This chapter applies principally to any person who needs to know whether they carry on insurance distribution activities and are1 thereby subject to FCA 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.

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The purpose of this guidance is to help persons consider whether they need authorisation or a variation of their Part 4A permission. Businesses1 who act only as introducers of insurance business are directed in particular to PERG 5.6.2 G1 to PERG 5.6.9 G1 to help consider whether they require authorisation. This guidance also explains the availability to persons carrying on insurance distribution activities1 of certain exemptions from regulation, including the possibility of becoming an appointed representative (see PERG 5.131(Appointed representatives)).

This guidance is issued under section 139A 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 FCA 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 FCA. This guidance represents the FCA'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 the United 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.

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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 arrangingregulated mortgage contracts. Such a person should also consult the guidance in PERG 2 (Authorisation and Regulated Activities), PERG 4 (Regulated activities connected with mortgages) and PERG 8 (Financial Promotion and Related Activities). A person may also wish to carry on regulated claims management activities (where their activities are not insurance distribution activities, and they fall outside of the exclusion in article 89U of the Regulated Activities Order). Such a person should also consult the guidance in PERG 2.7.20M and PERG 2.7.20N.2

Any person who carries on a regulated activity in the United Kingdom by way of business must either be an authorised person or exempt from the need for authorisation. Otherwise, the person commits a criminal offence and certain agreements may be unenforceable. PERG 2.2 (Authorisation and regulated activities) has further guidance on these consequences.

A person who is concerned to know whether their proposed insurance distribution activities4 may require authorisation will need to consider the following questions:4

1. (1)

   will the activities relate to contracts of insurance (see PERG 5.3(Contracts of insurance))?

2. (2)

   if so, will I be carrying on any insurance distribution activity4 (see PERG 5.5 (The regulated activities: dealing in contracts as agent) to PERG 5.11 (Other aspects of exclusions))?

3. (3)

   if so, will I be carrying on my activities by way of business (see PERG 5.4 (The business test))?

4. (4)

   if so, is there the necessary link with the United Kingdom (see PERG 5.12 (Link between activities and the United Kingdom))?

5. (5)

   if so, will any or all of my activities be excluded (see PERG 5.3.7 G (Connected contracts of insurance) to PERG 5.3.8 G (Large risks); PERG 5.6.4AG4 (Exclusions for the provision of information: article 33B and 72C4) to PERG 5.6.23 G (Other exclusions); PERG 5.7.7 G (Exclusions); PERG 5.8.24 G (Exclusion: periodical publications, broadcasts and web-sites) to PERG 5.8.26 G (Other exclusions); PERG 5.11 (Other aspects of exclusions) and PERG 5.12.9 G to PERG 5.12.10 G (Overseas persons))?

6. (6)

   if it is not the case that all of my activities are excluded, am I a professional firm whose activities are exempted under Part XX of the Act (see PERG 5.14.1 G to PERG 5.14.4 G (Professionals))?

7. (7)

   if not, am I exempt as an appointed representative (see PERG 5.13 (Appointed representatives))?

8. (8)

   if not, am I otherwise an exempt person (see PERG 5.14.5 G (Other exemptions))?

If a person gets as far as question (8) and the answer to that question is "no", that person requires authorisation and should refer to the FCA website page “How to apply4 for authorisation”: www.fca.org.uk/firms/authorisation/apply-authorisation for details of the application process.2 The order of these questions considers firstly whether a person is carrying on insurance distribution activities4 before dealing separately with the questions "will I be carrying on my activities by way of business?" (3) and "if so, will any or all of my activities be4 excluded?" (5).

It is recognised pursuant to section 22 of the Act that a person will not be carrying on regulated activities in the first instance, including insurance distribution activities4, unless the person is4 carrying on these activities by way of business. Similarly, where a person's activities are excluded that person4 cannot, by definition, be carrying on regulated activities. To this extent, the content of the questions above does not follow the scheme of the Act. For ease of navigation, however, the questions are set out in an order and form designed to help persons consider more easily, and in turn, issues relating to:

1. (1)

   the regulated activities4;

2. (2)

   the business test; and

3. (3)

   the exclusions.

The IDD4 imposes requirements upon EEA States relating to the regulation of insurance distribution and reinsurance distribution4. The IDD defines “insurance distribution”4 as including the activities of advising on4, proposing or carrying out other work preparatory to the conclusion of contracts of insurance4, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim. It includes the provision of information concerning one or more insurance contracts in accordance with criteria selected by customers through a website or other media and the compilation of an insurance product ranking list, including price and product comparison, or a discount on the price of an insurance contract, when the customer is able to directly or indirectly conclude an insurance contract using a website or other media. Reinsurance distribution is similarly defined (excluding the price comparison website activities).4 (The text of IDD articles 2.1(1), 2.1(2) and 2.2 is reproduced in full in PERG 5.16.2G4).

The United Kingdom5implemented the IDD (and the IMD before it)4, in part, through secondary legislation, which applies4 pre-existing regulated activities (slightly amended) in the Regulated Activities Order to the component elements of the insurance distribution and reinsurance distribution definitions in the IDD4 (see PERG 5.2.5 G and the text of IDD articles 2.1(1), 2.1(2) and 2.24 in PERG 5.16.2G4).

As a result,4 each of the regulated activities below potentially applies4 to any contract of insurance:

1. (1)

   dealing in investments as agent (article 21 (Dealing in investments as agent));

2. (2)

   arranging (bringing about) deals in investments (article 25(1) (Arranging deals in investments));

3. (3)

   making arrangements with a view to transactions in investments (article 25(2) (Arranging deals in investments));

4. (4)

   assisting in the administration and performance of a contract of insurance (article 39A (Assisting in the administration and performance of a contract of insurance));

5. (5)

   advising on investments (except P2P agreements) (article 53(1)3 (Advising on investments));

6. (6)

   agreeing to carry on any of the above regulated activities (article 64 (Agreeing to carry on specified types of activity)).

It is the scope of the Regulated Activities Order rather than the IDD4 which will determine whether a person requires authorisation or exemption. However, the scope of the activities set out in the5IDD4 is relevant to the application of certain exclusions under the Regulated Activities Order (see, for example, the commentary on article 67 in PERG 5.11.9 G (Activities carried on in the course of a profession or non-investment business)).

An unauthorised person who intends to carry on activities connected with contracts of insurance will need to comply with section 21 of the Act (Restrictions on financial promotion). This guidance does not cover financial promotions that relate to contracts of insurance. Persons should refer to the general guidance on financial promotion in PERG 8 (Financial promotion and related activities). (See in particular PERG 8.17A (Financial promotions concerning insurance distribution4 activities) for information on financial promotions that relate to insurance distribution activities4.)

A person who is concerned to know whether his proposed activities may require authorisation will wish to consider whether those activities relate to contracts of insurance or contracts of reinsurance, or to insurance business or reinsurance business, which is the business of effecting or carrying out contracts of insurance or reinsurance as principal.

The Regulated Activities Order does not attempt an exhaustive definition of a 'contract of insurance'. Instead, article 3(1) of the order (Interpretation) makes some specific extensions and limitations to the general common law meaning of the concept. For example, article 3(1) expressly extends the concept to fidelity bonds and similar contracts of guarantee, which are not contracts of insurance at common law, and it excludes certain funeral plan contracts, which would generally be contracts of insurance at common law.

One consequence of this is that common law judicial decisions about whether particular contracts amount to 'insurance' or their being effected or carried out amounts to 'insurance business' are relevant in defining the regulatory scope of the Act.

As with any other contract, a contract of insurance that is not effected by way of a deed will only be legally binding if, amongst other things, it is entered into for valuable consideration. Determining what amounts to sufficient consideration in any given case is a matter for the courts. In practice, however, the legal definition of consideration is very wide. In particular, just because a contract of insurance is 'free' in the colloquial sense does not mean that there is no consideration for it. In the vast majority of cases, therefore, 'free' insurance policies (such as policies that act as loss leaders for an insurance undertaking) will be binding contracts and will amount to specified investments and therefore be subject to regulation under the Act.5

The Regulated Activities Order does not define a reinsurance contract. The essential elements of the common law description of a contract of insurance are also the essential elements of a reinsurance contract. Whilst the terms derived from the IDD3 address4 insurance and reinsurance separately, throughout this guidance the term 'contract of insurance' (italicised or otherwise) also applies to contracts of reinsurance.

Guidance describing how the FCA identifies contracts of insurance is in PERG 6 (Guidance on the Identification of Contracts of Insurance).

Article 72B of the Regulated Activities Order (Activities carried on by a provider of relevant goods or services) excludes from FCA regulation certain regulated activities carried on by providers of non-motor goods or services3 and services related to travel in relation to contracts of insurance that satisfy a number of conditions. Details about the scope of this exclusion can be found at PERG 5.11.13 G to PERG 5.11.14G (Activities carried on by a provider of relevant goods or services).

Large risks situated outside the UK4 are also excluded (described in more detail at PERG 5.11.16 G (Large risks)). The location of the risk or commitment may be determined by reference to the State in which the risk is situated or the State of the commitment.4 Broadly put, this is:

1. (1)

   for insurance relating to buildings and/or their contents, the State4 in which the property is situated;

2. (2)

   for insurance relating to vehicles, the State4 of registration;

3. (3)

   for policies of four months or less duration covering travel or holiday risks, where the policy was taken out;

4. (4)

   in all other cases (including those determined by reference to the State4 of the commitment), the State4 where the policyholder has his habitual residence, or if the policyholder is a legal person, where his establishment, to which the contract relates, is situated.

For an activity to be a regulated activity, it must be carried on in relation to 'specified investments' (see section 22 of the Act Regulated activities) and Part III of the Regulated Activities Order (Specified investments)). For the purposes of insurance distribution activity3, specified investments include the following 'relevant investments' defined in article 3(1) of the Regulated Activities Order (Interpretation):

1. (1)

   rights under any contract of insurance (see article 75 (Contracts of insurance)); and

2. (2)

   rights to or interests in rights under life policies (see article 89 (Rights to or interests in investments)).

'Relevant investments' is the term used in articles 21 (Dealing in investments as agent), 25 (Arranging deals in investments) and 53(1)2 (Advising on investments (except P2P agreements)2)

of the Regulated Activities Order to help define the types of investment to which the activities in each of these articles relate.

A person will have rights under a contract of insurance when that person3 is a policyholder. The question of whether a person has rights under a contract of insurance may require careful consideration in the case of group policies (with reference to the Glossary definition of policyholder). In the case, in particular, of general insurance contracts and pure protection contracts, the existence or otherwise of rights under such policies may be relevant to whether a person is carrying on insurance distribution activities3.

A person may also have rights to or interests in rights under a life policy where he is not a policyholder, but this will again depend on the terms of the individual policy.

A person will only need authorisation or exemption if 1carrying on a regulated activity 'by way of business' (see section 22 of the Act (Regulated Activities)).

There is power in the Act for the Treasury to specify the circumstances in which a person is or is not to be regarded as carrying on regulated activities by way of business. The Business Order has been made using this power (partly reflecting differences in the nature of the different activities). As such, the business test for insurance distribution activity1 is distinguished from the standard test for 'investment business' in article 3 of the Business Order. Under article 3(4) of the Business Order, a person is not to be regarded as carrying on by way of business any insurance distribution activity1 unless that person1 takes up or pursues that activity for remuneration. Accordingly, there are two principal elements to the business test in the case of insurance distribution activities1:

1. (1)

   does a person receive remuneration for these activities?

2. (2)

   if so, does he take up or pursue these activities by way of business?

1. (1)

   As regards PERG 5.4.2G(1), the Business Order does not provide a definition of ‘remuneration’, however ‘remuneration’ is defined in the IDD. Article 2(1)(9) of the IDD defines ‘remuneration’ to mean any commission, fee, charge or other payment, including an economic benefit of any kind or any other financial or non-financial advantage or incentive offered or given in respect of insurance distribution activities.1

2. (2)

   In the FCA’s view, ‘remuneration’ in the Business Order follows the meaning of the IDD definition of remuneration, and:1

   1. (a)

      it has a broad meaning and covers both monetary and non-monetary rewards. This is regardless of who makes them. For example, where a person pays discounted premiums for their own insurance needs in return for bringing other business to an insurance undertaking, the discount would amount to remuneration for the purposes of the Business Order;1

   2. (b)

      it can also take the form of an economic benefit which the person expects to receive as a result of carrying on insurance distribution activities;1

   3. (c)

      it does not have to be provided or identified separately from remuneration for other goods or services provided. Nor is there a minimum level of remuneration.1

As regards PERG 5.4.2G (2), in the FCA's view, for a person to take up or pursue insurance distribution activity by way of business, the person1 will usually need to be carrying on those activities with a degree of regularity. The person will also usually need to be carrying on the activities for commercial purposes. That is to say, the person1 will normally be expecting to gain a direct financial benefit of some kind. Activities carried on out of friendship or for altruistic purposes will not normally amount to a business. However, in the FCA's view:

1. (1)

   it is not necessarily the case that services provided free of charge will not amount to a business; for example, advice (including advice available on a website) may be provided free of charge to potential policyholders but in the course of a business funded by commission payments; and

2. (2)

   the 'by way of business' test may very occasionally be satisfied by an activity undertaken on an isolated occasion (provided that the activity would be regarded as done 'by way of business' in other respects, for example, because of the size of reward received or its relevance to other business activities).

It follows that whether or not any particular person is acting 'by way of business' for these purposes will depend on that person’s1 individual circumstances. However, a typical example of where the applicable business test would be likely to be satisfied by someone whose main business is not insurance distribution activities1, is where a person recommends or arranges specific insurance policies in the course of carrying on that other business and receives a fee or commission for doing so.

Some typical examples of where the business test is unlikely to be satisfied, assuming that there is no direct financial benefit to the arranger, include:

1. (1)

   arrangements which are carried out by a person for their own benefit,1 or for members of the person’s1 family;

2. (2)

   where employers provide insurance benefits for staff; and

3. (3)

   where affinity groups or clubs set up insurance benefits for members.

PERG 5.4.8 G contains a table that summarises the main issues surrounding the business test as applied to insurance distribution activities1 and that may assist persons to determine whether they will need authorisation or exemption. The approach taken in the table involves identifying factors that, in the FCA's view, are likely to play a part in the analysis. Indicators are then given as to the significance of each factor to the person's circumstances. By analysing the indicators as a whole, a picture can be formed of the likely overall position. The table provides separate indicators for the two elements of remuneration and by way of business. As a person has to satisfy both elements, a clear overall indication against either element being satisfied should mean that the test is failed. This approach cannot be expected to provide a clear conclusion for everyone. But it should enable persons to assess the relevant aspects of their activities and to identify where changes could, if necessary, be made so as to make their position clearer. The person to whom the indicators are applied is referred to in the table as 'P'.

Article 21 of the Regulated Activities Order (Dealing in investments as agent) makes dealing in contracts of insurance as agent a regulated activity. The activity is defined in terms of buying, selling, subscribing for or underwriting contracts as agent, that is, on behalf of another. Examples include:

1. (1)

   where an intermediary, by accepting on the insurance undertaking's behalf to provide the insurance, commits an insurance undertaking to provide insurance for a prospective policyholder; or

2. (2)

   where the intermediary agrees, on behalf of a prospective policyholder, to buy an insurance policy.

Intermediaries with delegated authority to bind insurance undertakings are likely to be dealing in investments as agent. It should be noted, in particular, that this is a regulated activity:

1. (1)

   whether or not any advice is given (see PERG 5.8 (The regulated activities: advising on contracts of insurance); and

2. (2)

   whether or not the intermediary deals through an authorised person (for example, where he instructs another agent who is an authorised person to enter into a contract of insurance on his client's behalf).

There are also certain exclusions which are relevant to whether a person is carrying on the activity of dealing in investments as agent (see PERG 5.11 (Other aspects of exclusions)).

Article 25 of the Regulated Activities Order (Arranging deals in investments) describes two types of regulated activities concerned with arranging deals in respect of contracts of insurance. These are:

1. (1)

   arranging (bringing about) deals in investments (article 25(1) (Arranging deals in investments)); and

2. (2)

   making arrangements with a view to transactions in investments (article 25(2) (Arranging deals in investments)).

The activity in article 25(1) is carried on only if the arrangements bring about, or would bring about, the transaction to which the arrangement relates. This is because of the exclusion in article 26 of the Regulated Activities Order (Arrangements not causing a deal). Article 26 excludes from article 25(1) arrangements which do not bring about or would not bring about the transaction to which the arrangements relate. In the FCA's view, a person would bring about a contract of insurance if his involvement in the chain of events leading to the contract of insurance were important enough that, without it, there would be no policy. Examples of this type of activity would include negotiating the terms of the contract of insurance on behalf of the customer with the insurance undertaking and vice versa, or assisting in the completion of a proposal form and sending it to the insurance undertaking. Other examples include where an insurance undertaking enters into a contract of insurance as principal or an intermediary enters into a contract of insurance as agent.

The activity within article 25(2) contrasts with article 25(1) in that it is not limited by the requirement that the arrangements would bring about the transaction to which they relate.

Article 25(2) may, for instance, include activities of persons who help potential policyholders fill in or check application forms in the context of ongoing arrangements between these persons and insurance undertakings. A further example of this activity would be a person introducing customers to an intermediary either for advice or to help arrange an insurance policy. The introduction might be oral or written. By contrast, the FCA considers that a mere passive display of literature advertising insurance (for example, leaving leaflets advertising insurance in a dentist's or vet's waiting room and doing no more) would not amount to the article 25(2) activity.

1 Articles 33B and 72C of the Regulated Activities Order provide exclusions relating to the provision of information from the regulated activity of arranging.

1In broad terms, article 33B of the Regulated Activities Order excludes from article 25 (arranging) activities that consist of:

1. (1)

   the provision of information about a potential policyholder to:

   1. (a)

      a relevant insurer (as defined in article 39B(2) of the Regulated Activities Order) or

   2. (b)

      an insurance intermediary (as defined in article 33B(4) of the Regulated Activities Order2) or

   3. (c)

      an IDD reinsurance intermediary; or

2. (2)

   the provision of information to a potential policyholder about:

   1. (a)

      a contract of insurance; or

   2. (b)

      a relevant insurer (as defined in article 39B(2) of the Regulated Activities Order) or insurance intermediary (as defined in article 33B(4) of the Regulated Activities Order2) or IDD reinsurance intermediary,

where the provider of the information does not take any step other than the provision of information to assist in the conclusion of a contract of insurance.

1The exclusion in PERG 5.6.4BG will be of assistance to persons who would otherwise be carrying on the regulated activity of arranging. This exclusion was introduced2 to give effect to article 2.2 of the IDD (the text of which is reproduced in PERG 5.16.2G(2)) which refers to the ‘mere’ provision of this information without taking any additional steps not being considered to constitute insurance distribution. In the FCA’s view, the effect of this, and the reference in article 2.2(c) of the IDD to ‘data and information on potential policyholders’, is that the exclusion in PERG 5.6.4BG covers those situations where a person provides existing information they hold on potential policyholders (for example their name and contact details) but does not extend to information they obtain from other means such as pre-purchase questioning.

1A person seeking to rely on article 33B cannot provide information other than the information specified in that article. That person also cannot take a step other than the provision of the specified information where such a step would assist in the conclusion of a contract of insurance. For example, a person who forwards a proposal form to an insurance undertaking would not be able to benefit from the exclusion. Similarly, where a person does more than provide information (for example, by helping a potential policyholder fill in an application form) they would be unable to rely on this exclusion.

1This exclusion does not cover the activity of advising a customer under article 53(1) of the Regulated Activities Order (Advising on investments (other than P2P agreements)) (see PERG 5.8 and PERG 8.24).

Article 72C of the1Regulated Activities Order provides another1 potential exclusion in relation to article 251, however, only1 for persons whose principal business is other than insurance distribution activities. In contrast to article 33B, article 72C also provides an exclusion for regulated activities other than arranging1.

In broad terms, article 72C of the Regulated Activities Order excludes from the activities of arranging and assisting in the administration and performance of a contract of insurance activities that:

1. (1)

   consist of the provision of information to the policyholder or potential policyholder;

2. (2)

   are carried on by a person carrying on any profession or business which does not otherwise consist of regulated activities; and

3. (3)

   amount to the provision of information that may reasonably be regarded as being incidental to that profession or business.

In the FCA's view, 'incidental' in this context means that the activity must arise out of, be complementary to or otherwise be sufficiently closely connected with the profession or business. In other words, there must be an inherent link between the activity and the firm's main business. For example, introducing dental insurance may be incidental to a dentist's activities; introducing pet insurance would not be incidental to his activities. In addition, to be considered 'incidental', in the FCA's view, the activity must not amount to the carrying on of a business in its own right.

This exclusion applies to a person whose profession or business does not otherwise consist of regulated activities. In the FCA's view, the fact that a person may carry on regulated activities in the course of the carrying on of a profession or business does not, of itself, mean that the profession or business consists of regulated activities. This is provided that the main focus of the profession or business does not involve regulated activities and that the regulated activities that are carried on arise in a way that is incidental and complementary to the carrying on of the profession or business. So, the exclusion may be of relevance to exempt professional firms. It might also, for example, be relied on by doctors, vets and dentists as well as many businesses in the non-financial sector, even if they have permission to carry on regulated activities or are appointed representatives. This is assuming that their activities for which they are seeking to use the exclusion in article 72C are limited to providing information in a way which is incidental to their main profession or business. In contrast to article 33B, this1 exclusion only extends to information given to the policyholder or potential policyholder and not to the insurance undertaking. Unlike article 33B, article 72C does not specify what information may be provided within the scope of the exclusion.1 An intermediary who forwards a proposal form to an insurance undertaking would not be able to take the benefit of the exclusion. Similarly, where a person does more than provide information (for example, by helping a potential policyholder fill in an application form), they1 cannot take the benefit of this exclusion. Nor does it cover the activity of advising a customer under article 53 of the Regulated Activities Order (Advising on investments).

The exclusion may1 be of assistance to introducers who would otherwise be carrying on the regulated activity of making arrangements with a view to transactions in investments.1 Introducers may also find the guidance at PERG 5.9.2 G (The regulated activities: agreeing to carry on a regulated activity) and PERG 5.6.4BG to PERG 5.6.4EG1 helpful. PERG 5.6.17 G (Exclusion from article 25(2) for introducing) has guidance to assist persons to1 determine whether their introducing activities amount to making arrangements with a view to transactions in investments.

Article 27 of the Regulated Activities Order (Enabling parties to communicate) contains an exclusion that applies to arrangements which might otherwise bring within article 25(2) those who merely provide the means by which one party to a transaction (or potential transaction) is able to communicate with other parties. Simply providing the means by which parties to a transaction (or potential transaction) are able to communicate with each other is excluded from article 25(2) only. This will ensure that persons such as internet service providers or telecommunications networks are excluded if all they do is provide communication facilities (and these would otherwise be considered to fall within article 25(2)).

In the FCA's view, the crucial element of the exclusion in article 27 is the inclusion of the word 'merely'. When a publisher, broadcaster or internet website operator goes beyond what is necessary for him1 to provide its1 service of publishing, broadcasting or otherwise facilitating the issue of promotions, it may well bring itself1 within the scope of article 25(2). Further detailed guidance relating to the scope of the exclusion in article 27 is contained in PERG 2.8.6G (2) (Arranging deals in investments and arranging a home finance transaction1) and PERG 8.32.6 G to PERG 8.32.11 G (Arranging deals in investments).

Article 28 of the Regulated Activities Order (Arranging transactions to which the arranger is a party) excludes from the regulated activities in article 25(1) and 25(2) arrangements made for or with a view to contracts of insurance when:

1. (1)

   the person (P) making the arrangements is the only policyholder; or

2. (2)

   P, as a result of the transaction, would become the only policyholder.

Market makers in traded endowment policies may be able to rely on this exclusion to avoid the need to be authorised. They must ensure, however, that where they are carrying on the regulated activity of dealing in investments as principal (article 14) they are also able to rely on the exclusions in articles 15 or 16 (see the guidance in PERG 2.8.4 G (Dealing in investments as principal)).

Insurance undertakings do not fall within the terms of this exclusion and so will be arrangingcontracts of insurance, in addition to effecting and carrying out contracts of insurance.

In some cases, a person may make arrangements to enter into a contract of insurance as policyholder on its own behalf and also arrange that another person become a policyholder under the same contract of insurance. If so, the person should be aware that the effect of the narrower exclusion in article 28 as part of implementation of the IDD1 is that they1 may be arranging on behalf of the other policyholder. This may be relevant, for example, to a company which arranges insurance for itself (not arranging) as well as other companies in a group or loan syndicate (potentially arranging).

The restriction in the scope of article 28 raises an issue where there is a trust with co-trustees, where each trustee will be a policyholder with equal rights and obligations. If the activities of one of the trustees include arranging in respect of contracts of insurance, that trustee could be viewed as arranging on behalf of his co-trustees who will also be policyholders. Similar issues also arise in respect of trustees assisting in the administration and performance of a contract of insurance. The FCA is of the view, however, that trustees should not be regarded as carrying on regulated activities where they are acting as joint policyholders in arranging or assisting in the administration and performance of a contract of insurance. In this respect, trustees differ from policyholders under a group policy, where each person covered under the group policy may make claims on the policy in relation to his own risks. In that situation, a policyholder who is providing services to other policyholders of arranging or assisting in the administration and performance of a contract of insurance will be carrying on a regulated activity.

Article 33 of the Regulated Activities Order (Introducing) excludes arrangements which would otherwise fall under article 25(2) where:

1. (1)

   they are arrangements under which persons will be introduced to another person;

2. (2)

   the person to whom introductions are to be made is:

   1. (a)

      an authorised person; or

   2. (b)

      an exempt person acting in the course of business comprising a regulated activity in relation to which they are1 exempt; or

   3. (c)

      a person who is not unlawfully carrying on regulated activities in the United Kingdom and whose ordinary business involves the person1 in engaging in certain activities;

3. (3)

   the introduction is made with a view to the provision of independent advice or the independent exercise of discretion in relation to investments generally or in relation to any class of investments to which the arrangements relate; and

4. (4)

   the arrangements do not relate to transactions relating to contracts of insurance.

The effect of PERG 5.6.17G (4) is that some persons who, in making introductions, are making arrangements with a view to transactions in investments under article 25(2) of the Regulated Activities Order, cannot use the introducing exclusion. This is usually the case if1 the arrangements for making introductions relate to contracts of insurance (PERG 5.6.19 G has further guidance on when arrangements for introductions may be regarded as relating to contracts of insurance). However, this does not mean that all introducers whose introductions relate directly or indirectly to contracts of insurance will necessarily require authorisation if they cannot use the exclusions in articles 33B or1 72C of the Regulated Activities Order for merely passing information. For a person to need authorisation, they1must first be carrying on the business of making arrangements with a view to transactions in investments. In the FCA's view, the following points will be relevant in determining whether this is the case.

1. (1)

   Article 25(2) applies to ongoing arrangements made with a view to transactions taking place from time to time as a result of persons having taken part in the arrangements. So, they will not apply to one-off introductions or introductions that are not part of an ongoing pre-existing arrangement between introducer and introducee. An introducer who merely suggests to a person that he seeks advice or assistance from an authorised person or an exempt person with whom the introducer has no pre-existing agreement that anticipates introductions will be made, will not be making arrangements at all. He will simply be offering general advice or information.

2. (2)

   The purpose of the arrangements must be for the person who is introduced to, in general terms, enter into a transaction to buy or sellsecurities or relevant investments. So, arrangements for introducing persons for advice only will not be caught (for example, introductions to a financial planner or to the publisher of an investment newsletter). In other cases, it may be likely that transactions will be entered into following the provision of advice. Provided the introducer is completely indifferent as to whether or not a contract of insurance may ultimately be bought (or sold) as a result of the advice given to the person he has introduced, the introducer will not be making arrangements with a view to transactions in investments. This is likely to be the case where the introducer does not receive any pecuniary reward that is linked to the volume of business done as a result of his introductions.

Where a person is making arrangements with a view to transactions in investments by way of making introductions, and he is not completely indifferent to whether or not transactions may result, it may still be the case that the exclusion in article 33 will apply. In the FCA's view, this is where:

1. (1)

   the introduction is for independent advice on investments generally; and

2. (2)

   the introducer is indifferent as to whether or not a contract of insurance may ultimately be bought (or sold) rather than any other type of investment.

This is because the arrangements for making introductions do not specifically relate to a contract of insurance or to any other type of investment but to investments generally. Whether or not a person is making arrangements for introductions for the purpose of the provision of independent advice on investments generally will depend on the facts in any particular case. But, in the FCA's view, it is very unlikely that article 33 could apply where introductions are made to a person for the purposes of that person giving advice on and then arranginggeneral insurance.

The table in PERG 5.6.21 G has examples of the application of article 33 to arrangements for making introductions.

An unauthorised person who makes arrangements with a view to a person who participates in the arrangements buying or sellingcontracts of insurance may be excluded from article 25(2) by article 32 of the Regulated Activities Order (Provision of finance). This is provided the sole purpose of the arrangements is the provision of finance to enable the person to buy the contract of insurance. Premium finance companies may be able to rely on this exclusion provided the arrangements they put in place, taken as a whole, have as their sole purpose the provision of finance to fund premiums.

The Regulated Activities Order contains some other exclusions which have the effect of narrowing or limiting the application of regulated activities within article 25 by preventing certain activities from amounting to regulated activities. These are referred to in PERG 5.11.8 G (Exclusions applying to more than one regulated activity).

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, managing1 claims on behalf of certain insurers is not a regulated activity (see PERG 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 FCA'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 FCA'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 FCA'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 FCA'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 PERG 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 FCA'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).

By article 39B of the Regulated Activities Order (Claims management on behalf of an insurer etc):

1. (1)

   loss adjusting on behalf of a relevant insurer (see PERG 5.7.8 G);

2. (2)

   expert appraisal; and

3. (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 PERG 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. (1)

   an authorised person who has permission for effectingand carrying out contracts of insurance; or

2. (2)

   a member of the Society of Lloyd's or the members of the Society of Lloyd's taken together; or

3. (3)

   [deleted]2

4. (4)

   a reinsurer, being a person whose main business consists of accepting risks ceded by a person falling under (1) or (2)2 or a person who is established outside the United Kingdom and who carries on the activity of effectingand 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 managing1

claims

on behalf of such a person will not be able to use the exclusion in article 39B.

Article 53(1)2 of the Regulated Activities Order (Advising on Investments (except P2P agreements)2) makes advising on contracts of insurance a regulated activity. This covers advice which is both:

1. (1)

   given to a person in his capacity as an insured or potential insured, or as agent for an insured or a potential insured; and

2. (2)

   advice on the merits of the insured or his agent:

   1. (a)

      buying, selling, subscribing for or underwriting a particular contract of insurance; or

   2. (b)

      exercising any right conferred by a contract of insurance to buy, sell, subscribe for or underwrite a contract of insurance.

For advice to fall within article 53(1)2, it must:

1. (1)

   relate to a particular contract of insurance (that is, one that a person may enter into);

2. (2)

   be given to a person in his capacity as an investor or potential investor;

3. (3)

   be advice (that is, not just information); and

4. (4)

   relate to the merits of a personbuying, selling, subscribing for or underwriting (or exercising any right to do so) a contract of insurance or rights to or interests in life policies.

Each of these aspects is considered in greater detail in the table in PERG 5.8.5 G. Where an activity is identified as not amounting to advising on investments (except P2P agreements)3 it could still form part of another regulated activity. This will depend upon whether a person's activities, viewed as a whole, amount to arranging. Additionally, it should be borne in mind that the provision of advice or information may involve the communication of a financial promotion (see PERG 8 (Financial promotion and related activities)).

1. (1)

   4The scope of the regulated activity of advising on investments (except P2P agreements) is narrower for a person who is authorised for the purposes of the Act to carry on certain regulated activities (as set out in (2)) than as described in PERG 5.8.1G and PERG 5.8.2G.

2. (2)

   The narrower scope of advising on investments (except P2P agreements) referred to in (1) applies to a person who is authorised for the purposes of the Act to carry on any regulated activity other than (or in addition to):

   1. (a)

      advising on investments (except P2P agreements); or

   2. (b)

      the regulated activity of agreeing to carry on a regulated activity in relation to (a).

3. (3)

   A person in (2) is not advising on investments (except P2P agreements) except to the extent that they are providing a personal recommendation.

4. (4)

   PERG 8.24 explains in more detail when advising on investments (except P2P agreements) is limited to providing personal recommendations.

5. (5)

   PERG 8.30B (Personal recommendations) explains what a personal recommendation is.

1. (1)

   4There is more detail on the definition of advising on investments (except P2P agreements) in PERG 8.24 to PERG 8.30B. A person interested in what activities come within the regulated activity of advising on investments (except P2P agreements) in relation to contracts of insurance should also read PERG 8.24 to PERG 8.30B.

2. (2)

   In particular:

   1. (a)

      PERG 5.8.4G to PERG 5.8.5G reflect PERG 8.26 (The investment must be a particular investment);

   2. (b)

      PERG 5.8.6G to PERG 5.8.7G reflect PERG 8.27 (Advice to be given to persons in their capacity as investors (on the merits of their investing as principal or agent));

   3. (c)

      PERG 5.8.8G to PERG 5.8.11G reflect PERG 8.28 (Advice or information);

   4. (d)

      PERG 5.8.12G to PERG 5.8.14G reflect PERG 8.29 (Advice must relate to the merits (of buying or selling a particular investment));

   5. (e)

      PERG 5.8.20G to PERG 5.8.23G reflect PERG 8.30 (Medium used to give advice or information);

   6. (f)

      PERG 5.8.15G to PERG 5.8.19G reflect PERG 8.30A (Pre-purchase questioning (including decision trees));

   7. (g)

      PERG 8.30B contains further material on decision trees; and

   8. (h)

      PERG 8.30B explains how PERG 8.24 to PERG 8.30A (and therefore the corresponding parts of PERG 5.8 as listed in (a) to (g)) apply to the definition of personal recommendation.

Advice about contracts of insurance will come within the regulated activity in article 53(1)2 of the Regulated Activities Order only if it relates to a particular contract of insurance. So, generic or general advice will not fall under article 53(1)2. In particular:

1. (1)

   advice would come within article 53(1)2 if it took the form of a recommendation that a person should buy the ABC Insurers motor insurance;

2. (2)

   advice would not relate to a particular contract if it consists of a recommendation only that a person should take out insurance of a particular class without identifying any particular insurance undertaking;

   1
3. (3)

   the table in PERG 5.8.5 G identifies several typical recommendations and indicates whether they will be regarded as advice under article 53(1)2.

For the purposes of article 53(1)2, advice must be given to a person in that person’s’3 capacity as an investor or potential investor (which, in the context of contracts of insurance, will mean as policyholder or potential policyholder). So, article 53(1)2 will not apply where advice is given to persons who receive it as:

1. (1)

   an adviser who will use it only to inform advice they give3 to others; or

2. (2)

   a journalist or broadcaster who will use it only for journalistic purposes.

Advice will still be covered by article 53(1)2 even though it may not be given to any particular policyholder (for example, advice given in a periodical publication or on a website). Such advice would, however, be unlikely to be a personal recommendation (see PERG 5.8.3AG, PERG 8.24.1G and PERG 8.30BG).3

In the FCA's view, advice requires an element of opinion on the part of the adviser. In effect, it is a recommendation as to a course of action. Information, on the other hand, involves statements of facts or figures.

In general terms, simply giving information, without making any comment or value judgement on its relevance to decisions which a person may make, is not advice. In this respect, it is irrelevant that a person may be providing information on a single contract of insurance or on two or more. This means that a person may provide information on a single contract of insurance without necessarily being regarded as giving advice on it. PERG 5.8.11 G has guidance on the circumstances in which information can assume the form of advice.

In the case of article 53(1)2, information relating to buying or sellingcontracts of insurance may often involve one or more of the following:

1. (1)

   an explanation of the terms and conditions of a contract of insurance whether given orally or in writing or by providing leaflets and brochures;

2. (2)

   a comparison of the features and benefits of one contract of insurance compared to another;

3. (3)

   the production of pre-purchase questions for a person to use in order to exclude options that would fail to meet his requirements; such questions may often go on to identify a range of contracts of insurance with characteristics that appear to meet the person's requirements and to which he might wish to give detailed consideration (pre-purchase questioning is considered in more detail in PERG 5.8.15 G to PERG 5.8.19 G (Pre-purchase questioning (including decision trees));

4. (4)

   tables that compare the costs and other features of different contracts of insurance;

5. (5)

   leaflets or illustrations that help persons to decide which type of contract of insurance to take out; and

6. (6)

   the provision, in response to a request from a person who has identified the main features of the type of contract of insurance he seeks, of several leaflets together with an indication that all the contracts of insurance described in them have those features.

In the FCA's opinion, however, such information is likely to take on the nature of advice if the circumstances in which it is provided give it the force of a recommendation. Examples of situations where information provided by a person (P) might take the form of advice are given below.

1. (1)

   P may provide information on a selected, rather than balanced and neutral, basis that would tend to influence the decision of a person. This may arise where P offers to provide information about contracts of insurance that contain features specified by the person, but then exercises discretion as to which complying contract of insurance to offer to that person.

2. (2)

   P may, as a result of going through the sales process, discuss the merits of one contract of insurance over another, resulting in advice to enter into a particular one. In contrast, advice on how to complete an application form, without an explicit or implicit recommendation on the merits of buying or selling the contract of insurance whilst 'advice' in the general sense of the word, is not, in the view of the FCA, advice within the meaning of article 53(1)2. Such advice may, however, amount to arranging (for which see PERG 5.6.1 G to PERG 5.6.4 G (The regulated activities: arranging deals in, and making arrangements with a view to transactions in, contracts of insurance)).

Advice under article 53(1)2 relates to the advantages and disadvantages of buying, selling, subscribing for or underwriting a particular contract of insurance. It is worth noting that, in this context, 'buying' and 'selling' are defined widely under article 3 of the Regulated Activities Order (Interpretation). 'Buying' includes acquiring for valuable consideration, and 'selling' includes surrendering, assigning or converting rights under a contract of insurance.

The requirements imposed by the IDD3 (see PERG 5.2.5 G (Approach to implementation of the IMD)) and the text of article 2.3 IDD3 articles 2.1(1), 2.1(2) and 2. 2 in PERG 5.16.1 G3are narrower than the scope of the Regulated Activities Order (see PERG 5.2.7 G (Approach to implementation of the IDD)). Unlike3 the Regulated Activities Order, they do not relate to the assignment of contracts of insurance. This is of relevance to, amongst others, persons involved in the 'second-hand' market for contracts of insurance such as traded endowment policies and certain viatical instruments (that is, arrangements by which a terminally ill person can obtain value from their3life policy) (see also PERG 5.6.12 G (Exclusion from article 25(2): transactions to which the arranger is a party)). Persons advising on or arranging assignments of these contracts of insurance are therefore potentially carrying on regulated activities although they may be able to take the benefit of article 67 of the Regulated Activities Order (Activities carried on in the course of a profession or non-investment business) in certain circumstances (see PERG 5.11.9 G to PERG 5.11.12 G (Activities carried on in the course of a profession or non-investment business)).

Generally speaking, advice on the merits of using a particular insurance undertaking, broker or adviser in their capacity as such, does not amount to advice for the purpose of article 53(1)2. It is not advice on the merits of buying or selling a particular contract of insurance (unless, in the circumstances, the advice amounts to an implied recommendation of a particular policy).

Pre-purchase questioning involves putting a sequence of questions in order to extract information from a person with a view to facilitating the selection by that person of a contract of insurance or other product that meets his needs. A decision tree is an example of pre-purchase questioning. The process of going through the questions will usually narrow down the range of options that are available.

A key issue for those firms proposing to use pre-purchase questioning is whether the specific questioning used may amount to advice. There are two main aspects:

1. (1)

   advice must relate to a particular contract of insurance (see PERG 5.8.4 G (Advice must relate to a particular contract of insurance)); and

2. (2)

   the distinction between information and advice (see PERG 5.8.8 G to PERG 5.8.11 G (Advice or information)).

Whether or not pre-purchase questioning in any particular case is advising on contracts of insurance will depend on all the circumstances. The process may involve identifying one or more particular contracts of insurance. If so, to avoid advising on contracts of insurance, the critical factor is likely to be whether the process is limited to, and likely to be perceived by the person as, assisting the person to make his own choice of product which has particular features which the person regards as important. The questioner will need to avoid providing any judgement on the suitability of one or more products for that person and in this respect should have regard to the factors set out in PERG 5.8.2 G to PERG 5.8.4 G (Advice must relate to a particular contract of insurance) and the table in PERG 5.8.5 G. See also PERG 5.8.12 G to PERG 5.8.14 G (Advice must relate to the merits (of buying or selling a contract of insurance)) for other matters that may be relevant.

The potential for variation in the form, content and manner of pre-purchase questioning is considerable, but there are two broad types. The first type involves providing questions and answers which are confined to factual matters (for example, the amount of the cover). In the FCA's view, this does not itself amount to advising on contracts of insurance, if it involves the provision of information rather than advice. There are various possible scenarios, including the following:

1. (1)

   the questioner may go on to identify one or more particular contracts of insurance which match features identified by the pre-purchase questioning; provided these are selected in a balanced and neutral way (for example, they identify all the matching contracts of insurance available without making a recommendation as to a particular one) this need not involve advising on contracts of insurance; and

2. (2)

   the questioner may go on to advise a person on the merits of one particular contract of insurance over another; this would be advising on contracts of insurance.

The second type of pre-purchase questioning involves providing questions and answers incorporating opinion, judgement or recommendation. There are various possible scenarios, including the following:

1. (1)

   the pre-purchase questioning may not lead to the identification of any particular contract of insurance; in this case, the questioner has provided advice, but it is generic advice and does not amount to advising on contracts of insurance; and

2. (2)

   the pre-purchase questioning may lead to the identification of one or more particular contracts of insurance; the key issue then is whether the advice can be said to relate to a particular contract of insurance (see further PERG 5.8.4 G (Advice must relate to a particular contract of insurance)).

In the case of PERG 5.8.18G (2) and similar scenarios, the FCA considers that it is necessary to look at the process and outcome of pre-purchase questioning as a whole. It may be that the element of advice incorporated in the questioning can properly be viewed as generic advice if it were considered in isolation. But although the actual advice may be generic, the process has ended in identifying one or more particular contracts of insurance. The combination of the generic advice and the identification of a particular or several particular contracts of insurance to which it leads may well, in the FCA's view, cause the questioner to be advising on contracts of insurance. Factors that may be relevant in deciding whether the process involves advising on contracts of insurance may include:

1. (1)

   any representations made by the questioner at the start of the questioning relating to the service he is to provide;

2. (2)

   the context in which the questioning takes place;

3. (3)

   the stage in the questioning at which the opinion is offered and is significant;

4. (4)

   the role played by the questioner who guides a person through the pre-purchase questions;

5. (5)

   the outcome of the questioning (whether particular contracts of insurance are highlighted, how many of them, who provides them, their relationship to the questioner and so on); and

6. (6)

   whether the pre-purchase questions and answers have been provided by, and are clearly the responsibility of, an unconnected third party, and all that the questioner has done is help the person understand what the questions or options are and how to determine which option applies to his particular circumstances.

With the exception of:

1. (1)

   periodicals, broadcasts and other news or information services (see PERG 5.8.24 G to PERG 5.8.25 G (Exclusion: periodical publications, broadcasts and web-sites)); and

2. (2)

   situations involving an overseas element (see, generally, PERG 5.12 (Link between activities and the United Kingdom) and, in particular, PERG 5.12.8 G (Where is insurance distribution carried on?)),3

the use of the medium itself to give advice should make no material difference to whether or not the advice is caught by article 53(1)2.

Advice can be provided in many ways including:

1. (1)

   face to face;

2. (2)

   orally to a group;

3. (3)

   by telephone;

4. (4)

   by correspondence (including e-mail);

5. (5)

   in a publication, broadcast or web-site; and

6. (6)

   through the provision of an interactive software system.

Taking electronic commerce as an example, the use of electronic decision trees does not present any novel problem. The same principles apply as with a paper version (see PERG 5.8.15 G to PERG 5.8.19 G (Pre-purchase questioning (including decision trees))).

Advice in publications, broadcasts and web-sites is subject to a special regime (see PERG 5.8.24 G (Exclusion: periodical publications, broadcasts and web-sites) and PERG 7 (Periodical publications, news services and broadcasts: applications for certification)).

An important exclusion from advising on contracts of insurance relates to advice given in periodical publications, regularly updated news and information services and broadcasts (article 54 of the Regulated Activities Order (Advice given in newspapers etc)). The exclusion applies if the principal purpose of the publication or service taken as a whole (including any advertising content) is neither to give advice of a kind mentioned in article 53 (Advising on investments) or article 53A (Advising on regulated mortgage activities) nor to lead or enable persons to buy, sell, subscribe for or underwrite relevant investments or, as borrower, to enter into or vary the terms of a regulated mortgage contract.

This is explained in greater detail, together with the provisions on the granting of certificates by the FCA on the application of the proprietor of a periodical publication or news or information service or broadcast, in PERG 7 (Periodical publications, news services and broadcasts: applications for certification).

1. (1)

   4Where the definition of advising on investments (except P2P agreements) is limited to providing personal recommendations:

   1. (a)

      the exclusion described in PERG 5.8.24G does not apply; but

   2. (b)

      advice given in a publication issued to the general public, in a broadcast or on a website accessible to the general public will generally not involve a personal recommendation and hence will not involve advising on investments (except P2P agreements).

2. (2)

   PERG 7 and PERG 8.30B (Personal recommendations) give more details.

The Regulated Activities Order contains other limited exclusions which have the effect of preventing certain activities from amounting to advice on contracts of insurance. These are referred to in PERG 5.11.8 G (Exclusions applying to more than one regulated activity) to PERG 5.11.16 G (Large risks).

Under article 64 of the Regulated Activities Order (Agreeing to carry on specified kinds of activity), in addition to the regulated activities of:

1. (1)

   dealing in investments as agent;

2. (2)

   arranging (bringing about) deals in investments;

3. (3)

   making arrangements with a view to transactions in investments;

4. (4)

   assisting in the administration and performance of a contract of insurance; and

5. (5)

   advising on investments;

agreeing to do any of these things is itself a regulated activity. In the FCA's opinion, this activity concerns the entering into of a legally binding agreement to provide the services to which the agreement relates. So, a person is not carrying on a regulated activity under article 64 merely because he makes an offer to do so.

To the extent that an exclusion applies in relation to a regulated activity, 'agreeing' to carry on an activity within the exclusion will not be a regulated activity. This is the effect of article 4(3) of the Regulated Activities Order (Specified activities: general). So, for example, a vet can, without carrying on a regulated activity, enter into an agreement with an insurance undertaking to distribute marketing literature provided that the vet can rely on the exclusion in article 72C (Provision of information on an incidental basis) in relation to the activity of distributing the literature (see also PERG 5.6.6 G and PERG 5.6.9 G (Exclusion: article 72C (Provision of information on an incidental basis) or article 33B (Provision of information – contracts of insurance)1 in relation to the activity of distributing the literature (see also PERG 5.6.4AG to1PERG 5.6.9G which cover exclusions for the provision of information).1

It must be emphasised that activities which concern invitations to renew policies and the subsequent effecting of renewal of policies are likely to fall within insurance distribution activity2. Those considering the need for authorisation or variation of their permissions will wish to consider whether a process of tacit renewal operates: that is, where a policyholder need take no action if they wish to maintain their2 insurance cover by having their2policy 'renewed'. This process will typically result in the issue of a new contract of insurance, not an extension of the period of the existing one. It may involve the activities of advising on investments, arranging and dealing in investments as agent. More specifically, preparing a 'tacit renewal' letter on behalf of an insurance undertaking is likely to amount to arranging. Where it contains a recommendation to renew existing cover this is likely to constitute advising on investments (except P2P agreements)1 (under article 53(1)1 of the Regulated Activities Order). If the contract takes effect on the date stipulated in the renewal letter, a contract is concluded with the effect that the letter writer may be dealing in investments as agent. The process may also involve a regulated activity under article 64 (Agreeing to carry on a regulated activity).

This part of the guidance deals with:

1. (1)

   exclusions which are disapplied where the regulated activity relates to contracts of insurance;

2. (2)

   exclusions which are disapplied where a person carries on insurance distribution5; and

3. (3)

   the following exclusions applying to more than one regulated activity:

   1. (a)

      activities carried on in the course of a profession or non-investment business (article 67 (Activities carried on in the course of a profession or non-investment business));

   2. (b)

      activities carried on by a provider of relevant goods or services (article 72B (Activities carried on by a provider of relevant goods or services));

      4
   3. (c)

      large risks (article 72D (Large risks contracts where risk situated outside the United Kingdom6))4;

      43
   4. (d)

      4activities carried on by firms with a Part 4A permission to manage a UK UCITS6 or manage an AIF (article 72AA (Managers of UCITS and AIFs));3

      3
   5. (e)

      3activities carried on by a local authority (article 72G); and

   6. (f)

      3activities carried on by a person acting as an insolvency practitioner (article 72H).

Several exclusions that would5 have the effect of restricting the scope of the regulated activities referred to in this guidance5 are disapplied or modified. This was6 in order to properly implement IDD5.

The5 following exclusions do not apply if they concern transactions relating to contracts of insurance:

1. (1)

   dealing in investments as agent with or through authorised persons (article 22 of the Regulated Activities Order (Deals with or through authorised persons));

2. (2)

   arranging transactions to which the arranger is to be a party, where the arranger enters into or is to enter into the transaction:

   1. (a)

      as agent for another person; or

   2. (b)

      as principal, unless the arranger is the only policyholder or will, as a result of the transaction, become the only policyholder (article 28 (Arranging transactions to which the arranger is a party));

3. (3)

   arranging deals with or through authorised persons (article 29 (Arranging deals with or through authorised persons));

4. (4)

   introducing (article 33 (Introducing));

5. (5)

   activities carried on in connection with the sale of goods and supply of services (article 68 (Activities carried on in connection with the sale of goods and supply of services));

6. (6)

   groups and joint enterprises (article 69 (Groups and joint enterprises)) (see PERG 5.11.6 G); and

7. (7)

   activities carried on in connection with the sale of a body corporate (article 70 (Activities carried on in connection with the sale of a body corporate)).

The restrictions placed on the exclusions listed in PERG 5.11.3 G5 have the following effects:5

1. (1)

   Unauthorised persons who:

   1. (a)

      introduce clients or customers to an independent financial adviser with a view to a transaction; or

   2. (b)

      deal as agent on behalf of their clients or customers with or though an authorised person; or

   3. (c)

      arrange for their clients or customers to enter into a transaction with or though an authorised person;

   will not be able to rely on articles 29 or 33 to avoid the need for authorisation where the transaction relates to a contract of insurance.

2. (2)

   Unauthorised persons may, however, be able to rely on the exclusions for the provision of information in article 33B or5 provision of information on an incidental basis in article 72C to 5avoid the need for authorisation (see PERG 5.6.4AG5 to PERG 5.6.9G which cover exclusions for the provision of information5).

3. (3)

   Authorised persons who themselves introduce clients or customers to others for the purposes of buying or selling any kind of contract of insurance are likely to require permission to carry out arranging activities5, as neither article 33 nor generally, article 72C (see PERG 5.6.5 G to PERG 5.6.9 G (Exclusion: article 72C (Provision of information on an incidental basis))) will apply. Article 33B could apply, but the authorised person would need to be merely providing information and taking no additional steps to assist in the conclusion of the contract of insurance5.

Insurance undertakings are referred to 1MIPRU 51 (Insurance distributors and home finance providers5 using insurance distribution or home finance5 mediation services) as regards their obligations relating to the use of intermediaries generally.

1. (1)

   The5 exclusion for groups and joint enterprises in article 69 of the Regulated Activities Order (Groups and joint enterprises) does not apply to transactions relating to contracts of insurance. This will affect5 a company providing services for:

   1. (a)

      other members of its group; or

   2. (b)

      other participants in a joint enterprise of which it is a participant.

2. (2)

   Such companies might typically provide risk or treasury management or administration services which may include regulated activities relating to a contract of insurance. If so, such companies will need authorisation or exemption if they conduct the activities by way of business (see PERG 5.4 (The business test) generally and (3) and (4)). This is unless another exclusion applies.

3. (3)

   In the FCA's view, particular issues arise in applying the 5‘by way of business’5 test to group companies. Recital 11 of the IDD5 states that the Directive should apply to persons whose activity consists in providing insurance or reinsurance distribution5 services to third parties. This Recital 115 suggests that the Directive is intended to apply only where the service is provided to a third party. The expression 'third party' is not defined in the Directive. The FCA considers that a group company that is providing services solely for the benefit of other group companies would not normally be regarded as providing services to a third party. The group company also needs to be receiving remuneration for the activities (see PERG 5.4.2G(1)).5 The FCA also considers that5 a group company providing services solely for the benefit of other group companies should not normally be regarded as satisfying the requirement that it be remunerated for providing insurance distribution5 services to third parties. Were a group company to be remunerated other than by another group company, however, the situation may be different. For example, if the group company receives commission from an insurer or broker, the fact would tend to suggest that the company has been rewarded for providing a service to the insurer or broker. In the FCA's view, it is appropriate to apply this principle to a group as defined in section 421 (Group) of the Act.

4. (4)

   The FCA considers that similar principles to those applied to a group company in (2) may be applied to the participants in a joint enterprise. This would be where one participant in the joint enterprise is providing services solely for the benefit of another participant and for the purposes of the joint enterprise and who provides insurance distribution5 services to one or more participants for the purposes of or in connection with the joint enterprise.

Article 4(4A) of the Regulated Activities Order (Specified activities: general) disapplies certain exclusions where a person, for remuneration, takes up or pursues insurance distribution or reinsurance distribution5 (as defined in articles 2.1(1), 2.1(2) and 2.2 of the IDD5) and PERG 5.16.2G5) in relation to a risk or commitment located in the United Kingdom. In relation to a contract of insurance entered into before IP completion day, article 4(4A) applies in relation to a risk or commitment located in the United Kingdom or6 an EEA State5. The relevant exclusions which are disapplied are:

1. (1)

   arrangements in connection with lending on the security of insurance policies (article 30 of the Regulated Activities Order (Arranging transactions in connection with lending on the security of insurance policies));

2. (2)

   activities carried on by trustees, nominees and personal representatives (article 66 (Trustees, nominees and personal representatives)); and

3. (3)

   activities carried on in the course of a profession or non-investment business (article 67 (Activities carried on in the course of a profession or non-investment business)) (This exclusion is considered in further detail in PERG 5.11.9 G to PERG 5.11.12 G (Activities carried on in the course of a profession or non-investment business)).

Chapter XVII of the Regulated Activities Order (Exclusions applying to several specified kinds of activity) contains various exclusions applying to several kinds of activity. Five3exclusions of relevance in relation to contracts of insurance are dealt with in this section and a sixth3, overseas persons, in PERG 5.12 (Link between activities and the United Kingdom).

Article 67 excludes from the activities of dealing as agent, arranging (bringing about) deals in investments, making arrangements with a view to transactions in investments, assisting in the administration and performance of a contract of insurance and advising on investments, any activity which:

1. (1)

   is carried on in the course of carrying on any profession or business which does not otherwise consist of the carrying on of regulated activities in the United Kingdom; and

2. (2)

   may reasonably be regarded as a necessary part of other services provided in the course of that profession or business.

In the FCA's view, the fact that a person may carry on regulated activities in the course of the carrying on of a profession or business does not, of itself, mean that the profession or business consists of regulated activities. This is provided that the main focus of the profession or business does not involve regulated activities and that the regulated activities that are carried on arise in a way that is incidental and complementary to the carrying on of the profession or business.

Although the article 67 exclusion is disapplied (by article 4(4A) of the Regulated Activities Order (Specified investments: general)) when a person takes up or pursues insurance distribution or reinsurance distribution5 as defined by articles 2.1(1), 2.1(2) and 2.2 of the IDD5, there may be cases where a person is not carrying on activities that amount to insurance distribution5. For example, where a person's activities amount simply to the provision of information on an incidental basis in the context of another professional activity, these may fall outside the scope of article 2.1(1) and 2.1(2) of the IDD5 (see PERG 5.16.2G5) and the exclusion in article 67 may then operate to exclude these activities. Also, it is possible that a professional person's activities may not amount to a regulated activity at all. For example, a doctor who provides a medical report to an insurer may be regarded as making arrangements with a view to providing an expert medical opinion rather than with a view to transactions in contracts of insurance. In such cases, article 67 will not be needed.

Article 67 may also apply to activities relating to assignments of insurance policies, as, in the FCA'sview, article 2.1(1) of the IDD5 applies essentially to the creation of new contracts of insurance and not the assignment of rights under existing policies. As such, where a solicitor or licensed conveyancer arranges an assignment of a contract of insurance, the exclusion in article 67 remains of potential application. For similar reasons, trustees advising on or arranging assignments of contracts of insurance may, in certain circumstances, be able to rely on the exclusions in article 66 of the Regulated Activities Order.

For article 67 to apply in these cases, in addition to PERG 5.11.9G (1) and (2), the activity in question must not be remunerated separately from other services (article 67(2) of the Regulated Activities Order).

Article 72B (see also PERG 5.3.7 G (Connected contracts of insurance)) may be of relevance to persons who supply non-motor goods or services5 or provide services related to travel in the course of carrying on a profession or business which does not otherwise consist of carrying on regulated activities. In the FCA's view, the fact that a person may carry on regulated activities in the course of the carrying on of a profession or business does not, of itself, mean that the profession or business consists of regulated activities. This is provided that the main focus of the profession or business does not involve regulated activities and that the regulated activities that are carried on arise in a way that is incidental and complementary to the carrying on of the profession or business. For example, a travel agent might carry on insurance distribution activities5 in relation to some contracts of insurance that satisfy the conditions of the article 72B and some that do not. The former contracts will be excluded from regulation even though the travel agent must seek authorisation or become an appointed representative to be permitted to sell the latter contracts. The exclusion applies to insurance distribution activities5 when carried on in relation to 'connected contracts of insurance'. In broad terms, a 'connected contract of insurance' is a contract of insurance which:

1. (1)

   is not a contract of long-term insurance (as defined by article 3 of the Regulated Activities Order (Interpretation));

2. (2)

   [deleted]5

   22
3. (3)

   has an annual premium of:5

   2222
   1. (a)

      €600 euro or less (calculated on a pro rata annual basis); or5

   2. (b)

      200 euro or less, where the contract of insurance is complementary to a service being provided by the provider and the duration of that service is equal to or less than three months,5

   or equivalent amounts of sterling or another currency;5

4. (4)

   covers:2

   1. (a)

      the risk of 2breakdown, loss of, or damage to, non-motor goods supplied by the provider; 5

   2. (b)

      travel risks;2 or5

      2
   3. (c)

      the risk of the non-use of services;5

5. (5)

   does not cover any liability risks (except, in the case of a contract which covers travel risks, where the cover is ancillary to the main cover provided by the contract); and5

6. (6)

   is complementary to the non-motor goods being supplied or service being provided by the provider.5

7. (7)

   [deleted]5

1. (1)

   2There are two types of travel risks covered by PERG 5.11.13G (4)(b). The first type covers damage to, or loss of, baggage and other risks linked to the travel booked with the provider where that travel relates to attendance at an event organised or managed by that provider and the party seeking insurance is not an individual (acting in his private capacity) or a small business.

2. (2)

   "Small business" means a sole trader, body corporate, partnership or unincorporated association which had a turnover in the last financial year of less than £1,000,000. But if the small business is a member of a group within the meaning of section 262(1) of the Companies Act 1985 (and after the repeal of that section, within the meaning of section 474(1) of the Companies Act 2006), reference to its turnover means the combined turnover of the group. Turnover means the amounts derived from the provision of goods and services falling within the business’s ordinary activities, after deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.

3. (3)

   The second type of travel risk is damage to, or loss of, baggage and other risks linked to the hire from the insurance provider of an aircraft, vehicle or vessel which does not provide sleeping accommodation.

4. (4)

   PERG 5.11.13G (4)(a) does not apply to the hire of an aircraft, vehicle or vessel but does cover hire purchase and similar agreements.

In the FCA's view, the liability risks referred to in PERG 5.11.13G (5) cover risks in relation to liabilities that the policyholder might have to others (that is, third party claims). Many policies will provide this sort of cover and so fall outside the scope of the exclusion. For example, a policy that covers the cost of unauthorised calls made when a mobile telephone is stolen includes 'liability risks' and would not be a 'connected contract of insurance'. By contrast, travel policies which provide cover in respect of the policyholder's personal liability while travelling may fall within the exclusion by virtue of PERG 5.11.13G (5), where sold as part of a package by event organisers.2

Article 72D (Large risks contracts where risk situated outside the EEA) provides an exclusion for large risks situated outside the EEA. Broadly speaking, these are risks relating to:

1. (1)

   railway rolling stock, aircraft, ships, goods in transit, aircraft liability and shipping liability;

2. (2)

   credit and suretyship where relating to the policyholder's commercial or professional liability;

3. (3)

   land vehicles, fire and natural forces, property damage, motor vehicle liability where the policyholder is a business of a certain size.

For a fuller definition of contracts of large risks see the definition in the Glossary.

Article 72AA of the Regulated Activities Order (Managers of UCITS and AIFs) contains an exclusion relating to firms with a Part 4A permission to manage a UK UCITS7 or manage an AIF (see PERG 2.9.22 G).

3Article 72G (Local authorities) excludes from the activities of dealing in investments as agent, arranging (bringing about) deals in investments, making arrangements with a view to transactions in investments, assisting in the administration and performance of a contract of insurance and advising on investments any activity carried on by a local authority which relates to a contract of insurance which is not a life policy.

3Article 72H (Insolvency Practitioners) excludes from the activities of dealing in investments as agent, arranging (bringing about) deals in investments, making arrangements with a view to transactions in investments, assisting in the administration and performance of a contract of insurance and advising on investments any activity carried on by a person acting as an insolvency practitioner.

Section 19 of the Act (The general prohibition) provides that the requirement to be authorised under the Act only applies in relation to regulated activities which are carried on 'in the United Kingdom'. In many cases, it will be quite straightforward to identify where an activity is carried on. But, when there is a cross-border element, for example because a customer is outside the United Kingdom or because some other element of the activity happens outside the United Kingdom, the question may need careful consideration. 7

Even if a person concludes that he is not carrying on a regulated activity in the United Kingdom, he will need to ensure that he does not contravene other provisions of the Act that apply to unauthorised persons. These include the controls on financial promotion (section 21 (Financial promotion) of the Act) (see PERG 8 (Financial promotion and related activities)), and on giving the impression that a person is authorised (section 24 (False claims to be authorised or exempt)).

The table in PERG 5.12.4 G is a very simplified summary of territorial issues relating to overseas insurance intermediaries carrying on the business of insurance distribution activities5 in or into the United Kingdom for remuneration.

Persons carrying on insurance distribution activities5 from a registered office or head office in the United Kingdom will clearly be carrying on regulated activities in the United Kingdom. However, a person may be considered to be carrying on regulated activities in the United Kingdom even where not carrying on the activity from a registered office or head office in the United Kingdom. This is explained further in PERG 5.12.6 G to PERG 5.12.8 G.

In determining the location of an activity, and hence whether it is carried on in the United Kingdom, various factors need to be taken into account in turn, notably:

1. (1)

   section 418 of the Act (Carrying on regulated activities in the United Kingdom);

2. (2)

   the nature of the activity; and

3. (3)

   the overseas persons exclusion (see PERG 5.12.9 G to PERG 5.12.10 G (Overseas persons)).

Section 418 of the Act extends the meaning that 'carry on regulated activity in the United Kingdom' would normally have by setting out additional cases in which a person who would not otherwise be regarded as carrying on the activity in the United Kingdom is to be regarded as doing so. Each of the following cases thus amounts to carrying on a regulated activity in the United Kingdom:

1. (1)

   [deleted]6

2. (2)

   where a UK-based person carries on a regulated activity and the day-to-day management of the activity is the responsibility of an establishment in the United Kingdom;

3. (3)

   where a regulated activity is carried on by a person who is not based in the United Kingdom but is carried on from an establishment maintained by him in the United Kingdom; and

4. (4)

   [deleted]6

In each of these cases it is irrelevant where the person with whom the activity is carried on is situated.

Otherwise, where the cases in PERG 5.12.7G (1) do not apply, it is necessary to consider further the nature of the activity in order to determine where insurance distribution5 is carried on. Persons that arrange contracts of insurance will usually be considered as carrying on the activity of arranging in the location where these activities take place. As for dealing activities, the location of the activities will depend on factors such as where the acceptance takes place, which in turn will depend on the method of communication used. In the case of advising, this is generally considered to take place where the advice is received.

Article 72 of the Regulated Activities Order (Overseas persons) provides a potential exclusion for persons with no permanent place of business in the United Kingdom from which regulated activities are conducted or offers to conduct regulated activities are made. Where these persons carry on insurance distribution activities5 in the United Kingdom, they may be able to take advantage of the exclusions in article 72 of the Regulated Activities Order. In general terms, these apply where the overseas person either:

1. (1)

   deals or arranges deals with or through authorised or exempt persons only; or

2. (2)

   enters into deals with (or on behalf of) a person in the United Kingdom or gives advice on investments in the United Kingdom, in each case as a result of a 'legitimate approach'.

A 'legitimate approach', for the purposes of (2), is one that results from an unsolicited approach by a person (for example, a customer) or otherwise is a result of an approach by, or on behalf of, an overseas person which complies with the restriction on financial promotion under section 21 of the Act (see PERG 8.3.1 G (Financial promotion)).

The overseas person exclusion is available to persons who do not have a permanent place of business in the United Kingdom and so is of relevance to third country intermediaries 6who carry on insurance distribution activities5 in, or into, the United Kingdom (for example with or through authorised insurance brokers and insurance undertakings operating in the Lloyd's market).

UK-based persons must obtain Part 4A permission in relation to their insurance distribution activities5 in the United Kingdom as one of the following:

1. (1)

   a body corporate whose registered office is situated in the United Kingdom; or

2. (2)

   a partnership or unincorporated association whose head office is situated in the United Kingdom; or

3. (3)

   an individual (that is, a sole trader) whose residence is situated in the United Kingdom.

Non-UK-based persons wishing to carry on insurance distribution activities5 in the United Kingdom must:

1. (1)

   [deleted]6

2. (2)

   make use of the overseas persons exclusion (which then has the effect that activities are deemed not to be regulated activities carried on in the United Kingdom); or

3. (3)

   seek Part 4A permission.

Non-UK-based6 insurance intermediaries wishing to establish a branch in the UK for the purpose of carrying on insurance distribution activities5 may only do so with Part 4A permission.

Section 39 of the Act (Exemption of appointed representatives) exempts appointed representatives from the need to obtain authorisation (or, in relation to an appointed representative with a limited permission, provides that sections 20(1) and (1A) and 23(1A) of the Act do not apply in relation to the carrying on of the regulated activity which is comprised in the business for which his principal has accepted responsibility and for which he does not have limited permission)1. An appointed representative is a person who is party to a contract with an authorised person which permits or requires him to carry on certain regulated activities (see Glossary for full definition). SUP 12 (Appointed representatives) contains rules and guidance relating to appointed representatives.

Unless a person has only a limited permission for certain credit-related regulated activities, a1person who is an authorised person cannot be an appointed representative (see section 39(1) of the Act (Exemption of appointed representatives)).

An appointed representative can carry on only those regulated activities which are specified in the Appointed Representatives Regulations. The regulated activities set out in the table in PERG 5.13.4 G are included in those regulations. As set out in the table, the insurance distribution activities2 that can be carried on by an appointed representative differ depending on the type of contracts of insurance in relation to which the activities are carried on.

A person2 may wish to become an appointed representative2 in relation to one or more of the insurance distribution activities2 specified in the Appointed Representatives Regulations (see table in PERG 5.13.4 G). If so, the person2 must be appointed under a written contract by an authorised person, who has permission to carry on those regulated activities and who accepts responsibility for the appointed representative's actions when acting for them2. SUP 12.4 (What must a firm do when it appoints an appointed representative or an FCA registered3 tied agent2?) and SUP 12.5 (Contracts: required terms) set out the detailed requirements that must be met for an appointment to be made. In particular, an appointed representative will not be able to commence an insurance distribution activity2 until that appointed representative is2 included on the Financial Services Register for such activities.

Where a person (A), who2 is already an appointed representative, proposes to start to2 carry on any insurance distribution activities, A2 will need to consider the following matters.

1. (1)

   A2 must become authorised if the insurance distribution activities that A proposes to carry on2 include activities that do not fall within the table in PERG 5.13.4 G (for example, dealing as agent in pure protection contracts)2. The Act does not permit any person to be exempt for some activities and authorised for others (although a person with only a limited permission for certain credit-related regulated activities may also be an appointed representative for other regulated activities specified in the Appointed Representatives Regulations (see SUP 12.2.3 G))1. A2 will, therefore, need to apply for permission to cover all the regulated activities that A proposes 2 to carry on.

2. (2)

   If A2 proposes to carry on regulated activities that are2 specified in the Appointed Representatives Regulations in relation to contracts of insurance (see the table in PERG 5.13.4 G), A2 may be able to do so as an appointed representative bearing in mind the following.

   1. (a)

      A2 will need to be appointed by an authorised person prepared to accept responsibility for A’s insurance distribution activities2 when acting for the authorised person2. The authorised person must have permission to carry on these regulated activities.

   2. (b)

      If these insurance distribution activities2 are to be carried on for the same authorised person who has already appointed A for2 other regulated activities, the contract between them will need to be amended to reflect the additional activities. Other amendments to the contract will be required (see SUP 12.5.6A R).

   3. (c)

      A2 cannot commence an insurance distribution activity until A2 is included on the Financial Services Register as carrying on such activities.

   4. (d)

      An appointed representative would be entitled to have more than one principal subject to certain restrictions. In relation to non-investment insurance contracts (general insurance contracts and pure protection contracts), an appointed representative may have an unlimited number of principals. In relation to regulated mortgage contracts and designated investment business, an appointed representative is limited in the number of principals he may have. In any case where an appointed representative has multiple principals, those principals are required to enter into a multiple- principal agreement (see SUP 12.4.5D G to SUP 12.4.5G G (Appointment of an appointed representative (other than an introducer appointed representative)).

   5. (e)

      If A’s activities2 are limited to introducing, A2 should consider the specific Handbook provisions relating to introducer appointed representatives (see SUP 12 (What must a firm do when it appoints an appointed representative or an FCA registered3 tied agent2?)).

Professional firms (broadly firms of solicitors, accountants and actuaries) may carry on insurance distribution activities3 in the course of their professional activities. Exempt professional firms carrying on insurance distribution activities3 may continue to be able to use the Part XX exemption to avoid any need for authorisation. PROF 2 (Status of exempt professional firm) contains guidance on the Part XX exemption. They will, however, need to be shown on the Financial Services Register as carrying on insurance distribution activities3, in order to benefit from this exemption. The task of registration is the responsibility of the designated professional bodies who will need to inform the FCA both of member firms carrying on insurance distribution activities3 and individuals within firms' management responsible for these activities.

Professional firms with practices that involve acting for claimants in litigation against insurance undertakings are likely to be carrying on the regulated activity of assisting in the administration and performance of a contract of insurance. Exempt professional firms whose practices contain a material element of such activity should consider whether they can continue to take advantage of the Part XX exemption to avoid any need for authorisation, having regard to the relevant provisions of the Act, in particular section 327 (Exemption from the general prohibition) and the guidance in PROF 2.1.14 G (Exempt regulated activities).

Professional firms should be aware of the disapplication of the exclusions for trustees (article 66) and activities carried on in the course of a profession or non-investment business (article 67) outlined in PERG 5.11.7 G (Exclusions disapplied in connection with insurance distribution3) where their activities would amount to insurance distribution3. Where they do not, they will still be able to rely upon article 67. Otherwise, the Non-Exempt Activities Order3 imposes limitations on the extent to which professional firms can give advice to individuals. In particular, a professional firm cannot make a recommendation3 to a private client to3 buy a life policy, unless it3 is endorsing a corresponding recommendation given to the client. The recommendation it3 endorses must be one given by an authorised person permitted to advise on life policies, or an exempt person for these purposes. No such restrictions apply, however, in relation to contracts of insurance other than life policies.

As indicated in PERG 5.6.8 G, the article 72C exclusion (Provision of information on an incidental basis) is potentially available to unauthorisedprofessional firms including exempt professional firms. This may be relevant to professional firms arranging contracts of insurance for clients on an individual basis.

In addition to certain named persons exempted by the Exemption Order from the need to obtain authorisation, the following bodies are exempt in relation to insurance distribution activities3 that do not relate to life policies:

1. (1)

   [deleted]2

   2
2. (2)

   registered social landlords in England and Wales within the meaning of Part I of the Housing Act 1996 but not their subsidiaries;

3. (3)

   registered social landlords in Scotland within the meaning of the Housing (Scotland) Act 2001 but not their subsidiaries;

4. (4)

   the Office of Tenants and Social Landlords (known as the Tenant Services Authority);

   1
5. (4A)

   1the Homes and Communities Agency;

6. (5)

   Scottish Homes; and

7. (6)

   The Northern Ireland Housing Executive.

The table in PERG 5.15.4 G is designed as a short, user-friendly guide but should be read in conjunction with the relevant sections of the text of this guidance. It is not a substitute for consulting the text of this guidance or seeking professional advice as appropriate (see PERG 5.1.6 G on the effect of this guidance). References in this table to articles are to articles of the Regulated Activities Order. In this table, it is assumed that each of the activities described is carried on by way of business (see PERG 5.4). Save where otherwise indicated, it is assumed that the intermediary is carrying on activities in respect of policies where the intermediary2 is not the policyholder. Also, that this table does not provide an exhaustive list of all of the exclusions or exemptions that are of relevance to each type of activity. For a full explanation of the exclusions and exemptions under the Regulated Activities Order and their applicability see generally PERG 5.3.7 G to PERG 5.3.8 G, PERG 5.6.4AG2 to PERG 5.6.23 G, PERG 5.7.7 G, PERG 5.8.24 G to PERG 5.8.26 G, PERG 5.11, PERG 5.12.9 G to PERG 5.12.10 G, PERG 5.13 and PERG 5.14. This table2 is referred to in PERG 5.7.5 G (The regulated activities: assisting in the administration and performance of a contract of insurance).

PERG 5.16.2 G sets out the text of article 2.1(1), 2.1(2) and 2.2 of the IDD1. It is referred to in PERG 5.2.5 G and PERG 5.2.6R1 (Approach to implementation of the IDD), PERG 5.8.13G (Advice must relate to the merits of buying or selling a contract of insurance),1PERG 5.11.7 G (Exclusions disapplied in connection with insurance distribution1) and PERG 5.11.10 G (Activities carried on in the course of a profession or non-investment business).

1. (1)

   Text of article 2.1(1) of the Insurance Distribution Directive1

   “‘Insurance distribution’ means the activities of advising on, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim, including the provision of information concerning one or more insurance contracts in accordance with criteria selected by customers through a website or other media and the compilation of an insurance product ranking list, including price and product comparison, or a discount on the price of an insurance contract, when the customer is able to directly or indirectly conclude an insurance contract using a website or other media. 1

2. (2)

   Text of article 2.1(2) of the Insurance Distribution Directive1

   “‘Reinsurance distribution’ means the activities of advising on, proposing or carrying out other work preparatory to the conclusion of contracts of reinsurance2, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim”. 1

3. (3)

   Text of article 2.2 of the Insurance Distribution Directive1

   “For the purposes of points (1) and (2) of paragraph 1, the following shall not be considered to constitute insurance distribution or reinsurance distribution: 1

   1. (a)

      the provision of information on an incidental basis in the context of another professional activity where:1

      1. (i)

         the provider does not take any additional steps to assist in concluding or performing an insurance contract;1

      2. (ii)

         the purpose of that activity is not to assist the customer in concluding or performing a reinsurance contract;1

   2. (b)

      the management of claims of an insurance undertaking or of a reinsurance undertaking on a professional basis, and loss adjusting and expert appraisal of claims;1

   3. (c)

      the mere provision of data and information on potential policyholders to insurance intermediaries, reinsurance intermediaries, insurance undertakings or reinsurance undertakings where the provider does not take any additional steps to assist in the conclusion of an insurance or reinsurance contract;1

   4. (d)

      the mere provision of information about insurance or reinsurance products, an insurance intermediary, a reinsurance intermediary, an insurance undertaking or a reinsurance undertaking to potential policyholders where the provider does not take any additional steps to assist in the conclusion of an insurance or reinsurance contract.”1