Related provisions for PERG 6.4.4
1 - 20 of 69 items.
(1) Under the section heading "What you have told us", the illustration must state the information that has been obtained from the customer under MCOB 9.4.6 R and MCOB 9.3.12 R (apart from MCOB 9.4.6 R(1) and MCOB 9.4.6 R(5) which are provided for in Section 5 of the illustration ), and can include brief details of any other information that has been obtained from the customer and used to produce the illustration.(2) Where the customer requests an additional illustration showing
Under the section heading "What fees must you pay?" the illustration must:(1) itemise all the fees that are included in the calculation of the APR in accordance with MCOB 10 (Annual Percentage Rate), excluding any charges for insurance set out in Section 12 in accordance with MCOB 9.4.72 R; and1(2) include a statement at the end of the section using the following text:"You may have to pay other taxes or costs in addition to any fees shown here.".
An example of a fee that would be included in Section 11 would be an administrative charge to redeem theregulated lifetime mortgage contract. An example of a fee that would not be included would be a fee payable by the customer to insure their property elsewhere (however this would need to be stated in the separate "Insurance" section as required by MCOB 9.4.72 R). Where fees are payable only on early repayment of theregulated lifetime mortgage contract. they should not be stated
(1) Under the section heading "Insurance" the illustration must include details of:(a) insurance which is a tied product and(b) insurance which is required as a condition of the regulated lifetime mortgage contract which is not a tied product(2) Under this section heading a firm may also provide details of insurance which is optional for the customer to take out.(3) It must be clear to the customer which products he is required to purchase under which circumstances (for example,
Under the sub-heading 'Insurance you must take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]' the following information must be included if the regulated lifetime mortgage contract requires the customer to take out insurance that is a tied product either through the mortgage lender or where relevant the mortgage intermediary:(1) details of which insurance is a tied product;(2) for how long the customer is obliged
If the regulated lifetime mortgage contract does not require the customer to take out insurance as a tied product, the sub-heading "Insurance you must take out through [insert name of mortgage lender and where relevant the name of the mortgage intermediary] "must be retained and a statement must be provided under this heading that the customer is not obliged to take out any insurance through the mortgage lender or, where relevant, the mortgage intermediary.
The following information must be included under the sub-heading "Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]":(1) if the regulated lifetime mortgage contract requires the customer to take out an insurance policy (other than that which is a tied product which the customer is obliged to purchase through the mortgage lender
Under the sub-heading "Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]", the illustration should not include any insurance policy that may be taken out by a mortgage lender itself to protect its own interests rather than the customer's interests, for example, because of the ratio of the loan amount to the property value.1
If the cost of any insurance that the mortgage lender might take out to protect its own interests because of the ratio of the loan to the property value is passed on to the customer, it will be shown elsewhere in the illustration, for example as a higher lending charge or in the interest rate charged.
A firm may include in the illustration, under the sub-heading "Optional insurance", quotations (estimated where necessary) for any insurance products (other than the insurance products covered elsewhere in the illustration in accordance with MCOB 9.4.72 R and MCOB 9.4.76 R) that the firm issuing the illustration wishes to sell to the customer.
(1) If any quotations for insurance are included in the illustration in accordance with MCOB 9.4.73 R(3), MCOB 9.4.76 R(1) or MCOB 9.4.79 R, the illustration:(a) must include a brief description only of the type of insurance (full details of the insurance cover may however be provided separately); and(b) (i) must include the total price to be paid by the customer in a column on the right hand side of the illustration under the heading "[insert frequency of payments quoted] payments";
MCOB 9.4.111 R(3) would require, for example, a reference to the fact that the overall cost takes into account mortgage payment protection insurance where this is required as a condition of the regulated lifetime mortgage contract to which the illustration relates. The requirement to take out such insurance must be stated in Sections 5 and 12 of the illustration in accordance with MCOB 9.4.24 R(7), MCOB 9.4.72 R or MCOB 9.4.76 R.
(1) Under the section heading 'What you have told us', the illustration must state the information that has been obtained from the customer under MCOB 5.6.6 R (apart from MCOB 5.6.6 R(1) which is provided for in Section 4 of the illustration), and can include brief details of any other information that has been obtained from the customer and used to produce the illustration.(2) If the amount on which the illustration is based includes the amount that the customer wants to borrow
Under the section heading 'What fees must you pay?' the illustration must:(1) itemise all the fees that are included in the calculation of the APR in accordance with MCOB 10 (Annual Percentage Rate), excluding any charges for insurance set out in Section 9 in accordance with MCOB 5.6.73 R; and1(2) include a statement at the end of the section using the following text:'You may have to pay other taxes or costs in addition to any fees shown here.'
An example of a fee that would normally be included in Section 8 would be a fee to re-inspect a property after completion of works if it is known that this fee will be charged at the time the illustration is produced. An example of a fee that would not be included would be a fee payable by the customer to insure their property elsewhere (however this would need to be stated in Section 9 of the illustration 'Insurance', as required by MCOB 5.6.77 R(2)). Fees payable upon repayment
(1) Under the section heading 'Insurance' the illustration must include details of:(a) insurance which is a tied product; and(b) insurance which is required as a condition of the regulated mortgage contract which is not a tied product.(2) A firm may also provide details of insurance which it is optional for the customer to take out under this section heading.(3) It must be clear to the customer which products he is required to purchase under which circumstances (for example, where
Under the sub-heading 'Insurance you must take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]' the following information must be included if the regulated mortgage contract requires the customer to take out insurance that is a tied product either through the mortgage lender or where relevant the mortgage intermediary:(1) details of which insurance is a tied product;(2) for how long the customer is obliged to purchase
If the regulated mortgage contract does not require the customer to take out insurance as a tied product, the sub-heading 'Insurance you must take out through [insert the name of the mortgage lender, and where relevant the name of the mortgage intermediary]' must be retained and a statement must be provided under this heading that the customer is not obliged to take out any insurance through the mortgage lender or, where relevant, the mortgage intermediary.
The following information must be included under the sub-heading 'Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert the name of the mortgage lender, or where relevant the name of the mortgage intermediary, or both]':(1) if the regulated mortgage contract requires the customer to take out an insurance policy (other than that which is a tied product which the customer is obliged to purchase through the mortgage lender,
Under the sub-heading 'Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]' the illustration should not include any insurance policy that may be taken out by a mortgage lender itself to protect its own interests rather than the customer's interests, for example, because of the ratio of the loan amount to the property value.1
If the cost of any insurance that the mortgage lender might take out to protect its own interests, because of the ratio of the loan amount to the property value, is passed on to the customer, it will be shown elsewhere in the illustration, for example, as a higher lending charge or in the interest rate charged.
A firm may include in the illustration, under the sub-heading 'Optional insurance', quotations (estimated where necessary) for any insurance products (other than the insurance products covered elsewhere in the illustration in accordance with MCOB 5.6.74 R and MCOB 5.6.77 R) that the firm issuing the illustration wishes to promote to the customer.
(1) If any quotations for insurance are included in the illustration in accordance with MCOB 5.6.74 R(3), MCOB 5.6.77 R(1) or MCOB 5.6.80 R, the illustration:(a) must include a brief description only of the type of insurance (full details of the insurance cover may however be provided separately); and(b) (i) must include the total price to be paid by the customer in a column on the right hand side of the illustration under the heading '[insert frequency of payments quoted] payments';
(1) In calculating example cash amounts in accordance with MCOB 5.6.84 R(1)(f), it must be assumed that:(a) the regulated mortgage contract is repaid in full;(b) unless the original amount borrowed is used, that all payments due on the regulated mortgage contract are actually paid;(c) additional fees and charges such as insurance premiums have been paid; and(d) no underpayments or overpayments have been made.(2) If:(a) cashbacks or other incentives need to be repaid; or(b) fees
Where an insurance transaction
involves more than one firm acting
in a chain such that for example money is
transferred from a "producing" broker who has received client money from a retail
customer to an intermediate broker and thereafter to an insurance
undertaking, each broker firm will
owe obligations to its immediate client to
segregate client money which
it receives (in this example the producing broker in relation to the retail customer and the intermediate broker in relation
If it is prudent to do so to ensure that client money is protected (and provided that
doing so would otherwise be in accordance with CASS
5.5.63 R (1)(b)(ii)),2 a firm may pay into, or maintain in, a client bank account money of its own, and
that money will then become client money for the purposes of CASS 5 and the client money (insurance)
distribution rules.
A firm can
hold client money in either
a general client bank account (CASS 5.5.38 R) or a designated client bank account (CASS 5.5.39 R). A firm holds all client money in general
client bank accounts for its clients as
part of a common pool of money so
those particular clients do
not have a claim against a specific sum in a specific account; they only have
a claim to the client money in
general. A firm holds client money in designated
client bank accounts for those clients who
requested
(1) A firm may draw down commission from
the client bank account if:(a) it
has received the premium from
the client (or from a third party premium finance
provider on the client's behalf);2 and(b) this
is consistent with the firm'sterms of business which it maintains with
the relevant client and 2the insurance undertaking to
whom the premium will become2 payable;and the firm may
draw down commission before
payment of the premium to the insurance undertaking, provided that the
conditions
(1) As
soon as commission becomes due
to the firm (in accordance with CASS
5.5.16 R (1)) it must be treated as a remittance which must be withdrawn in
accordance with CASS
5.5.16 R (2). 2The procedure required by CASS 5.5.16 R will also 2apply where moneyis 2due and payable 2to the firm in
respect of fees due from clients (whether to the firm or
other professionals).(2) Firms are reminded that money received
in accordance with CASS
5.2 must not,
except where a firm and an insurance
If client
money is received in accordance with CASS 5.5.19 R,
the firm must ensure that its appointed representatives, field representatives or other agents keep client money (whether in the form of premiums, claims money or premium refunds) separately identifiable
from any other money (including
that of the firm) until the client money is paid into a client bank account or sent to the firm.
(1) CASS 5.5.23 R allows a firm with appointed representatives, field representatives and other agents to
avoid the need for the representative to
forward client money on a daily
basis but instead requires a firm to
segregate into its client money bank account amounts
which it reasonably estimates to be sufficient to cover the amount of client money which the firm expects
its representatives or agents
to receive and hold over a given period. At the expiry of each such period,
the
A firm may
hold client money with a bank
that is not an approved bank if
all the following conditions are met:(1) the client money relates to one or more insurance
transactions which are subject to the law or market practice of a jurisdiction
outside the United Kingdom;(2) because
of the applicable law or market practice of that overseas jurisdiction, it
is not possible to hold the client money in
a client bank account with an approved bank;(3) the firm holds the money with
such
The client
money resource, for the purposes of CASS
5.5.63 R (1)(a),2 is:(1) the
aggregate of the balances on the firm's client money
bank accounts, as at the close of business on the previous business day and, if held in accordance with CASS
5.4, designated investments (valued
on a prudent and consistent basis) together with client
money held by a third party in accordance with CASS 5.5.34 R;
and(2) (but
only if the firm is comparing
the client money resource with
its client's
The individual client balance
for each client must be calculated
as follows:(1) the
amount paid by a client to the firm (to include all premiums);
plus(2) the
amount due to the client (to
include all claims and premium refunds);
plus(3) the
amount of any interest or investment returns due to the client;(4) less
the amount paid to insurance undertakings for
the benefit of the client (to
include all premiums and commission due
to itself) (i.e. commissions that
are due but have not
A firm's client money (accruals)
requirement is the sum of the following:(1) all
insurance creditors shown in the firm's business
ledgers as amounts due to insurance undertakings, clients and other persons;
plus(2) unearned commission 2being the amount of commission 2shown as accrued (but not shown
as due 2and payable) as at the date of
the calculation (a prudent estimate must be used if the firm is
unable to produce an exact figure at the date of the calculation).
Medical schemes under which an employer operates or contributes to a fund, from which the employee has a right to a benefit (for example, a payment) on the occurrence of a specified illness or injury, are likely to be insurance schemes. This will be the case whether the employee makes any contribution to the fund, or the scheme is funded by the employer as an emolument. The scheme would not be insurance, however, if the employer has an absolute discretion whether or not to provide
Under a simple manufacturer's or retailer's warranty the purchase price of the goods includes an amount, in consideration of which the manufacturer undertakes an obligation (the warranty) to respond (without further expense to the purchaser) to specified defects in the product that emerge within a defined time after purchase. When the warranty operates, the manufacturer or retailer provides repairs or replacement products in response to a defined event (the emergence of a latent
A manufacturer or retailer may undertake an obligation to ensure that the customer becomes a party to a separate contract of insurance in respect of the goods sold. This would include, for example, a contract for the sale of a freezer, with a simple warranty in relation to the quality of the freezer, but also providing insurance (underwritten by an insurer and in respect of which the customer is the policyholder) covering loss of frozen food if the freezer fails. The FSA is unlikely
The FSA distinguishes the contract in PERG 6.7.15 G from a contract under which the manufacturer or retailer assumes the obligation to provide the customer with an indemnity against loss or damage if the freezer fails, but takes out insurance to cover the cost of having to provide the indemnity to the customer. The obligation to indemnify is of a different nature from the seller's or supplier's usual obligations as regards the quality of goods or services and is an insurance obligation.
The following are examples of typical warranty schemes operated by motor dealers. Provided that, in each case, the FSA is satisfied that the obligations assumed by the dealer are not significantly more extensive in content, scope or duration that a dealer's usual obligations as to the quality of motor vehicles of that kind, the FSA would not usually classify the contracts embodying these transactions as contracts of insurance.(1) The dealer gives a verbal undertaking to the purchaser
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 FSA's view, a person would bring about a contract of
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 FSA considers that a mere passive display of literature
In the FSA'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',
This exclusion applies to a person whose profession or business does not otherwise consist of regulated activities. In the FSA'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
The exclusion will be of assistance to introducers who would otherwise be carrying on the regulated activity of making arrangements with a view to transactions in investments (assuming, as mentioned in PERG 5.6.8 G, that they provide information only to policyholders or potential policyholders, and not to the intermediary or insurance undertaking to whom they introduce these policyholders or potential policyholders). In order to assist such introducers determine whether or not
The Regulated Activities Order, which sets out the activities for which authorisation is required, does not attempt an exhaustive definition of a 'contract of insurance'. Instead, it makes some specific extensions and limitations to the general common law meaning of the concept. For example, it 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
The best established of these descriptions appears in the case of Prudential v. Commissioners of Inland Revenue [1904] 2 KB 658. This case, read with a number of later cases, treats as insurance any enforceable contract under which a 'provider' undertakes:(1) in consideration of one or more payments;(2) to pay money or provide a corresponding benefit (including in some cases services to be paid for by the provider) to a 'recipient';(3) in response to a defined event the occurrence
Contracts, under which the amount and timing of the payments made by the recipient make it reasonable to conclude that there is a genuine pre-payment for services to be rendered in response to a future contingency, are unlikely to be regarded as insurance. In general, the FSA expects that this requirement will be satisfied where there is a commercially reasonable and objectively justifiable relationship between the amount of the payment and the cost of providing the contract
Contracts under which, in consideration for an initial payment, the provider stands ready to provide services on the occurrence of a future contingency, on condition that the services actually provided are paid for by the recipient at a commercial rate, are unlikely to be regarded as insurance. Contrast PERG 6.7.21 G (Example 7: solicitors' retainers) with PERG 6.7.22 G (Example 8: time and distance cover).
Under most commercial contracts with a customer, a provider will assume more than one obligation. Some of these may be insurance obligations, others may not. The FSA will apply the principles in PERG 6.5.4 G, in the way described in (1) to (3) to determine whether the contract is a contract of insurance.(1) If a provider undertakes an identifiable and distinct obligation that is, in substance an insurance obligation as described in PERG 6.5.4 G, then, other things being equal,
The following factors are also relevant.(1) A contract is more likely to be regarded as a contract of insurance if the amount payable by the recipient under the contract is calculated by reference to either or both of the probability of occurrence or likely severity of the uncertain event.(2) A contract is less likely to be regarded as a contract of insurance if it requires the provider to assume a speculative risk (ie a risk carrying the possibility of either profit or loss)
UK-based persons must obtain Part IV permission in relation to their insurance mediation activities in the United Kingdom as one of the following:(1) a body corporate whose registered office is situated in the United Kingdom; or(2) a partnership or unincorporated association whose head office is situated in the United Kingdom; or(3) an individual (that is, a sole trader) whose residence is situated in the United Kingdom.The United Kingdom will, in each case, be the Home State
The effect of the IMD is that any EEA-based insurance intermediaries must first be registered in their home EEA State before carrying on insurance mediation in that EEA State or other EEA States. For these purposes, an EEA-based insurance intermediary is either:(1) a legal person with its registered office or head office in an EEA State other than the United Kingdom; or(2) a natural person resident in an EEA State other than the United Kingdom.Registered EEA-based insurance intermediaries
The E-Commerce Directive does not remove the IMD requirement for persons taking up or pursuing insurance mediation for remuneration to be registered in their Home State. Nor does it remove the requirement for EEA-based intermediaries to acquire passporting rights in order to establish branches in the United Kingdom (see PERG 5.12.7 G (Where is insurance mediation carried on?) in relation to electronic commerce activity carried on from an establishment in the United Kingdom) or
Put shortly, the E-Commerce Directive relates to services provided into the United Kingdom from other EEA States and from the United Kingdom into other Member States. In broad terms, such cross-border insurance mediation services provided by an EEA firm into the United Kingdom (via electronic commerce activity or distance means) will generally be subject to IMD registration in, and conduct of business regulation of, the intermediary's EEA State of origin. By contrast, insurance
A firm that enters into a regulated lifetime mortgage contract with a customer where interest payments are required (whether or not they will be collected by deduction from the income from an annuity or other linked investment product) must provide the customer with the following information before the customer makes the first payment under the contract:(1) the amount of the first payment required;(2) the amount of the subsequent payments;(3) the method by which the payments will
A firm that enters into a regulated lifetime mortgage contract which is a drawdown mortgage, with fixed payments to the customer, must provide the customer with the following information before the first payment is drawn down by the customer:(1) the amount of the first payment to be made;(2) the amount of subsequent payments, if different; (3) the method by which the payment will be made (for example, by transfer to the customer's bank account) and the date of issue of the first
Where the regulated lifetime mortgage contract is a drawdown mortgage and the customer can choose the amount and frequency of the payments they receive, or the amount and frequency of payments can vary for other reasons (for example in line with interest rates) the firm must provide the customer with the following information before the first payment is drawn down by the customer:(1) (a) where the customer can choose the amount and frequency of the payments they receive, details
Where the regulated lifetime mortgage contract provides for a lump sum payment to be made to the customer, and all or part of the interest will be rolled up during the life of the mortgage, the firm must provide the customer with the following information before the customer makes the first payment under the contract, or if no payments are required from the customer, within seven days of completion of the mortgage:(1) if no payments are required from the customer, confirmation
The meaning of contract of insurance is set out in article 3(1) of the Regulated Activities Order (Interpretation). It does not include benefit-in-kind funeral plans, which are specified in article 60 of the Regulated Activities Order (plans covered by insurance or trust arrangements). Such funeral plans (to the extent that they are insurance) are also excluded from theInsurance Directives. It covers some contracts which might not otherwise be viewed as insurance in the United
Articles 2, 3 and 4 of the First Non-Life Directive and article 3 of the Consolidated Life Directive set out certain exclusions by reference to:(1) types of insurance;(2) types of insurer;(3) particular conditions under which insurance activities are carried out.(4) annual income; and(5) particular identified institutions.
Some of the exclusions referred to mirror exclusions in the Regulated Activities Order. So, the exclusion for breakdown insurance in article 2(3) of the First Non-Life Directive is matched by a slightly narrower exclusion in article 12 of the Regulated Activities Order (Breakdown insurance). The separate treatment of benefit-in-kind funeral plans under the Regulated Activities Order (see SUP App 3.10.4 G) is matched by their exclusion on a slightly wider basis in article 3(5)
Under the Act and the Regulated Activities Order, the activities of effecting and carrying out contracts of insurance are treated as being carried on in the United Kingdom on the basis of legal tests under which the location of the risk is only one factor. If the risk is located in the United Kingdom, then (other relevant factors being taken into account) the activity will, in the vast majority of cases, also be viewed as carried on in the United Kingdom. There are exceptions,
(1) CASS
5.6 (the client money (insurance)
distribution rules) applies to a firm that
in holding client money is subject
to CASS
5.3 (statutory trust) or CASS
5.4 (Non-statutory trust) when
a primary pooling event or a secondary pooling event occurs.(2) In
the event of there being any discrepancy between the terms of the trust as
required by CASS
5.4.7 R (1)(c) and the provisions of CASS
5.6,
the latter shall apply.
(1) The client money (insurance) distribution rules have
force and effect on any firm that
holds client money in accordance
with CASS
5.3 or CASS
5.4. Therefore, they may apply to a UK branch of a non-EEA
firm. In this case, the UK branch of the firm may
be treated as if the branch itself
is a free-standing entity subject to the client
money (insurance) distribution rules.(2) Firms that act in accordance with CASS
5.4 (Non-statutory trust) are reminded that the client
money (insurance)
The client
money (insurance) distribution rules seek to ensure that clients who have previously specified that
they are not willing to accept the risk of the bank that has fails, and who therefore requested that their client money be placed in a designated client bank account as a different
bank, should not suffer the loss of the bank that has failed.
The transferor will need to provide the FSA with the information that the Home State regulator requires from FSA. This information includes:(1) the transfer agreement or a draft, with:(a) the names and addresses of the transferor and transferee; and(b) the classes of insurance business and details of the nature of the risks or commitments to be transferred;(2) for the business to be transferred (both before and after reinsurance):(a) the amount of technical provisions;(b) the
If the transferee is not (and will not be) authorised and will be neither an EEA firm nor a Swiss general insurance company, then the FSA will need to consult itsinsurance supervisor in the place where the business is to be transferred. The FSA will need confirmation from this supervisor that the transferee will meet his solvency margin requirements there (if any) after the transfer.
The scheme report should comply with the applicable rules on expert evidence and contain the following information:(1) who appointed the independent expert and who is bearing the costs of that appointment;(2) confirmation that the independent expert has been approved or nominated by the FSA;(3) a statement of independent expert's professional qualifications and (where appropriate) descriptions of the experience that fits him for the role;(4) whether the independent expert has,
A transfer may provide for benefits to be reduced for some or all of the policies being transferred. This might happen if the transferor is in financial difficulties. If there is such a proposal, the independent expert should report on what reductions he considers ought to be made, unless either:(1) the information required is not available and will not become available in time for his report, for instance it might depend on future events; or(2) otherwise, he is unable to report
The assessment is a continuing process, starting when the scheme promoters first approach the FSA about a proposed scheme. Among the considerations that may be relevant to both the depth of consideration given to, and the FSA's opinion on, a scheme are:(1) the potential risk posed by the transfer to the regulatory objectives;(2) the purpose of the scheme;(3) how the security of policyholders' (who include persons with certain rights and contingent rights under the policies) contractual
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) 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;
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) whether or not any advice is given (see PERG 5.8 (The regulated activities: advising on contracts of insurance); and(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
There are, however, general derogations from the internal market provisions under article 3(3) of the E-Commerce Directive. The derogations include consumer contracts, the permissibility of unsolicited e-mail and certain insurance services (both life and non-life). Where these derogations apply, the EEA States in which the recipients of the service are based may continue to be able to impose their own requirements.
1The Single Market Directives require credit institutions, insurance undertakings, investment firms, UCITS management companies and insurance intermediaries to make a notification to the Home State before establishing a branch or providing cross border services.SUP 13.5 (Notices of intention) sets out the notification requirements for a firm seeking to establish a branch or provide cross border services. As firms will note, the decision whether a passport notification needs to
If a firm holds money as agent of an insurance
undertaking then the firm'sclients (who are not insurance
undertakings) will be adequately protected to the extent that
the premiums which it receives
are treated as being received by the insurance
undertaking when they are received by the agent and claims money and premium refunds
will only be treated as received by the client when
they are actually paid over. The rules in CASS
5.2 make provision for agency agreements between firms
(1) Agency
agreements between insurance intermediaries and insurance undertakings may be of a general
kind and facilitate the introduction of business to the insurance
undertaking. Alternatively, an agency agreement may confer on
the intermediary contractual
authority to commit the insurance undertaking to
risk or authority to settle claims or handle premium refunds
(often referred to as "binding authorities"). CASS 5.2.3 R requires
that binding authorities of this kind must
(1) A firm must not agree to:(a) deal in investments as agent for an insurance undertaking in connection with insurance mediation; or(b) act
as agent for an insurance undertaking for
the purpose of settling claims or handling premium refunds;
or(c) otherwise
receive money as agent of an insurance undertaking;unless:(d) it
has entered into a written agreement with the insurance
undertaking to that effect; and(e) it
is satisfied on reasonable grounds that the terms of the policies
Neither assisting in the administration nor assisting in the performance of a contract alone will fall within this activity. Generally, an activity will either amount to assisting in the administration or assisting in the performance but not both. Occasionally, however, an activity may amount to both assisting in the administration and performance of a contract of insurance. For example, where a person assists a claimant in filling in a claims form, in the FSA's view this amounts
More generally, an example of an activity that, in the FSA's view, is likely to amount to assisting a policyholder in both the administration and the performance of a contract of insurance is notifying a claim under a policy and then providing evidence in support of the claim, or helping negotiate its settlement on the policyholder's behalf. Notifying an insurance undertaking of a claim assists the policyholder in discharging his contractual obligation to do so (assisting in the
Where a person receives funds on behalf of a policyholder in settlement of a claim, in the FSA's view, the act of receipt is likely to amount to assisting in the performance of a contract. By giving valid receipt, the person assists the insurance undertaking to discharge its contractual obligation to provide compensation to the policyholder. He may also be assisting the policyholder to discharge any obligations he may have under the contract to provide valid receipt of funds,
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) arrangements which are carried out by a person for himself, or for members of his family;(2) where employers provide insurance benefits for staff; and(3) where affinity groups or clubs set up insurance benefits for members.
Table: Carrying on insurance mediation activities 'for remuneration' and 'by way of business'
Carrying on insurance mediation activities 'for remuneration' and 'by way of business' |
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'For remuneration' |
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Factor |
Indicators that P does not carry on activities "for remuneration" |
Indicators that P does carry on activities "for remuneration" |
Direct remuneration, whether received from the customer or the insurer/broker (cash or benefits in kind such as tickets to the opera, a reduction in other insurance premiums, a remission of a debt or any other benefit capable of being measured in money's worth) |
P does not receive any direct remuneration specifically identified as a reward for his carrying on insurance mediation activities. |
P receives direct remuneration specifically identified as being a reward for his carrying on insurance mediation activities. |
Indirect remuneration (such as any form of economic benefit as may be explicitly or implicitly agreed between P and the insurer/broker or P's customer – including, for example, through the acceptance of P's terms and conditions or mutual recognition of the economic benefit that is likely to accrue to P). An indirect economic benefit can include expectation of making a profit of some kind as a result of carrying on insurance mediation activities as part of other services. |
P does not obtain any form of indirect remuneration through an economic benefit other than one which is not likely to have a material effect on P's ability to make a profit from his other activities. |
P obtains an economic benefit that: (a) is explicitly or implicitly agreed between P and the insurer/broker or P's customer; and (b) has the potential to go beyond mere cost recovery through fees or other benefits received for providing a package of services that includes insurance mediation activities but where no particular part of the fees is attributable to insurance mediation activities. This could include where insurance mediation activities are likely to:
P charges his customers a greater amount for other goods or services than would be the case if P were not also carrying on insurance mediation activities for those customers and this:
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Recovery of costs |
P receives no benefits of any kind (direct or indirect) in respect of his insurance mediation activities beyond the reimbursement of his actual costs incurred in carrying on the activity (including receipt by P of a sum equal to the insurance premium that P is to pass on to the insurer or broker). |
P receives benefits of any kind (direct or indirect) in respect of his insurance mediation activities which go beyond the reimbursement of his actual costs incurred in carrying on the activity. |
'By way of business' |
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Factor |
Indicators that P does not carry on activities "by way of business" |
Indicators that P does carry on activities "by way of business" |
Regularity/ frequency |
Involvement is one-off or infrequent (for instance, once or twice a year) provided that the transaction(s) is not of such size and importance that it is essential to the success of P's other business activities. Transactions do not result from formal arrangements (for instance, occasional involvement purely as a result of an unsolicited approach). |
Involvement is frequent (for instance, once a week). Involvement is infrequent but the transactions are of such size or importance that they are essential to the success of P's other business activities. P has formal arrangements which envisage transactions taking place on a regular basis over time (whether or not such transactions turn out in practice to be regular). |
Holding out |
P does not hold himself out as providing a professional service that includes insurance mediation activities (by professional is meant not the services of a layman). |
P holds himself out as providing a professional service that includes insurance mediation activities. |
Relevance to other activities/ business |
Insurance mediation activities:
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Insurance mediation activities:
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Commercial benefit |
P receives no direct or indirect pecuniary or economic benefit. P is a layman and acting in that capacity. P would not obtain materially less income from his main activities if they did not include |
P receives a direct or indirect pecuniary or economic benefit from carrying on insurance mediation activities – such as a fee, a benefit in kind or the likelihood of materially enhanced sales of other goods or services that P provides. P would obtain materially less income from his main activities if they did not include insurance mediation activities. |