(1) Where a conflict of interests arises or there is disagreement over the settlement of a dispute between the insurer and insured under a legal expenses insurance contract, the insurer shall give written notice to the insured informing him of -

(a) the right referred to in regulation 6(2), and

(b) the possibility of having recourse to arbitration in accordance with regulation 8.

(2) Where the management of claims is entrusted to a separate undertaking as mentioned in regulation 5(3), the duty of the insurer is to make arrangements to secure that such notice is given by that undertaking.