Pets are treasured members of the family; when they are ill and need the help of a vet, it can be stressful and emotional. Many owners want, or have pet insurance to cover these costs, but to make the process less stressful, vet practices often offer help with finding and securing pet insurance.
However, there is a possibility that this type of activity could be considered “regulated” by the Financial Conduct Authority (FCA), and it would need to be authorised. This is because assisting with or arranging insurance contracts 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. So, it is vital that vet practices are aware of the following legal considerations.
Key considerations for practices regarding pet insurance
Arranging the policy
Any steps taken before the insurance contract starts 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 (for example leaving them in a waiting room) would not be classified as arranging the policy, any steps taken beyond this – such as recommending a particular company or product – could be deemed a regulated activity.
Given the recent digitalisation of insurance claims due to the pandemic, some practices are finding that their clients are asking them to complete and submit the claim on their behalf, as opposed to the vet or practice merely completing relevant sections 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 up to the contract being taken out, including whether the practice has negotiated the terms of the policy, assisted in the completion of the proposal form, or sent it to the insurance provider. If these steps have been taken by the practice, the FCA may deem this regulated activity.
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 their client’s behalf.
Assisting in the performance of the contract would occur if the practice went on to fill in a significant part or the whole of the claim form on behalf of a client. This is because the practice is assisting the policyholder with their contractual obligations under the policy, such as notifying the insurer in the event of a claim.
By contrast, only completing the ‘veterinary’ section of the form is not likely to amount to administration and performance. Therefore, it would not stray into regulated territory. Likewise, simply providing pointers or information will help avoid falling into this category.
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 FCA authority.
Remuneration includes both monetary and non-monetary awards. So, it’s important to consider any rewards systems that your practice has in place which may constitute a benefit. There is no minimum level of remuneration required to meet the threshold of a regulated activity.
Top tips to avoid straying into regulated activity
- Minimise 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 advertise your practice as providing a professional service in respect of insurance distribution activities
- Seek advice in respect of any direct or indirect financial 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.