What insurance mediation activities are regulated by the FSA

The regulated activities are summarised below.

Dealing in contracts of insurance as agent

This activity is defined as buying, selling, subscribing for or underwriting contracts as agent, whether for the insured or the insurer.

Where intermediaries commit an insurance undertaking to provide insurance for prospective policyholders – ie have delegated authority to bind an insurer to contracts – they are carrying out a regulated activity. This applies whether or not any advice is given and even if the intermediary deals through another authorised person – ie instructs another agent to enter into the contract on a client’s behalf.

Intermediaries are also carrying out regulated business when they agree, on behalf of a prospective policyholder, to buy an insurance policy.

Arranging (bringing about) deals in contracts of insurance

A person brings about a contract of insurance if their involvement in the chain of events leading to the contract is necessary – ie there would be no policy without it. Examples include:

_ negotiating the terms of the contract on behalf of the customer with the insurance undertaking (and vice versa);

_ assisting in the completion of a proposal form and sending it to the insurance undertaking;

_ entering into a contract of insurance as agent.

Making arrangements with a view to transactions in contracts of insurance

This activity is closely related to the arranging activity above. The difference is that it does not have to bring about the transaction to which it relates.

Examples of this regulated activity are when a person helps a potential policyholder fill in or check an application form, or introduces a customer to an intermediary either for advice or to help arrange an insurance policy. In both cases the participant is playing an active part in the distribution chain. The passive activity of merely displaying literature advertising insurance does not count under 25(2). There is a further exclusion for those who introduce insurance ‘incidentally’

Assisting in the administration and performance of a contract of insurance

This relates to activities undertaken by intermediaries after the conclusion of a contract, for and on behalf of policyholders, in particular, claims management.

The application of article 39A is not as wide as it first appears. FSA guidance is that merely advising about claims would not be enough to be caught. The intermediary must assist the policyholder not only in the administration of the policy but also in the performance of their contractual obligations. Further, claims management on behalf of most insurers is excluded by article 39B. The best example of a regulated activity under 39A is where an intermediary notifies a claim under a policy and then provides evidence in support of it or helps negotiate its settlement on the policyholder’s behalf.

Advising on contracts of insurance

The advice must relate to a particular contract of insurance, be given to a person in their capacity as investor or potential investor and relate to the merits of a person buying, selling, subscribing for or underwriting a contract of insurance. Simply providing information is not a regulated activity. According to the FSA, information is likely to be ‘advice’ if the circumstances give it the force of a recommendation. Typical recommendations and whether they will be regulated as advice are set out in PERG 5.8.5. The decisive factor is whether or not a specific policy is implied. ‘I recommend you take the ABC insurer’s motor insurance policy’ would be regulated advice; ‘I recommend that you take out motor insurance’ would usually not. Many insurers now use pre-purchase questioning and/or decision-tree methods. PERG 5.8 provides detailed guidance on the extent to which prepurchase questioning or decision trees will constitute advice and what amounts to a regulated activity.

Agreeing to carry on a regulated activity

That is, agreeing to carry on any of the activities listed above.