In-house investigators dodge PI regulation amid deadline delay

24 Mar 2015
By Katie Marriner for Post Magazine

In-house claims investigators will not be subject to statutory licensing for private eyes, according to the Association of British Insurers, which has expressed concerns that uncertainty around the introduction of PI regulation is “hindering” insurers.

Home secretary Theresa May first pledged a licensing regime for private investigators in July 2013, with administration for setting up such a scheme handed to the Security Industry Association.

It was previously expected that from 6 April this year, under the Private Security Industry Act, the undertaking of investigative activity by an unlicensed person would be an offence.

However a lack of clarity remains around when the regulation will be brought in, with the SIA confirming the April deadline will not be met and that regulation will come into force "as soon as possible" after the general election.

Confirming that licencing for private eyes will not be introduced before the dissolution of parliament on 30 March, a spokesman from the SIA told Post: "The Home Office said the government expects the introduction of the statutory licensing of private investigation activities to come into force as soon as possible during the next parliamentary session, which starts in May 2015. No date was set for that."

"The SIA will continue to work with the Home Office, which has responsibility for introducing the regulation of the private investigation sector. In advance of any regulation date, we will publicise widely further information about the proposed regulation of private investigations," he said.

Former managing director of G4S Investigation Solutions Matthew Cantle, now MD at Cotswold Group, told Post he expected the regulation to be introduced towards the end of next year, depending on the general election result. Despite delays, he was certain government remained committed to the licensing rules.

"The Conservatives have made a pretty strong pledge off the back of the Leveson Inquiry [into media ethics]. I would hope it doesn't drift away. We are self-regulated at the minute and that does not give much reassurance at all times," he said.

The Association of British Insurers has written to Home Office parliamentary under-secretary of state for criminal information Lord Bates expressing concern about the lack of certainty around the introduction of PI licensing.

ABI fraud and financial crime manager Mark Allen told Post: "[We] wrote to Lord Bates to ask for clarity on the timescales and scope of the proposed licensing regime for private investigators. We argued that the ongoing uncertainty was hindering the ability of the insurance sector to plan ahead."

Global Options UK region operations director Steve Cook said his firm remained hopeful the licensing regulations would be implemented early in 2016, despite the upcoming election stalling progress.

However, for insurance investigation firm Absolute Partnership, a key issue is the lack of information from the SIA about what to expect when the regulations are enforced.

"Being in regular contact with the SIA we are updated on changes and there has been no material information given on what to expect when these regulations are enforced. The expectation is we would have received some sort of guidance by now if the proposed regulations were going to take effect in April," an Absolute spokesman said.

"There are a lot of firms talking about compliance and offering training to bring firms up to code but without knowing what the code is we find it hard to understand how they can do this. We are awaiting advice on what to expect and will act accordingly once this is given."

Meanwhile, the ABI said it had received confirmation from the Home Office that licenses would not be required for in-house claims investigators at insurance companies.

In September 2014, the ABI updated its member guidelines to say that while it supported the statutory regulation of PIs, insurers' pre-existing supervision by the Financial Conduct Authority means they should be exempt from any additional regulation.

Allen said: "The Home Office has confirmed under the relevant section [of the Private Security Industry Act] that the licensing regime will only apply in relation to supplied services, which effectively rules in-house, desk-based investigators outside the scope of the Act."

However, he added there is still some uncertainty for insurers that conduct field investigations.

Elsewhere, Cook predicted a potential consequence of the regulation would be self-employed private investigators going out of business or smaller market players consolidating.

Commenting on the fact that the regulations will mean that individual investigators as well as the overarching investigation business must be licensed, Cook said: "It is quite a large investment for some smaller firms. Some won't do it.

"There will probably be some consolidation. The barrier for smaller operations will be the up-front cost and the ongoing costs [of maintaining the license]. Sole traders have a place in the industry but they will struggle to get business licenses."

Cantle agreed there could be some consolidation among smaller firms as well as individual investigators giving up if the companies they are contracted to will not fund the cost of the license.

"If companies are using self-employed [investigators] and will not fund the qualification cost it would be a cost to the individual so the individual may exit," he said.