Insurance rules should not hit UK auctioneers

Andrew Jobson, managing director of the art and private client division of Aon Ltd, has been working though the implications of the new FSA regulations for some time. While he believes the European Directive to which all member countries must comply by January 15, 2005 will impose a massive additional administrative burden on the insurance industry, he does not anticipate extra red tape for the trade.

“It does not seem to me that auctioneers, dealers, valuers and restorers will be affected to a large degree by the regulation, as they are not carrying out what is deemed to be ‘regulated activities’,” he told the Antiques Trade Gazette. “Despite the fact the FSA Fact Sheet 8 specifically mentions antique dealers and jewellers, the critical thing is whether or not the dealer arranges insurance for a customer in the customer’s name, thus making the customer a policyholder and enabling him to claim on a policy directly to the insurer.”

This might well be the case for some jewellers who will offer ‘all risks’ insurance cover on items bought in the name of the customer. In such situations seeking expert legal advice is the best option.

However, the vast majority of dealers and auctioneers have a more general business insurance where they are the only policy holders and their customers or vendors have no direct right to claim on the policy. This should be the case even, as in the case of most auctioneers, if a charge for insurance is made to consignors says Mr Jobson.

“For example, should there be loss or damage of items entrusted for sale, the dealer or auctioneer would submit a claim and be paid themselves, and they in turn would reimburse the customer or vendor. The customer or vendor is not a policyholder and therefore not able to make a direct claim on the dealer’s or auctioneer's insurance.” As reported in Antiques Trade Gazette No. 1645, June 26, the full implications of the legislation were previously not understood by the major trade associations.

Meanwhile the Royal Institute of Chartered Surveyors, whose members include fine art auctioneers and valuers (alongside other surveyors more directly affected by the directive), are seeking a long-term alternative to the regulation.

CEO Louis Armstrong, who attended a meeting with Treasury officials to discuss the issue on June 14 said his association have seen “a few chinks of light”.

“They [the FAS] want to fulfil the Government’s ‘light touch’ pledge on regulation, while RICS wants to avoid tying the industry sectors up in red tape, hurting small businesses and reducing choice and competition. These two aims should be compatible and we will continue to explore the regulatory alternatives to the current FSA approach.”

We will keep readers informed as consultations continue.