Under the PPB legislation, a policyholder’s ability to
select property or an index is defined to have a wide scope. It
extends to circumstances where a policyholder has any say, even
indirectly, in the selection of the property or index.
In particular, a policyholder will be treated as having the
ability to select property or an index if under the terms of the
policy or contract, the index or property in question may be
selected by any of the following:
Where there is more than one policyholder, there will be an
‘ability to select’ if
any of the policyholders have the ability to
select property or an index.
Where the policyholder genuinely does not have the ability to
select property or an index, even if that property or index is not
within any of the permitted categories, the policy or contract will
not be a PPB, although the presence of personal assets would test
this analysis.
If, for instance, the insurer has complete discretion over
the selection of the property or index determining the benefits
then the policy would not be a PPB. But if the policyholder does
have influence over the selection then the ‘ability to
select’ lies with the policyholder.
Where the policyholder is also an employee of a permitted
fund such as a collective investment scheme or investment trust
company – see
IPTM7745 and
IPTM7750 – and selects units or
shares in that fund, that in itself would not cause the policy to
be a PPB. However, the property selection conditions would still
need to be met – see
IPTM7780 onwards.
Even if the original terms of the policy provide only for the selection of property within the permitted categories, if the policyholder subsequently selects other property then that will indicate that the terms of the policy have been varied to allow selection of property wider than the permitted categories. Then the policy will be a PPB.
If a policyholder is entitled to exercise an option to select
property or an index determining the benefits under the policy then
the policyholder does have the ‘ability to select’ even
if the option is not exercised. But if the insurer has discretion
to offer the policyholder the right to select the property or
index, the policyholder will have no ability to select until this
discretion has been exercised by the insurer.
Similarly, if the terms of the policy allow the policyholder
to request a change in its terms to permit selection of property
outside the scope of the permitted property, but subject to the
agreement of the insurer, the policyholder lacks the ability to
select until the insurer has agreed. A link to personal assets to
determine policy benefits will indicate the existence of an ability
to select.
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