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CII IF2 study materials
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CII IF2: Regulation and Conduct of Insurance Business

CII IF2 · Work through your exam, one topic at a time.

All guide sections

Regulation and Conduct of Insurance Business

What this domain tests

This domain tests how insurance business is authorised, who is accountable for it, and the conduct rules that shape distribution, promotions and claims. Expect questions on SM&CR, the Consumer Duty, financial promotions, complaints and compensation.

Authorisation and individuals

FSMA 2000 requires Part 4A permission for regulated activities. Insurers are dual-regulated; intermediaries are FCA-only. The SM&CR replaced the Approved Persons Regime for insurers in December 2018: Senior Management Functions, Prescribed Responsibilities, the Certification Regime for material-risk staff, and the Conduct Rules (five individual, four senior-manager). Senior managers have a duty of responsibility and a 'reasonable steps' defence.

Conduct requirements

  • PRIN sets 13 Principles; ICOBS governs general insurance conduct.
  • The Consumer Duty (PRIN 2A) requires firms to act in good faith, avoid foreseeable harm and enable customers to pursue their financial objectives, delivering four outcomes: products and services, price and value, consumer understanding, and consumer support. It covers retail customers, including many SMEs.
  • Financial promotions (s.21 FSMA) must be fair, clear and not misleading; COBS 4 applies.
  • IDD: demands-and-needs assessment, product and remuneration disclosure, 15 hours' CPD a year.
  • Complaints: DISP requires a final response within 8 weeks. Customers have 6 months from that response to go to FOS, whose award limit is £430,000 (from 1 April 2024).
  • FSCS: 100% for long-term and compulsory insurance; 90% for other general insurance claims.

Worked example

A renewal letter headlines a lower premium but omits that accidental damage cover has been removed. This breaches the Consumer Duty outcomes on price and value and consumer understanding, and is likely a misleading financial promotion and an ICOBS breach. The firm should correct the letter, review similar renewals, and consider redress and notification to the FCA if the issue is systemic.

Traps

  • Assuming the Consumer Duty applies only to individual consumers: retail customers include many SMEs.
  • Treating FOS as a court or its decisions as precedent.
  • Confusing SM&CR designation (senior managers) with the wider Conduct Rules (most staff).
  • Mixing the 8-week complaint clock with the 6-month FOS referral window.