Finance Editor, Kael Tripton Ltd - LBS MBA - Verified against FCA Handbook: 14 June 2026
Quick answer
ICOBS 2.5 requires FCA-authorised insurers and brokers to act honestly, fairly and professionally in the best interests of customers. Consumer Duty (PRIN 12, July 2023) strengthens this further. If an insurer or broker recommended unsuitable cover or hid material exclusions, you can complain citing both rules.
What Is the Customer Best Interests Rule in Insurance?
Direct answer
Must my insurer or broker act in my best interests under FCA rules?
Yes. Under ICOBS 2.5 (handbook.fca.org.uk/handbook/ICOBS/2/), all FCA-authorised insurers and brokers must act honestly, fairly and professionally in the best interests of customers. Consumer Duty (July 2023) adds a positive obligation to deliver good outcomes. If a broker recommended unsuitable cover or hid exclusions, you can complain to the FOS.
FCA Handbook - ICOBS 2.5.1 - Verbatim Rule Text Source: handbook.fca.org.uk
A firm must act honestly, fairly and professionally in accordance with the best interests of its customer.
Check the broker or comparison site is FCA authorised
Verify at register.fca.org.uk.
Ask the broker why they recommend a specific policy
An FCA-authorised broker must explain why the policy meets your needs.
Read the exclusions before accepting
Check for material exclusions relevant to your situation.
If the policy does not cover a claim you expected
Check whether the exclusion was disclosed before purchase. If not, complain citing ICOBS 2.5.
Escalate to the FOS if unresolved
The FOS handles ICOBS 2.5 complaints against both insurers and brokers.
Related KT guides
ICOBS 2.5 and Online Comparison Sites: What FCA Authorisation Means
Comparison websites that are FCA-authorised as insurance intermediaries are subject to ICOBS 2.5 best interests obligations. This means they cannot present information in a misleading way, cannot default pre-tick add-ons, and must give sufficient information for consumers to make informed comparisons. The FCA has previously issued guidance to price comparison websites on how ICOBS 2.5 applies to their presentation of results, including requirements around prominence of sponsored listings and clear disclosure of what is included in each quoted price.
Frequently Asked Questions
What is the customer best interests rule in insurance?
ICOBS 2.5 requires FCA-authorised firms dealing in non-investment insurance to act honestly, fairly and professionally in accordance with the best interests of customers. It means the insurer or broker must not recommend a product that does not meet the customer's needs, must not use pressure selling, and must communicate clearly. Consumer Duty (PRIN 12, July 2023) has since strengthened this with a positive obligation to deliver good outcomes.
Does the best interests rule mean insurers must find the cheapest policy?
No. ICOBS 2.5 requires honest, fair and professional conduct -- not necessarily the cheapest price. It means the firm must not recommend a policy clearly unsuitable for your needs, must not use misleading marketing, and must not recommend add-ons with no benefit for your situation.
How does ICOBS 2.5 interact with Consumer Duty?
Consumer Duty (PRIN 12, July 2023) supplemented and strengthened ICOBS 2.5. Consumer Duty imposes a positive outcome-focused obligation while ICOBS 2.5 sets minimum conduct standards. Together they form the core of the FCA's fair treatment framework for insurance customers.
Can I complain if a broker recommended unsuitable home insurance?
Yes. If an insurance broker recommended home insurance that was clearly unsuitable (insufficient sum insured, exclusions covering your main risk), you can complain citing ICOBS 2.5 and Consumer Duty. The FOS handles such complaints and can order the broker to pay compensation for losses.
Does the best interests rule apply to comparison websites?
FCA-authorised comparison websites are subject to ICOBS 2.5. They must not present information in a way that misleads customers into unsuitable choices. The FCA has previously investigated comparison sites for misleading presentation of insurance products including default pre-ticked add-on boxes.
Primary sources
Kael Tripton Ltd is registered with the Information Commissioner's Office under registration number ZC135439.
