Insurance mediation is defined as:-
“The activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or assisting in the administration and performance of such contracts, in particular in the event of a claim.”
Therefore a solicitor is fairly likely to be carrying out activities which constitute a regulated activity particularly when dealing with personal injury claims.”
No. However, you may be conducting regulated activities (i.e. insurance mediation) and therefore you must be registered with The Law Society for that purpose. Please note that your permission to conduct regulated activities is limited in nature. Any advice must be, inter alia, ancillary to your main stream activities and you must “hold to the order” of the client any commission or any other financial advantage you receive. Please note that merely agreeing to provide insurance mediation is a regulated activity in its own right.
The starting point is that you must always act in your client’s best interests as per Rule 1 of the Solicitors’ Practice Rules. You must satisfy yourself that the proposed contract of insurance is suitable to your client’s needs and that adequate cover is provided. Note, however, that Rule 12 may prohibit this kind of arrangement. In any event, you must comply with both SCOPE and COB Rules as you will be arranging the insurance. Regard must also be had to the Referral Code as amended and the disclosure requirements thereunder.
As stated above, Rule 12 of the Solicitors’ Practice Rules 1999 prohibits a Solicitor from entering into “tied” agreements/relationships. The logic may be found in Rule 1 and the Solicitor’s obligation to act independently and in the client’s best interests at all time. Whilst claims management on behalf of an Insurer is not a regulated activity, assisting in the administration / performance of a contract of insurance is a regulated activity. You must therefore determine whether you are acting for the lay client or for the Insurer. You may conclude that you act for both in which case you must consider the clear conflict of interest.
In any event, regard must be had to your obligation to consider suitability of the insurance taking into account the client’s own specific circumstances. You are generally required to conduct a fair analysis of the market prior to making any recommendation to the client.
Whilst the Conditional Fee Agreements Regulations 2000 have been revoked, under Paragraph 4.j.(iii) of the Solicitors’ Costs Information and Client Care Code 1999 you are obliged to consider “whether it would be advisable for the client’s liability for another party’s costs to be covered by after the event insurance”. Particular emphasis is placed upon CFA funded cases (see also Paragraph 5(d)). Current authorities support the proposition that LEI is suitable in the simplest RTA case particularly those funded under CFA. It is difficult to see that the Solicitor will be acting in the client’s best interest (except in unusual cases) where cover is not obtained at the outset. This is particularly since obtaining LEI at a late stage of the proceedings may prove costly and indeed impossible.
Please also see Case Speccing
Yes, provided you comply with your professional and legal obligations. These are, inter alia, as follows:
1. You must “account to the client” any commission received – This means hold to the order of the client which in turn means pay to the client. The £20 de minimis in Rule 10 does not apply!
2. Disclosure – you must disclose to the client any interest you have in recommending the insurance.
3. Informed Consent – In order to retain any commission you must obtain the client’s informed consent. This means you must inform the client that any commission belongs to the client and he/she must specifically authorise you to keep the commission. A statement that you will keep the commission if the client does not instruct you otherwise is insufficient (i.e. negative consent).
Essentially, you must advise your client in the same way that any other regulated insurance intermediary would. The obligations are clearly set out in the in the SCOPE and COB Rules. Particular regard must be given to Appendix1 of the COB Rules. Under both COB Rules and the Solicitors’ Costs Information and Client Care Code 1999, you are obliged (inter alia) to consider the availability of any suitable pre-existing contracts of insurance suitable. Please note that your obligation is to conduct a fair analysis of the market and ensure that the product is suitable to your client rather than being advantageous to your firm!
Apart from the obvious professional negligence claim and formal complaint to The Law Society, under SCOPE Rule 6(3)(b) the FSA may prevent you from carrying on any regulated activities (i.e. insurance mediation). Perhaps more importantly, it is a criminal office to conduct regulated activities without authorisation or in breach of Section 327 FSMA 2000 (see above). Section 26 FSMA 2000 provides that an agreement made by a person whilst in breach of the rules is unenforceable.
In Garbutt the Court of Appeal acknowledged that The Solicitors’ Practice Rules 1999 have the force of subordinate legislation. The requirements for an enforceable CFA remain set out in Section 58 Courts and Legal Services Act 1990 as amended. There seems to be a wide misconception that Garbutt is an authority to the proposition that breach of conduct rules cannot affect the enforceability of the CFA. This is plainly wrong. Garbutt is distinguishable on the basis that the Court of Appeal was concerned with the solicitors post-retainer obligation, namely the obligation to provide a costs estimate. The obligation to advise vis alternative methods of funding is pre-retainer.
It is clear that the obligations previously imposed under the Conditional Fee Agreements Regulations 2000 have not been eradicated but simply relocated. Arguably, therefore, breach of professional rules (SCOPE & COB rules included) may lead to unenforceability of the CFA.
Insurance Mediation primarily concern: introducing, advising and selling. It follows that introducing your client to a broker is a regulated activity. Provided you are registered with the FSA (see above), you can refer your client to an insurance broker. You will not be advising in relation to or selling insurance and therefore are not required to provide Statement of Demands and Needs, conduct market analysis etc (see above). This will be the broker’s obligation and the broker (not you) must comply with these obligations. You must act in accordance with your Rule 1 obligations and in line with Rule 12.