Demands and needs as a scored criterion: ICOBS 5.2 on a protection call

A file note that says "demands and needs discussed" records what the adviser believes happened. It does not show what the customer was asked, what they answered, or whether the policy proposed matched the answers. On a protection sale made by phone, that evidence is on the recording. This guide writes ICOBS 5.2, and the advised-sales provisions beside it, as criteria a call can pass or fail, each labelled by what it rests on.

Two requirements, not one#

A scorecard line reading "demands and needs and suitability" merges two sets of provisions with different reach. A call can meet one and fail the other.

ICOBS 5.2 applies to the sale, advised or not. ICOBS 5.2.1R: "This section applies to an insurance distributor when carrying on insurance distribution activities." ICOBS 5.2.2DR: "The sale of a contract of insurance must always be accompanied by a demands and needs test on the basis of information obtained from the customer." The FCA's guidance at ICOBS 5.2.2CG confirms that the consistency rule in 5.2.2BR "applies whether or not advice is given".

ICOBS 5.3, headed "Advised sales", applies only where advice is given, and it has two different triggers. ICOBS 5.3.1R is triggered by advice: "A firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgement." ICOBS 5.3.4R is triggered only by a personal recommendation. A scorecard that treats the two triggers as one will apply the wrong criteria to some calls.

One boundary. This is written for firms selling protection under ICOBS. A firm that has elected to comply with COBS for its pure protection business is outside ICOBS, except ICOBS 4.6, for that business, under ICOBS 1 Annex 1, Part 2, 3.1R.

What ICOBS 5.2 actually says#

ICOBS 5.2.2R, headed "Demands and needs", reads: "Prior to the conclusion of a contract of insurance a firm must specify, on the basis of information obtained from the customer, the demands and the needs of that customer. The details must be modulated according to the complexity of the contract of insurance proposed and the type of customer. A statement of the demands and needs must be communicated to the customer prior to the conclusion of a contract of insurance."

ICOBS 5.2.2BR adds the consistency test: "When proposing a contract of insurance a firm must ensure it is consistent with the customer's insurance demands and needs."

ICOBS 5.2.2AG is guidance. A firm "may obtain information from the customer in a number of ways including, for example, by asking the customer questions in person or by way of a questionnaire prior to any contract of insurance being proposed." Those are the FCA's examples, not a required method.

The rules bind the firm, not the individual adviser. The adviser is how the firm meets them.

The rule written as scored criteria#

Criteria 1 to 5 have a basis, a passing call and a failing one; criterion 6 is a file check. Each is labelled rule (R), guidance (G) or firm standard. The label matters most on a fail. Falling short of guidance is not in itself a breach of a rule, but where the guidance explains how to meet a rule, as ICOBS 5.3.2G does for the suitability rule in 5.3.1R, it bears on whether that rule was met.

1. Needs gathered from the customer before anything is proposed

Basis: ICOBS 5.2.2R (R) requires demands and needs to be specified, on information obtained from the customer, before the contract is concluded, and 5.2.2DR (R) requires every sale to be accompanied by a demands and needs test. The guidance examples in 5.2.2AG gather that information "prior to any contract of insurance being proposed". Requiring that order on the call is the firm's own standard. Where the needs came from a questionnaire or an earlier call, score the file or the sale, not this call.

Passes: the customer answers in their own words. Who relies on their income, the mortgage balance and term, what happens to the household if they cannot work. The depth fits the product and the customer, as the rule's "modulated" wording requires.

Fails: "So it's just life cover for the mortgage, yeah? I'll get you a price." The need was supplied to the customer, not obtained from them.

2. The proposal is consistent with what the customer said

Basis: ICOBS 5.2.2BR (R), advised or not. The rule requires the proposal to be consistent with the customer's demands and needs. It does not require the link to be explained on the call; unless a personal recommendation is made (criterion 5), asking the adviser to spell it out is the firm's evidence standard.

Passes: what is proposed matches the needs the customer gave. Fails: the customer names being off work as their main worry at minute six, is proposed life cover alone at minute twenty, and nothing on the call shows that worry was dealt with or set aside by the customer.

3. Existing cover established (advice on pure protection)

Basis: ICOBS 5.3.2G(1)(a) (G), guidance on meeting the suitability rule in ICOBS 5.3.1R (R). The FCA's guidance says a firm advising on a pure protection contract should establish demands and needs "by using information readily available to the firm and by obtaining further relevant information from the customer, including details of existing insurance cover". It sets a limit too: the firm "need not consider alternatives to policies nor customer needs that are not relevant to the type of policy or policies in which the customer is interested". Do not fail a call for leaving those out.

Passes: the existing cover is established: who it is with, what it pays and on what event, and when it ends. How much detail counts is the firm's standard. Where the firm already holds the details, decide whether confirming them on the call is enough, and write that into the criterion. Fails: see the worked example.

4. Unmet needs told to the customer (advice on pure protection)

Basis: ICOBS 5.3.2G(1)(c) (G), guidance on meeting ICOBS 5.3.1R (R): the firm should "inform the customer of any demands and needs that are not met".

Passes: "This won't replace your income if you're off work for six months, and you said that was a worry." Fails: a need the customer raised, which the recommended policy does not meet, is never mentioned again.

5. A personalised explanation (personal recommendation only)

Basis: ICOBS 5.3.4R (R). Where a firm provides a personal recommendation, it must, "in addition to the statement of demands and needs, provide the customer with a personalised explanation of why a particular contract of insurance would best meet the customer's demands and needs."

Passes: reasons that belong to this customer: their term, their dependants, their existing cover. Fails: "It's one of the best policies out there."

6. The statement of demands and needs: a file check

Basis: ICOBS 5.2.2R (R): the statement "must be communicated to the customer prior to the conclusion of a contract of insurance". ICOBS 5.2.5R (R) then sets how that information is given, by reference to ICOBS 4.1A, which this guide does not cover.

A call can show a statement read out where the firm's process gives one there. It cannot show a document. Treat delivery of the statement as a file check on every sale, not as a call criterion, and do not treat the recording as the whole record of it. For criteria 4 and 5, the call shows what was said; it is not the whole record.

Worked example: replacement business on an advised sale#

A customer took out a level term life policy when they bought their first home. The adviser recommends a new policy with life and critical illness cover, and the customer says they will cancel the old one.

No provision in ICOBS 5 deals with replacement business as such. The only related wording is "including details of existing insurance cover" in ICOBS 5.3.2G(1)(a), which is guidance and covers only advice on pure protection contracts. Anything a scorecard adds beyond that on replacement business does not come from ICOBS 5.

What a passing call contains:

• Details of the existing policy established: who it is with, what it pays and on what event, and when it ends (G, ICOBS 5.3.2G(1)(a); the level of detail is the firm's standard).
• Any other cover established the same way, not "yes, something through work" accepted as the answer (firm standard, applying the same guidance).
• Where a personal recommendation is made, an explanation of why the new policy would best meet this customer's demands and needs (R, ICOBS 5.3.4R), given with the cover they already hold in view (firm standard).
• Any demands and needs the new policy does not meet, told to the customer (G, ICOBS 5.3.2G(1)(c)).

Where firms get it wrong:

• The existing-cover question is asked, the answer is vague, and the adviser moves on.
• Existing cover is gathered at minute four and never mentioned again. ICOBS 5.3.4R does not require a comparison with it, so a firm that expects the explanation to account for the cover being replaced has to write that into its criterion.
• The customer says they will cancel the old policy, and the call carries on as if they had not.

ICOBS 5 has nothing on the third. A firm may decide, as its own standard, that where a new policy replaces an old one, the customer confirms they understand any gap in cover if the old policy stops before the new one starts. No provision in ICOBS 5 requires it, and the scorecard should label it as the firm's standard. Our protection consent-gate checklist has an item for it, "Existing cover and replacement business": any existing cover is disclosed and, if the policy replaces it, the customer confirms they understand any gap in cover during the switch. It is a generic starting template to adapt, not a statement of regulation.

One sale, several calls#

Needs are gathered on Monday and the recommendation is made on Thursday. Score those calls one at a time, as single-call criteria, and Thursday's call fails criterion 1, because no needs were gathered on it, while Monday's has no proposal to test. Yet 5.2.2DR attaches the test to "the sale of a contract of insurance", not to a call, and the sale as a whole may pass what its calls fail individually.

Scoring it with CallGuard AI#

CallGuard AI does not decide what ICOBS requires of your firm. Your scorecard defines the criteria. CallGuard AI transcribes the call and scores it against that scorecard. Each criterion is scored with the transcript evidence it was decided on. Where the call never touches a criterion, the evidence reads "no relevant evidence found" and the criterion is not met, which is one more reason to keep file checks, such as delivery of the written statement, off the call scorecard. Multiple calls with one customer can be scored together as one sale, starting from the sale in your CRM.

Where a firm marks an item consent-gated, such as the gap-in-cover confirmation, it goes to a manual review queue when CallGuard can't reliably tell which speaker is the customer. When your compliance team corrects a verdict, deciding for instance that "something through work" is not details of existing cover, up to five of the most recent corrections on that criterion are shown to the AI as examples the next time it scores that criterion. That is the substance of call compliance monitoring for FCA-regulated advice firms: criteria your firm writes, scored call by call or sale by sale, as set up for your firm, with the evidence for each verdict.

To see your own demands and needs criteria scored, we run the demo on synthetic calls against a scorecard like yours, and put a DPA in place before any of your real recordings are processed.