The rise of the Appointed Representative

By Howard Pepper
Managing Director, Momentum Broker Solutions

For a long while the Appointed Representative (AR) business model in the general insurance market has not had the same acceptance as Directly Authorised brokers. In the broader financial services world, however, this is a prevalent way of trading, with thousands of IFAs operating in this manner, from sole traders to substantial businesses. In other parts of the world, AR models, or variations of them, are broadly recognised as a valuable part of the insurance community.

The perception in the UK has not been helped by a number of major brokerages attempting to build an AR model as an adjunct to their own brokerages. They have done this in a variety of formats, with little uniformity, adding to the confusion surrounding the model, and often in conflict with their own retail brokerages.

Unlike financial services, there is a dearth of dedicated providers to ARs in the insurance market. As a result when seeking to start up their own brokerages many individuals went straight for the Directly Authorised model – even though it is difficult to get there, costly to achieve, and leaves the broker with a whole host of issues still to address; agencies, cash management, compliance, systems provision, marketing support, website design etc.

The business world has become fleeter of foot, recessions tend to do that, there is no shortage of entrepreneurial, smart insurance people with the energy, commitment and the belief to build their own business. The key is to make the model relevant for where we are now. Originally the AR model was largely in response to the transfer in regulation under the Insurance Brokers (Registration) Act 1977 to regulation by the Financial Services Authority in January 2005. That is still an issue, few entrepreneurs really want to spend a chunk of their time with administration, but there are now many other factors; A modern broker needs to have access to great products, competitive pricing, a trading platform that supports the business not restricts it, the ability to e-trade, marketing support etc. The freedom to dedicate their time to what they do best and enjoy most – looking after clients and winning new business.

The AR model is increasingly being seen as the most relevant for start-ups and small independents – not just an alternative to Direct Authorisation. This is because for a dedicated Appointed Representative provider to be successful, its ARs need to be successful. The relationship that develops is more than a network – it goes far beyond access to the insurance market; it is a genuine partnership, bound by the same interest – the growth and development of the business.