The role of an insurance broker is one of mediator between clients and the insurers. Brokers are supposed to be impartial, offering their clients – who may be anything from individuals to multinational companies – the best of the options available on the market.
Before you start
Setting up as an insurance broker requires a number of different skills, qualifications and areas of knowledge. Most people who consider setting up their own agency will have already worked for some time in the industry, building experience and understanding of the different types of insurance. One of the first questions to consider is what kind of insurance you will be selling. A relevant factor is the comparative reluctance of the big firms to work with small or new brokers; finding a niche makes this an easier process. This is also wise because, with over 100,000 people already in the insurance business in the UK, becoming a new insurance broker is relatively competitive.
Beyond that, there are the issues that affect anyone starting a new business. You need to make sure that you – or your prospective employees – have the relevant skills and qualifications. For insurance, sales experience, administrative ability and good levels of numeracy are all important. But most importantly this business is about people: building a client list who trust you to provide good information and the best deal on the market. Without a pool of potential clients, you stand little chance of getting your company off the ground. This is why those who have previously worked in the industry may have had contractual restrictions placed on them by their previous employers for a period of time after leaving: it reduces the chances of competition for the same clients.
Because it takes time to build up a book of contacts and new clients, your first year as an insurance broker is likely to be lean. It is therefore important that you plan for this financially, ensuring that you have adequate cash reserves to get through the initial phase before your business turns a profit. Even after that, it’s wise to assume that your salary will be fairly basic for a number of years as you invest your excess income back into the company to ensure that you have the financial cushion to weather any storms in the future.
Qualifications and other requirements for insurance brokers
Setting up as an insurance broker generally involves a certain amount of training and, inevitably, compliance with industry regulation. You may have received most of what you need in the past if you have worked for another broker, or elsewhere in the industry. This may have included on-the-job training or an apprenticeship, or a placement on a graduate training scheme for one of the larger brokerages. You will need to take an appropriate qualification, such as the CII (Chartered Insurance Institute) Certificate in Insurance for trainees. This can be done by distance learning or online, and part-time.
All UK insurance brokers must be regulated by the FSA, which will come at a substantial cost to you: currently at least £1,000 annually. There are also yearly rates to be paid to the Financial Services Compensation Scheme and the Financial Ombudsman Service, which will increase your outgoings by another £2,000. In addition, you will need to factor in the costs for professional indemnity insurance.
Conclusion
Setting up as an insurance broker is a long-term enterprise. As well as the appropriate industry experience and qualifications, you will need the means to build a client list and the financial reserves to survive the early phase of your business. Once you have established a successful insurance brokerage, however, you can expect a good income from new referrals and the residual income from renewals.
About the Author
This article was supplied by the leading firm of Irish insurance brokers and members of the Irish Brokers Association, Robertson Low, established in 1995 and the only Irish incorporated ‘Lloyd’s broker’.