AUTH App 5.1 Application and purpose

This appendix applies principally to any person who needs to know whether he carries on insurance mediation activities and is thereby subject to FSA regulation. As such it will be of relevance among others to:

1. (1)

   insurance brokers;

2. (2)

   insurance advisers;

3. (3)

   insurance undertakings; and

4. (4)

   other persons involved in the sale and administration of contracts of insurance, even where these activities are secondary to their main business.

With effect from 14 January 2005 certain pre-contractual sales and post-contractual administration activities relating to contracts of insurance will become regulated by the FSA for the first time as part of the implementation by the United Kingdom of the Insurance Mediation Directive (IMD).

The insurance mediation activities apply to all contracts of insurance, but the implementation of the IMD brings the mediation of general insurance contracts and pure protection contracts within the scope of FSA regulation for the first time.

The FSA already regulates certain activities carried on by intermediaries in relation to life policies (see the guidance contained in AUTH 2 (Authorisation and regulated activities)). However, the changes to FSA regulation in force from 14 January 2005 will also potentially affect the regulatory position of firms already carrying on regulated activities in connection with life policies including insurers. These firms should therefore consider whether or not they need to apply for a variation of their Part IV permission.

Insurance mediation activities will typically be carried out by insurance and reinsurance brokers, financial advisers, agents, consultants and outsourcers. In addition, persons whose principal business is not insurance mediation may also carry on these activities and will need to consider whether they require authorisation or can benefit from an exclusion or exemption.

The purpose of this guidance is to help persons consider whether they need authorisation or a variation of their Part IV permission. Businesses new to regulation who act only as introducers of insurance business are directed in particular to AUTH App 5.6.2 G (Article 25(1): arranging (bringing about) deals in investments) to AUTH App 5.6.9 G (Exclusion: article 72C provision of information on an incidental basis) and AUTH App 5.15.6 G (Flow chart: introducers) to help consider whether they require authorisation. This guidance also explains the availability to persons carrying on insurance mediation activities of certain exemptions from FSA regulation, including the possibility of becoming an appointed representative (see AUTH App 5.13.1 G to AUTH App 5.13.6 G (Appointed representatives)).

This guidance is issued under section 157 of the Act (Guidance). It is designed to throw light on particular aspects of regulatory requirements, not to be an exhaustive description of a person's obligations. If a person acts in line with the guidance and the circumstances contemplated by it, then the FSA will proceed on the footing that the person has complied with aspects of the requirement to which the guidance relates.

Rights conferred on third parties cannot be affected by guidance given by the FSA. This guidance represents the FSA's view, and does not bind the courts, for example, in relation to the enforceability of a contract where there has been a breach of the general prohibition on carrying on a regulated activity in theUnited Kingdom without authorisation (see sections 26 to 29 of the Act (Enforceability of Agreements)).

A person reading this guidance should refer to the Act and the various Orders that are referred to in this guidance. These should be used to find out the precise scope and effect of any particular provision referred to in this guidance. A person may need to seek his own legal advice.

The text in AUTH App 5.1.2 G to AUTH App 5.1.6 G, AUTH App 5.2.6 G, AUTH App 5.11.2 G, AUTH App 5.13.5 G and AUTH App 5.13.6 G relates only to the period prior to the implementation of the Insurance Mediation Directive, that is before 14 January 2005.

A person may wish to carry on activities related to other forms of investment in connection with contracts of insurance, such as advising on and arranging regulated mortgage contracts. Such a person should also consult the guidance in AUTH 2 (Authorisation and Regulated Activities), AUTH App 1 (Financial Promotion and Related Activities) and AUTH App 4 (Regulated activities connected with mortgages).