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Pet insurance shake up
– an end to breeders promoting policies?

A MAJOR shake-up in the regulation of the Pet Insurance industry could spell the end for dog and cat breeders giving out six weeks free pet insurance with every puppy or kitten sold. New regulations outlined last month by the Financial Services Authority, acting on behalf of the Government are cracking down on ‘insurance mediation activities’ by third parties on behalf of insurance companies.

Businesses that are in any way involved in helping people buy general insurance or pure protection policies need to take action to bring their activities within the remit of new regulations due to come into force in 2005, warned the Financial Services Authority (FSA).

Up to now the sale of these products has been subject to voluntary regulation and codes of practice. But in order to implement various European directives - mainly the Insurance Mediation Directive (IMD) - in the UK, the Government has given the FSA responsibility for regulating general insurance from 14 January 2005.


All businesses that sell insurance as an adjunct to their main business will come within the scope of FSA regulation, unless they can rely on an exclusion. Regulation will cover a range of activities such as: offering customers insurance policies; making recommendations about which insurance company to go with; issuing cover notes; and helping customers claim on a policy.

Sarah Wilson, Director of the FSA's High Street Firms Division, said:

"With general insurance regulation less than a year away, the clock is ticking and businesses need to get cracking now if they want to be ready in time.

"If you want to continue doing general insurance business after the 14 January 2005 you have two options: to become authorised by the FSA; or to become an Appointed Representative of an authorised firm, known as a 'principal'. We have no preference as to which route you take – that is a commercial decision for your business.

"So far, businesses selling insurance as a secondary activity have been slow to come forward and register their details with us. If you want to become FSA authorised, I would urge you not to leave it until the last minute – we face a tight timetable and it will be in everyone's best interests to avoid a last minute rush to regulation."

The FSA also warned vets selling pet plan insurance that they will have to sign up for regulation by the FSA from 14 January 2005 or stop doing this business and lose the income it generates. The directives as applied to vets could just as easily be applied to breeders who effectively ‘sell’ or promote policies for a pet insurance company.

Sarah Wilson added: "As vets you probably don't see yourself as part of the financial services industry. But this is all about to change. In just under a year, you will have to be regulated by the Financial Services Authority.

"This means that it will become a criminal offence to continue selling pet plan insurance 14 January 2005 without becoming FSA regulated."

There is now a fear that breeders may feel so discouraged by recommending pet insurance to purchasers that they will simply not bother to do so, which could lead to a decline in animal welfare if animals remain uninsured. Breeders could also find themselves facing liability should a puppy or kitten fall sick after it has been sold, if it is uninsured.

However, Petplan, one of the UK market leaders in pet insurance, says it is leading the way in making compliance with the new FSA regulations as easy as possible for breeders.

Petplan has been working closely with the FSA to ensure that the new regulations will not have a detrimental effect on the promotion of pet insurance. This means that breeders will still be able to gain the commercial and welfare benefits of having insured clients.


Fiona Pinkney, Petplan’s communications manager said: "Many thousands of breeders recognise the important protection that pet insurance gives the new owner. Petplan has a well-established relationship with the breeder community and we will continue to deliver our comprehensive support packages and long-term commitment.

"The FSA changes will have an effect on the way puppy breeders can promote pet insurance policies to their clients. Petplan is currently working with the FSA and all breeders will be given adequate notice of the changes and will receive all of the necessary information from us. The timing for this notification will be towards the end of 2004. In the meantime, all Petplan breeders can continue to issue Instant Puppy Policies as normal."

Petplan will be launching a compliance telephone helpline for breeders in the second half of 2004.

l The relevant FSA regulations which affect breeders state: ‘Direct remuneration, whether received from the customer or the insurer/broker (cash or benefits in kind such as tickets to the opera, a reduction in other insurance premiums, a remission of a debt or any other benefit capable of being measured in money's worth) a person (P) does not receive any direct remuneration specifically identified as a reward for his carrying on insurance mediation activities. P receives direct remuneration specifically identified as being a reward for providing insurance mediation services.

Indirect remuneration (such as any form of economic benefit as may be explicitly or implicitly agreed between P and the insurer/broker or P's customer – including, for example, through the acceptance of P's terms and conditions or mutual recognition of the economic benefit that is likely to accrue to P). An indirect economic benefit can include expectation of making a profit of some kind as a result of carrying on insurance mediation activities as part of other services. P does not obtain any form of indirect remuneration through an economic benefit other than one which is not likely to have a material effect on P's ability to make a profit from his other activities.’

FSA website: