Executive Summary

Legal Basis

BC-A.2.1

This Module was first issued in April 2005 by the BMA, together with the rest of Volume 3 (Insurance). Any material changes that have been subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

BC-A.2.2

When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 3 was updated in January 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.

BC-A.2.3

A list of recent changes made to this Module is detailed in the table below:

BC-A.2.3 [Deleted]

BC-A.2.4

Guidance on the implementation and transition to Volume 3 (Insurance) is given in Module ES (Executive Summary).

BC-B.1.1

Except as noted in this section, the requirements in this Module apply to all insurance licensees, with respect to their direct insurance activities carried on from the Kingdom of Bahrain with a person who is a resident of Bahrain ('domestic business').

BC-B.1.2

The requirements of this Module therefore apply to insurance firms and insurance intermediaries who are selling, intermediating or advising on direct insurance contracts from their offices in Bahrain, with respect to customers who are resident of Bahrain. The requirements in this Module do not, therefore, apply to direct insurance activities carried on from overseas branches and subsidiaries of Bahraini insurance licensees, or to activities carried on with non-residents.

BC-B.1.3

Reinsurance business is exempted from the requirements of this Module because the reinsurance market is limited to dealings between insurance market professionals.

BC-B.1.4

The activities of insurance managers and operators of insurance exchanges do not fall within the scope of this Module. However, the CBB expects the insurance manager to consider the requirements of this Module in relation to the service provided, on behalf of the captive insurer or insurance firm, to its 'clients', namely insured members of the group.

BC-B.1.5

Although the requirements of this Module apply in full to all direct insurance activities in relation to domestic business, the CBB recognises that customers' needs vary. For example, because a captive insurer is insuring the risks of its parent group, it would be acceptable for the level of sales documentation and written disclosure to be less than would be required for retail customers. Large corporate customers may also require less extensive written disclosures than retail customers. The requirements in this Module give insurance licensees the flexibility to adapt their processes to suit the different needs of different customer types.

BC-C.1.1

Insurance licensees must ensure that all regulated financial services are provided without any discrimination based on gender, nationality, origin, language, faith, religion, physical ability or social standing.

BC-1.1.1

This Module applies to the direct insurance activities of all licensees in relation to domestic business.

BC-1.1.2

This Module aims to encourage high standards of business conduct, which are broadly applicable to all licensees, all types of direct insurance business (i.e. excluding reinsurance), and all types of customers. However, it is recognized that some types of licensees or business (such as captive insurance or commercial insurance) may present lower regulatory risks in relation to business conduct. For these types of business, the CBB therefore accepts that less detailed arrangements are likely to be sufficient to implement the principles contained in this Module. The CBB will monitor the regulatory performance of the market, and may in due course allow for specific exemptions or relaxations for certain types of business or licensees (see also BC-1.1.11 and BC-1.1.12).

BC-1.1.3

Where packaged investment products include insurance elements, this Module applies to the insurance elements.

BC-1.1.4

It is recognised that investment products represent different features and risks that require separate regulatory treatment. Specific rules applying to business conduct in relation to investment products will be developed over time.

BC-1.1.5

All licensees must comply with the Insurance Code of Practice for business conduct with customers, which sets out the minimum standards of good practice for market conduct in relation to direct insurance activities.

BC-1.1.6

The Code comprises a number of overarching principles and a number of principles-based requirements rules in relation to the conduct of direct insurance business with customers. The structure of the Insurance Code of Practice for Business Conduct with customers reflects the key stages and activities over the lifetime of the customer relationship for insurance products and services (see Illustration 1).

Illustration 1: Structure of Insurance Code of Practice for Business Conduct

BC-1.1.7

Licensees must maintain compliance with the Code throughout the lifetime of their relationships with all of their customers.

BC-1.1.8

The Code focuses on desired outcomes, rather than prescribing in detail measures required to achieve those outcomes. Licensees therefore have the flexibility to design arrangements that implement the Code, in a way that suits the particular nature of their business.

BC-1.1.9

Insurance licensees must take responsibility for compliance with the Code of all persons carrying out direct insurance activities on their behalf (including, but not limited to, appointed representatives and insurance managers).

BC-1.1.10

Licensees must put in place appropriate measures across all their business operations and distribution channels to ensure compliance with the Code. Licensees must maintain adequate records to demonstrate compliance with the Code.

BC-1.1.11

The CBB will monitor compliance with the Code and standards of business conduct. If required, the CBB may develop more detailed rules and guidance to supplement the existing Code.

BC-1.1.12

The CBB will apply these requirements in a way that allows them to be adapted to fit the circumstances of licensees' businesses, to be achieved through a pragmatic approach to supervision. However, in exceptional circumstances, it may be appropriate for the CBB to consider and grant waivers where strict compliance would be unduly burdensome or would not achieve the purpose for which the requirement was intended. Each application for waiver will be considered on its individual merits. The fact that a waiver has been granted to a particular licensee should not be regarded as an indication that similar waivers will be issued to any other licensee.

BC-2.1.1

In the course of direct insurance activities, licensees must:

BC-2.2.1

Licensees must ensure that all advertising and promotional material is clear, fair and not misleading.

BC-2.3.1

At the initial point of contact, before any contract is concluded between the customer and the insurance licensee, licensees must advise customers of the nature of the service they can offer and their relationship with the customer, including:

BC-2.4.1

Licensees must identify customers' requirements by seeking from customers such information about their circumstances and objectives as might reasonably be expected to be relevant in establishing their specific insurance needs in relation to the products and services about which they are enquiring.

BC-2.5.1

Any recommendations made must be appropriate to the customer's needs. The recommendation must include an explanation as to how the recommended product suits the customer's identified needs. Where more than one product is recommended as appropriate to the customer's needs, the recommendation must include an explanation of the differences in and relative costs in the alternative options.

BC-2.5.2

In the case of compulsory insurance, such as third party motor liability insurance, the explanation of the product's suitability may be limited to a brief explanation of the obligation to hold such insurance, and the options available to satisfy the obligation.

BC-2.5.3

The objective of Paragraph BC-2.5.1 is to ensure that a customer is provided with sufficient information with which to make an informed decision. An insurance firm is able to rely on the customer's explanation of his insurance needs and is not otherwise required to verify the customer's own assessment of his needs. Given the customer's stated needs, the insurance firm must explain how the proposed contract(s) would meet those needs, and provide sufficient information regarding the different options so that the customer is able to make an informed decision.

BC-2.6.1

Before customers make their final commitment to enter into a contract of insurance, licensees must provide to the customer sufficient information on the key features of the product being proposed to enable the customer to make an informed purchasing decision, including:

BC-2.6.2

Before customers make their final commitment to enter into a contract of insurance, licensees must provide to the customer full details of costs of the insurance products and services being offered, including:

BC-2.6.3

While an insurance broker may not approach every possible underwriter for each risk, he should make reasonable efforts to make his selection from a panel of insurance firms. An insurance broker's submission of quotations should incorporate the reasons for recommending or choosing an insurance firm.

BC-2.6.4

Except for clients with turnover exceeding BD 1 million per year, an insurance intermediary must draw the client's attention to the status of the insurance firm: i.e. whether or not the insurance firm is locally licensed (as a Bahraini insurance firm or overseas insurance firm) and, if not, the reasons for recommending or choosing that insurance firm. In respect of these clients, this advice must be delivered in writing.

BC-2.6.5

An insurance intermediary should recommend, in the first instance, a policy from a CBB licensed insurer (which, for the avoidance of doubt, may be an overseas insurance firm) that he considers best suited to the needs of his client, and offering ease of client service, claims handling, etc. Paragraph BC-2.6.4 covers the situation where an insurance intermediary proposes use of an overseas insurer not licensed or incorporated in Bahrain, because of the lack of availability of local cover.

BC-2.6.6

Insurance intermediaries acting on behalf of customers in arranging their insurance must, on request, disclose the amount of commission payable to them from the insurance premium, and any other remuneration received for arranging the insurance contract.

BC-2.6.7

Before customers make a final commitment to enter into a contract of insurance, licensees must inform the customer of their key obligations and rights with regard to the transaction, including:

BC-2.6.8

There are no specific requirements prescribing customers' cancellation rights or required standards of cancellation terms for insurance products and customers. It is expected that licensees will put in place cancellation terms that are fair, reasonable and appropriate with respect to their customers and the products provided, in line with the overarching principles requiring fair dealings with customers (see Paragraph BC-2.1.1). The CBB will monitor the regulatory performance of the market in this area, and may make amendments over time (see Paragraphs BC-1.1.11, BC-1.1.12).

BC-2.7.1

On the conclusion of contracts, licensees must provide customers with prompt written confirmation and details of the insurance that has been effected, including:

BC-2.7.2

Licensees must provide full policy documentation promptly following the conclusion of contracts, unless this has already been issued with the confirmation of cover.

BC-2.8.1

Licensees must respond to and administer customers' requests for amendments to their insurance policies in a timely manner. In particular, licensees must:

BC-2.9.1

In addition to the requirements under Paragraph BC-2.9.2, where licensees' insurance activities include the handling of claims, they must:

BC-2.9.2

Where an insurance firm deals with medical insurance and handles all the claim processing activities directly, i.e. without using a TPA:

BC-2.9.3

Insurance firms must comply with Paragraph BC-2.9.2 by 30^th September 2016 at the latest.

BC-2.10.1

Licensees must notify customers of the renewal or expiry of their policy in time to allow the customer to consider and rearrange any continuing cover they may need, including:

BC-2.10.2

On expiry or cancellation of insurance policies, at the request of the customer, licensees must make available all documentation and information to which the customer is entitled in a timely manner.

BC-2.11.1

[This paragraph was deleted in October 2011]

BC-2.11.2

[This paragraph was deleted in October 2011]

BC-2.11.3

[This paragraph was deleted in October 2011]

BC-2.11.4

[This paragraph was deleted in October 2011]

BC-2.11.5

[This paragraph was deleted in October 2011]

BC-2.12.1

Licensees must ensure that all information presented to customers in accordance with this Code shall be clear, fair and not misleading, and comprehensible to the customer having regard to the complexity of the products and services being offered and the customer's knowledge.

BC-2.12.2

Licensees must ensure that customer information presented to customers in accordance with this Code is provided in an appropriate format with regard to the complexity of the product being discussed. In particular:

BC-2.13.1

Licensees must avoid conflicts of interest, or if conflicts are unavoidable, must explain the position fully and manage the situation so as to avoid prejudice to any party. In particular, licensees who act on behalf of their customers must not put their own interests above their duty to any customers for whom they act.

BC-2.13.2

Insurance intermediaries must disclose in writing to the client any relationship that he may have with an insurance firm that he is recommending to his client and which may result in a potential conflict of interest including, but not limited to, disclosure in writing any association arising from common shareholder/controller/Director.

BC-2.14.1

Licensees must ensure that any information obtained from customers must not be used or disclosed except in the normal course of negotiating, maintaining or renewing insurance for that customer, unless:

BC-2.14.2

Licensees must take appropriate steps to ensure the security of any money, documents, other property or information handled or held on behalf of customers.

BC-3.1.1

This Chapter applies only to those insurance firms licensed to conduct insurance business under takaful principles.

BC-3.1.2

The CBB acknowledges that the nature of takaful and the operation of a takaful business are not entirely equivalent to and in some respects different from a conventional insurance business. The specific requirements set out in this Chapter aim not only to allow takaful firms to operate in Bahrain within the CBB's insurance regulatory regime on a basis consistent with conventional insurers but also to recognise some of the differences in takaful that are relevant to the way in which takaful business is carried on.

BC-3.1.3

The specific requirements in this Chapter are additional to Chapters BC-A to BC-2. The requirements in Chapters BC-A to BC-2 apply to takaful firms unless those requirements are specifically modified or waived by this Chapter.

BC-3.2.1

The use of the terms 'takaful', 'retakaful', 'general takaful' and 'family takaful' may only be used to describe the products of insurance firms that are Islamic financial institutions within the meaning of the CBB Rulebook.

BC-3.2.2

For the purposes of this Module, references to takaful shall be taken as including 'takaful', 'retakaful', 'general takaful' and 'family takaful'.

BC-3.2.3

The use of the term 'Islamic insurance' should be avoided and may never be used by a firm not licensed to conduct the regulated activity of takaful.

BC-3.3.1

An insurance firm may only offer takaful products if it is licensed to do so. An insurance intermediary may offer both conventional insurance and takaful products but must provide clear information to enable consumers to make informed choices.

BC-3.3.2

Any comparison between takaful and conventional insurance products must draw the customer's attention to the principal differences between these products. These differences may include:

BC-3.4.1

Takaful firms must provide participants and shareholders with clear information about the performance of their business. This information must, as a minimum, comply with relevant AAOIFI standards, in particular Standard 13 (Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies) and 12 (General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies).

BC-3.4.2

Takaful firms must clearly disclose to participants the calculation (percentage) and amount of wakala fee and mudaraba share of profits paid by the takaful fund to the takaful operator.

BC-4.1.1

All insurance licensees must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31^st March 2012.

BC-4.1.2

Customer complaints procedures must be documented appropriately and their customers must be informed of their availability.

BC-4.1.3

All insurance licensees must appoint a customer complaints officer and publicise his/ her contact details at all departments and branches. The customer complaints officer must be of a senior level at the insurance licensee and must be independent of the parties to the complaint to minimize any potential conflict of interest.

BC-4.1.3A

The position of customer complaints officer may be combined with that of compliance officer.

BC-4.1.4

In the case of an overseas insurance licensee, a local complaints officer must be present and must report all complaints to the head office complaints unit.

BC-4.2.1

In order to make customer complaints handling procedures as transparent and accessible as possible, all insurance licensees must document their customer complaints handling procedures. These include setting out in writing:

BC-4.2.2

Insurance licensees must provide a copy of the procedures to all relevant staff, so that they may be able to inform customers. A simple and easy-to-use guide to the procedures must also be made available to all customers, on request, and when they want to make a complaint.

BC-4.2.3

Insurance licensees are required to ensure that claims forms and claim notification documents include a statement informing the customer of the availability of a simple and easy-to-use guide on customer complaints procedures in the event the customer is not satisfied with the services provided.

BC-4.3.1

Adherence to the following principles is required for effective handling of complaints:

Visibility

Accessibility

Responsiveness

Objectivity and Efficiency

BC-4.4.1

An insurance licensee's internal complaint handling procedures must provide for:

BC-4.4.2

An insurance licensee's internal complaint handling procedures must be designed to ensure that:

BC-4.5.1

An insurance licensee must acknowledge in writing within the same day of receipt of customer written complaints for non-life insurance policies and within 5 business days of receipt of customer written complaints for life insurance policies.

BC-4.5.2

An insurance licensee must respond in writing to a customer's complaint within one week of receiving non-life insurance policies complaint and within 2 weeks of receiving life insurance policies complaint, explaining their position and how they propose to deal with the complaint.

Redress

BC-4.6.1

An insurance licensee must maintain a record of all customers' complaints. The record of each complaint must include:

BC-4.7.1

An insurance licensee must submit to the CBB's Consumer Protection Unit a quarterly report summarising the following:

BC-4.7.2

The report referred to in Paragraph BC-4.7.1 must be sent electronically to Complaint@cbb.gov.bh.

BC-4.7.3

Where no complaints have been received by the licensee within the quarter, a 'nil' report should be submitted to the CBB’s Consumer Protection Unit.

BC-4.8.1

Compliance with these requirements is subject to the ongoing supervision of the CBB as well as being part of any CBB inspection of a licensee. Failure to comply with these requirements is subject to enforcement measures as outlined in Module EN (Enforcement).