What are Insurance Distribution Activities?

The activities envisaged by the directive include "advising on, proposing, or carrying out other work preparatory to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim". A firm carries out insurance distribution if in relation to any contract of insurance it does or agrees to do any of the following:

• Advising;
• Arranging;
• Acting as an agent; or
• Assisting in the administration and performance.

Contracts of insurance are defined very widely so as to include life policies, pensions, ATE Insurance and policies of insurance to cover conveyancing issues such as local search insurance or insurance to cover lack of planning permission, building regulations and the like.

Your most likely reason to become involved in insurance distribution would be advising clients to obtain:

• Defective title insurance in conveyancing;
• ATE Insurance in litigation; or
• Seven-year plans in inheritance tax planning
• Warranty and indemnity insurance in a corporate transaction

There may be other insurance products that you advise on or arrange for your clients. Whatever the type of insurance, these are treated as insurance distribution activities.

We are an "ancillary insurance intermediary" and as such, we can help to arrange insurance for our clients which is complementary to the legal services we provide.

If you are carrying out an Insurance Distribution Activity, then you must give your client the information specified in the following section.

What information do you have to give to the client?

The general information to be provided to all clients at the outset of all matters is dealt with in our Terms of Engagement, but there are also certain other requirements which will need to be addressed on an individual basis by you. You must take reasonable steps to communicate this information to the client in a way that is "clear, fair and not misleading" (Rule 9.1 COBR).

More specifically, you will need to assess their particular circumstances and provide them with a "Demands and Needs Statement" (DNS), as specified by Rule.12 COBR. You therefore need to: (i) identify the client's demands and needs relating to any insurance contract proposed and (ii) ensure any insurance contracts proposed to the client are consistent with those demands and needs. The DNS must be based on the instructions that you have received from the client and should be adapted to the complexity of the insurance required and the individual client's circumstances to ensure that the insurance you recommend is consistent with that statement.

To ensure that you comply with the Insurance Distribution requirements:

• You must check whether there is suitable existing insurance or other means of covering the risk identified. If no suitable insurance exists, you will need to document a decision to obtain insurance (or not to, depending on the client's instructions).

• You must go to an FCA authorised insurance broker to ensure that you obtain the best possible terms for your client. Always deal with at least one broker, never insurers directly. See the guidance on €˜Referrals' and €˜Instructing other law firms, experts, advisers etc.'. Where you introduce the client to an insurance intermediary (i.e. broker), you must check they are registered on the FCA's Financial Services Register.

• In all cases where you wish to advise the client to obtain any form of insurance, including life assurance, you must complete the Demands and Needs Statement (DNS) using our approved template here. This template letter is adequate for simple contracts of insurance e.g. chancel repair and defective title. The template includes information that you must provide about you, the firm and the services you can provide when arranging insurance. Where you are dealing with more complicated insurance such as ATE insurance or warranty and indemnity insurance or where you are unsure, you must consult with the General Counsel as it may be the case that advice from an insurance specialist is required.

• You do not need to provide a DNS if the client uses its broker and obtains the policy without any reference to you. However, if you have recommended a client to seek out insurance, then that is enough to require you to produce a DNS and send it to the client.

Remember, you must provide the client with a duly completed DNS whenever advising the client to obtain any form of insurance. If you feel that you should be exempted from the need to do so, then, you must seek the consent from the General Counsel for this.

When a Demands and Needs Statement should be sent

Rule 21 COBR provides that the client must be supplied with "objective and relevant" information about a policy "in good time prior to the conclusion of the policy, so that the client can make an informed decision".