AUTH App 5.7 The regulated activities: assisting in the administration and performance of a contract of insurance
The regulated activity of assisting in the administration and performance of a contract of insurance (article 39A) relates, in broad terms, to activities carried on by intermediaries after the conclusion of a contract of insurance and for or on behalf of policyholders, in particular in the event of a claim. Loss assessors acting on behalf of policyholders in the event of a claim are, therefore, likely in many cases to be carrying on this regulated activity. By contrast, claims management on behalf of certain insurers is not a regulated activity (see AUTH App 5.7.7 G (Exclusions)).
Neither assisting in the administration nor assisting in the performance of a contract alone will fall within this activity. Generally, an activity will either amount to assisting in the administration or assisting in the performance but not both. Occasionally, however, an activity may amount to both assisting in the administration and performance of a contract of insurance. For example, where a person assists a claimant in filling in a claims form, in the FSA's view this amounts to assisting in the administration of a contract of insurance. In some instances, however, this may also amount to assisting in the performance of a contract of insurance. In the FSA's view, an example of when a person may be assisting in the performance of a contract is where a person fills in the whole or a significant part of a claims form on behalf of a claimant. This is because, by helping complete a claims form, a person may be assisting the policyholder to perform his contractual obligation to notify the insurance undertaking in the event of a claim and provide details of the claim in the manner and form required by the contract.
Put another way, where an intermediary's assistance in filling in a claims form is material to whether performance takes place of the contractual obligation to notify claims, it is more likely to amount to assisting in the administration and performance of a contract of insurance. Conversely, in the FSA's view, a person who merely gives pointers about how to fill in the claims form or merely supplies information in support of a claim will not be assisting in the performance of a contract of insurance. Instead, the person will only be facilitating rather than assisting in the performance of a contract of insurance.
More generally, an example of an activity that, in the FSA's view, is likely to amount to assisting a policyholder in both the administration and the performance of a contract of insurance is notifying a claim under a policy and then providing evidence in support of the claim, or helping negotiate its settlement on the policyholder's behalf. Notifying an insurance undertaking of a claim assists the policyholder in discharging his contractual obligation to do so (assisting in the performance); providing evidence in support of the claim or negotiating its settlement assists management of the claim (assisting in the administration).
On the other hand, where a person does no more than advise a policyholder generally about making a claim or provide evidence in support of a claim, this is unlikely to amount to both assisting in the administration and performance. Similarly, the mere collection of premiums from policyholders is unlikely, without more, to amount to assisting in the administration and performance of a contract of insurance. The collection of premiums from customers or clients at the pre-contract stage, however, may amount to arranging (see example in AUTH App 5.15.4 G (Types of activity - are they regulated activities and, if so, why?)).
Where a person receives funds on behalf of a policyholder in settlement of a claim, in the FSA's view, the act of receipt is likely to amount to assisting in the performance of a contract. By giving valid receipt, the person assists the insurance undertaking to discharge its contractual obligation to provide compensation to the policyholder. He may also be assisting the policyholder to discharge any obligations he may have under the contract to provide valid receipt of funds, upon settlement of a claim. Where a person provides valid receipt for funds received on behalf of the policyholder, he is also likely to be assisting in the administration of a contract of insurance (for example, making prior arrangements relating to transmission and receipt of payment).
Exclusions
By article 39B of the Regulated Activities Order (Claims management on behalf of an insurer etc):
- (1)
loss adjusting on behalf of a relevant insurer (see AUTH App 5.7.8 G);
- (2)
expert appraisal; and
- (3)
managing claims for a relevant insurer;
are also excluded from the regulated activity of assisting in the administration and performance of a contract of insurance. This is where the activity is carried on in the course of carrying on any profession or business (see also AUTH App 5.14 (Exemptions)). In determining whether they are carrying on the regulated activity of assisting in the administration and performance of a contract of insurance, therefore, persons should consider whether they are acting on behalf of the relevant insurer and not the policyholder.
A 'relevant insurer' for the purposes of article 39B means:
- (1)
an authorised person who has permission for effecting and carrying out contracts of insurance; or
- (2)
a member of the Society of Lloyd's or the members of the Society of Lloyd's taken together; or
- (3)
- (4)
a reinsurer, being a person whose main business consists of accepting risks ceded by a person falling under (1), (2) or (3) or a person who is established outside the United Kingdom and who carries on the activity of effecting and carrying out contracts of insurance.
So, a person whose activities are excluded under article 12 of the Regulated Activities Order (Breakdown insurance) will not be a relevant insurer for these purposes and any person who performs loss adjusting or claims management on behalf of such a person will not be able to use the exclusion in article 39B.