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HMRC internal manual

VAT Insurance

Claims handling: Claims handling by insurance brokers and agents

Claims handling services provided by insurance brokers or insurance agents (see VATINS5200) are exempt from VAT.

In recent years the provision of claims handling services has evolved, particularly in respect of standardised, high volume business, such as claims under motor and home contents policies. Many insurers no longer handle these claims in-house but enter into contracts with specialist claims management companies who act as their agents, and deal with high volumes of work at relatively low fee rates. In the event of a claim a policyholder either makes contact with the insurer who refers the policyholder to the claims handler or is asked to make contact with the claims handler directly. The claims management company either acts in the name of its principal, the insurance company, as an undisclosed agent or informs the claimant that it is acting as the agent of the insurer.

Under current UK law, Legal Note (1)(c) to Item 4, specialist claims management companies acting as an agent of an insurer providing a claims handling service are providing exempt insurance-related services, and there is no need to have a delegated authority for exemption to apply. It is only when claims handling services are provided as part of a loss adjusting or other expert service that the possession of a delegated authority to handle insurance claims is required to make the expert an insurance agent for the purposes of the VAT exemption (see VATINS5530).