Starting your own broking business can be an exciting and rewarding endeavour. But where do you start? Here are three of the first steps to starting an insurance broking business.
Research Your Market
Market research involves identifying and contacting potential customers of your new business to determine whether there is an interest and desire to work with you. You want to make sure that there is a readymade client base who will support you with your new venture. Researching your market allows you to address problems before wasting too much time, effort and money.
Make sure you:
- Identify and talk to potential customers about their specific needs and how you intend to support them.
- Determine what makes you stand out from competitors. Chances are your USP is you and that’s what your client will buy into. Are you providing something better than or different from what is already available?
There are two basic routes to FCA authorisation: Directly Authorised and Appointed Representative (AR).
In the past becoming Directly Authorised was the usual route to starting an insurance brokerage. However, following the lead of the Financial Services sector where the AR model is widespread, there has been a significant rise in the number of ARs amongst the General Insurance sector. In fact, this model is widely acknowledged as an alternative to the more traditional approach and a growing number of businesses have made this their preferred route.
Key considerations when becoming an AR include:
- Having access to different skills and expertise with whom you can share responsibilities and help provide you with the time to focus more on your clients and generation of new business.
- Understanding the insurer relationships your principal has and their ability to influence placement?
- Ensuring that they provide appropriate Professional indemnity cover to protect your business.
- Understanding their control and oversight to ensure that they keep your clients protected and ensure you are compliant.
- Clear and concise contractual terms that provide clarity on the responsibilities of both parties?
- Ensuring the Principal’s business is financially stable which provides confidence that they will be able to fulfil their obligations to you and your clients.
- Medium term ambitions for the business should be taken into account as a change of business partner can result in substantial impact to the business and reduce your ability to focus on your clients.
Ensure you do due diligence on your chosen partner and speak to their members/AR’s about your needs/wants to ensure that you share common values.
Set Up your Business
- You will need to consider what the business will be called which can be daunting in its own right but doesn’t need to be. The key to choosing a business name is making sure it is:
- Easy to find when you google it.
- Doesn’t get confused with a competitor and/or a business that dominates internet search engines.
- Is personal and/or relevant to what your business will do, using your own name or being geographical specific normally works well.
- The domain name with .co.uk is available. The website doesn’t have to replicate the business name exactly so consider options. The shorter the domain name the better as it is easier for clients to remember.
- Setting up a limited company can be done simply by visiting Gov.uk. The application is straight forward to complete and costs £12.
- You will need to register with the Information Commissioner officer which can be done by visiting ico.org.uk. The cost is £40 per annum for a start-up business.
- With any new business it is important to keep overheads at a minimum as cashflow is critical in the early days, when considering the need for leasing an office or the employment of staff you should consider the cost v benefit and the ability of your Principal to support you in the short and medium term. Our experience is that provided you have a suitable place to work from home, you can avoid this expense in the first couple of years of trading if not longer.