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HMRC internal manual

VAT Insurance

Claims handling: Claims handling by experts and delegated authority

Where loss adjustors or other experts are not providing insurance claims handling services as described in VATINS5505 and VATINS5510 then their services will be standard rated. However, if they also provide insurance claims handling services, their services will be exempt when they are acting as an agent of the insurer when supplying those services which is evidenced by certain conditions, detailed below, being met.

An expert must hold written delegated authority to act on behalf of the insurer, so that his actions will be binding on the insurer. This means that the expert, as the agent of the insurer, will have the power (without reference to the insurer) to investigate claims, and perform the claims handling services specified in VATINS5505. This delegated authority must be granted to the expert before action commences in respect of the claim. Where the expert does not hold written evidence of the delegated authority, or deals with a claim which falls outside the terms set out in the delegated authority, the expert’s claims handling services will be subject to VAT.

If an insurer gives written authority to another person (such as a broker) who in turn issues written authority to an expert, the expert’s services will still be exempt provided that the original authority from the insurer gave the original recipient power to delegate the authority to another party in this way.

It is normal practise within the industry for a delegated authority agreement granted to an agent by the insurance company to impose conditions, such as financial limits above which the case must be referred back to the insurer or certain other circumstances when referral is required, for example, when fraud is suspected.