragraphs of article 10(2) of the IDD]

1. (1) Where a firm has non-investment insurance personnel, it is reminded of the provisions of SYSC 3.1.6R or SYSC 5.1.1R (Competent employees rule), as applicable, as well as SYSC 28.2.1R(1). Such a firm should ensure that it and each non-investment insurance employee (or other person) undertakes continued professional training and development in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market. 
2. (2) For the purposes of (1), the firm should take into account:
   1. (a) the role and activity carried out by the non-investment insurance employee (or other person) within the firm; and 
   2. (b) the type of distribution and the nature of the products sold.

Where a firm has non-investment insurance personnel, the firm should, for the purposes of SYSC 28.2.1R(1) and SYSC 3.1.6R or SYSC 5.1.1R (Competent employees rule), as applicable, take into account the following elements of professional knowledge and competence in light of the role and activity carried out by each non-investment insurance employee (or other person) within the firm:

1. (1) for general insurance contracts:
   1. (a) knowledge of terms and conditions of policies offered, including ancillary risks covered by such policies;
   2. (b) knowledge of applicable laws governing the distribution of insurance products, such as consumer protection law, relevant tax law and relevant social and labour law;
   3. (c) knowledge of claims handling;
   4. (d) knowledge of complaints handling;
   5. (e) knowledge of assessing customer needs;
   6. (f) knowledge of the insurance market;
   7. (g) knowledge of business ethics standards; and
   8. (h) financial competence; and
2. (2) for pure protection contracts (but not long-term care insurance contracts):
   1. (a) knowledge of policies including the terms, conditions, the guaranteed benefits and, where applicable, ancillary risks;
   2. (b) knowledge of organisation and benefits guaranteed by the pension system of the relevant state;
   3. (c) knowledge of applicable insurance contract law, consumer protection law, data protection law, anti-money laundering law and, where applicable, relevant tax law and relevant social and labour law;
   4. (d) knowledge of insurance and other relevant financial services markets;
   5. (e) knowledge of complaints handling;
   6. (f) knowledge of assessing consumer needs;
   7. (g) conflict of interest management;
   8. (h) knowledge of business ethics standards; and
   9. (i)  financial competence.

Where a firm has long-term insurance personnel, the firm must, including in relation to the long-term insurance employee (or other person), demonstrate compliance with the following professional knowledge and competence requirements:

1. (1) [deleted]
2. (2) for insurance-based investment products:
   1. (a) minimum necessary knowledge of insurance-based investment products, including terms and conditions and net premiums and, where applicable, guaranteed and non-guaranteed benefits;
   2. (b) minimum necessary knowledge of advantages and disadvantages of different investment options for policyholders;

   3. (c)

       minimum necessary knowledge of financial risks borne by policyholders;

   4. (d)

       minimum necessary knowledge of policies covering life risks and other savings products;

   5. (e)

       minimum necessary knowledge of organisation and benefits guaranteed by the pension system;

   6. (f)

       minimum necessary knowledge of applicable laws governing the distribution of insurance products, such as consumer protection law and relevant tax law;

   7. (g)

       minimum necessary knowledge of the insurance market and the saving products market;

   8. (h)

       minimum necessary knowledge of complaints handling;

   9. (i)

       minimum necessary knowledge of assessing customer needs;

   10. (j)

        conflict of interest management;

   11. (k)

        minimum necessary knowledge of business ethics standards; and

   12. (l)

        minimum necessary financial competence; and

3. (3)

    for long-term insurance contracts (other than pure protection contracts) and long-term care insurance contracts:

   1. (a)

       minimum necessary knowledge of policies including the terms, conditions, the guaranteed benefits and, where applicable, ancillary risks;

   2. (b)

       minimum necessary knowledge of organisation and benefits guaranteed by the pension system of the relevant state;

   3. (c)

       knowledge of applicable insurance contract law, consumer protection law, data protection law, anti-money laundering law and, where applicable, relevant tax law and relevant social and labour law;

   4. (d)

       minimum necessary knowledge of insurance and other relevant financial services markets;

   5. (e)

       minimum necessary knowledge of complaints handling;

   6. (f)

       minimum necessary knowledge of assessing consumer needs;

   7. (g)

       conflict of interest management;

   8. (h)

       minimum necessary knowledge of business ethics standards; and

   9. (i)

       minimum necessary financial competence.

[Note: article 10(2) last paragraph and annex I of the IDD]

This section does not apply to a connected travel insurance intermediary.

A firm must ensure that all the persons in its management structure and any staff directly involved in insurance distribution activities are of good repute.[Note: article 10(3) paragraphs 1 to 3 of the IDD]

An IDD ancillary insurance intermediary must ensure that natural persons working in the firm, responsible for ancillary insurance distribution activities, are of good repute.

[Note: article 10(3) paragraph 4 of the IDD]

In considering a person’s repute the firm must at a minimum ensure that the person:

1. (1)

   has a clean criminal record or any other national equivalent in relation to serious criminal offences linked to crimes against property or other crimes related to financial activities; and

2. (2)

   has not previously been declared bankrupt,

unless they have been rehabilitated in accordance with national law.

[Note: article 10(3) paragraph 1 of the IDD]

A firm must:

1. (1)

   establish, maintain and keep appropriate records to demonstrate compliance with this chapter; and

2. (2)

   be in a position to provide to the FCA, on request, the name of the person responsible for the record-keeping requirement in (1).

[Note: article 10(8) last paragraph of the IDD]

A firm must:

1. (1)

    make an up-to-date record of the continued professional training or development completed by each long-term insurance employee (or other person) in each 12 month period;

2. (2)

    retain that record for not less than 3 years after the long-term insurance employee (or other person) stops carrying on the activity; and

3. (3)

    be in a position to provide any version of the record to the FCA on request.

[Note: article 10(2) second paragraph of the IDD]

A firm must not prevent a non-investment insurance employee (or other person) from obtaining a copy of the records relating to that non-investment insurance employee which are maintained by the firm for the purposes of SYSC 28.4.1R and SYSC 3.2.20R or SYSC 9.1.1R, as applicable.