Pets are often seen as a valuable and treasured member of the family. It can be an emotionally taxing time when a pet is sick and in need of veterinary assistance. To make the process less stressful for pet owners, veterinary practices often offer additional services such as assistance with finding and securing pet insurance for their clients.
There is a possibility that this type of activity could be considered “regulated” by the Financial Conduct Authority (FCA), resulting in the need for authorisation to conduct such activities. This is because assisting in the administration and performance of a contract of insurance, or arranging insurance with or without a view to transact in that investment, may amount to an insurance distribution activity requiring regulation under the Financial Services and Markets Act 2000 (FSMA).
Unless your practice is exempt or meets one of the exclusions under FSMA, failure to obtain such authorisation is a criminal offence and may result in imprisonment and/or an unlimited fine. Therefore, it is vital that veterinary practices are aware of the following legal considerations.
Key considerations for practices regarding pet insurance
1. Arranging the policy
Any steps taken prior to the inception of the insurance contract are likely to be scrutinised by the FCA to establish whether a practice is arranging an investment. While displaying literature for clients to consider regarding pet insurance (eg leaving them in a waiting room) would not classify as arranging the policy, any steps taken beyond this, such as recommending a particular company or product, will likely be deemed a regulated activity.
Any steps taken prior to the inception of the insurance contract are likely to be scrutinised by the FCA to establish whether a practice is arranging an investment
2. Completing forms
Given the recent digitalisation of insurance claims due to the pandemic, some practices are finding that their clients are more frequently asking them to complete and submit the claim form on their behalf, as opposed to merely completing the relevant section of the form and returning it to the client to submit.
The danger with this is that the FCA may view this as “bringing about” the contract of insurance. To establish this, the FCA will look at the chain of events leading to the formation of the contract, including whether the practice has negotiated the terms of the policy, assisted in the completion of the proposal form, and/or sent it to the insurance undertaking. If these criteria are met, the FCA may deem this regulated activity.
3. Assisting and performing
To meet the threshold of a regulated activity, a practice would have to assist with both the administration and performance of a contract of insurance on its client’s behalf. Following on from the point above, an example of “assistance with administration” would be contributing to the filling out of the claim form. Assisting in the performance of the contract would occur if the practice went on to fill in the whole or a significant part of the claim form on behalf of a client. This is because the practice is assisting the policyholder with their performance of their contractual obligations under the policy (such as notifying the insurer in the event of a claim).
To meet the threshold of a regulated activity, a practice would have to assist with both the administration and performance of a contract of insurance on its client’s behalf
By contrast, only completing the veterinary section of the form relating to the treatment received or any pre-existing conditions would not likely amount to administration and performance. Therefore, it would not stray into regulated territory. Likewise, simply providing pointers or information will not meet this threshold.
4. Receipt of remuneration
Negotiating a settlement or receiving funds on behalf of a policyholder may amount to assisting in the performance of a contract of insurance, and thus trigger the requirement for authority from the FCA.
Negotiating a settlement or receiving funds on behalf of a policyholder may amount to assisting in the performance of a contract of insurance
Remuneration includes both monetary and non-monetary awards, so it is important to consider any rewards systems that your practice has in place which may constitute a benefit. While there is no minimum level of remuneration required to meet the threshold of a regulated activity, this will be more likely if you are carrying on the activities with a degree of regularity and for commercial purposes.
Top tips to avoid the risk of straying into a regulated activity
- Minimise as much as possible the level of involvement your practice has in completing insurance claim forms for clients
- Seek advice before receiving settlement monies directly from the insurer on behalf of a client
- Do not hold your practice out as providing a professional service in respect of insurance distribution activities
- Consider and seek advice in respect of any direct or indirect economic benefits received from helping clients with their pet insurance
Much will depend on the extent of your practice’s involvement with helping clients obtain or fill in insurance claims. These activities may amount to a regulated activity. Therefore, we recommend seeking legal advice tailored to your specific situation.