Last week we had a visit from a consultant who specialises in FCA regulation and claims management conduct issues. During the conversation we were informed that we needed to be regulated by the FCA because we are assisting with the administration and performance of a contract of insurance.
The consultant then went on to advise us that the Directors could be prosecuted and even go to jail if we did not become regulated. We were then offered the opportunity to use the consultant’s services to resolve this matter and protect the Directors from prosecution.
Do we need to be regulated or is the consultant just using high pressure sales to make us pay him quite a lot of money every month?
This question seems to have been asked by a number of repairers recently so you are not alone. Perhaps there are a number of these types of consultants that are trying to carve out an income from repairers and the insurance industry.
It is recommend that you do not enter into any arrangements with these types of people until you have either spoken with Retail Motor Law, (if you are a member) or until you have spoken with other repairers that this consultant is working with. These types of consultants appear to promise a significant rise in income if you use their system and become FCA Compliant.
Having considered these schemes it is unclear what they actually add to your service, the cost of the repairs increases but a proportion of this cost will be taken by the consultant.
There is nothing wrong with increasing charges if they are rightly incurred, possibly as a result of training, equipment or reaching a ‘standard’. One of the biggest issues faced by the industry is that estimators/VDA’s do not know how to calculate the business’ labour rate. Sometimes they are not aware of what the break even point is per hour and this can lead to an agreement to accept repairs at any price. The result is that everyone in the business is busy losing money.
So does a repairer need to be registered with the FCA?
It is suggested that an ‘average’ repairer does not need to be registered with the FCA.
If a repairer is concerned to know whether it may require authorisation it will need to consider the following questions.
- Will the activities undertaken by the repairer relate to contracts of insurance (see PERG 5.3(Contracts of insurance))?
- Yes, assisting in the administration and performance of a contract of insurance is a regulated activity.
- If so, will the repairer be carrying on any insurance mediation activities?
- Potentially Yes (d) assisting in the administration and performance of a contract of insurance) https://www.handbook.fca.org.uk/handbook/glossary/G566.html
- If so, will the repairer be carrying on these activities by way of business (see PERG 5.4 (The business test))?
- No. Assisting a customer with a claim is not to be regarded as carrying on by way of business unless the Repairer takes up or pursues that activity for remuneration.
It appears therefore that whilst the activity is ‘of a specified kind’ it is not carried on by way of business, https://www.handbook.fca.org.uk/handbook/PERG/5/4.html because no charge is made for assisting the customer with the claim, therefore it appears that a repairer does not need to be registered.
If your income is obtained purely from repairing cars, and your charges are all itemised in the estimate/invoice, then you are not generating income from assisting customers with the administration of their claims. It is therefore unlikely that you will required to be registered.
However, if you do make a charge for assisting customers with the administration of their claim then you will need to be registered with the FCA.
Conversely if you hold yourself out as being able to provide a claims management service and your estimates were higher because they incorporated a ‘hidden’ charge for the service then the FCA may decide you should be regulated. However in accordance with section 2(3)(c) the burden imposed on the person should be proportionate.
Finally if you are not being paid to assist with a claim then it is likely to be disproportionate to mandate that you be regulated.