Is the Appointed Representative model suitable for my Association?

The ‘Insurance Appointed Representative’ is a recent initiative within the insurance industry and the only regulatory model globally where a ‘Principle’ and Appointed Representative relationship can exist.  It allows entrepreneurial individuals to quickly deploy their knowledge of the marketplace in supporting their customers and in the process, to develop their own brokerage/insurance business.  It is a significant move away from the schemes that the industry was custom to through ‘insurance agents’, who were often tied into selling one scheme or products of one insurer. 

Background

Insurance advice, arranging and execution is a regulated profession in the United Kingdom which is governed by the Financial Conduct Authority (FCA). Prior to setting up a business as a broker or insurance professional (i.e. someone who sells insurance directly to the end customer/insured) you will need to demonstrate that you have knowledge and expertise of a type that qualifies you to deal with the public in this area.  The laws and regulations exist for consumer protection and to maintain the professional reputation and standards of the UK’s global insurance industry and regulatory framework. At one time, to run an insurance business, it was necessary for the individual concerned to demonstrate his or her core competencies directly with the FCA.  It was also necessary for the new entrant to show the existence of a professional framework including:

• Accounting and Statutory Reporting framework
• Professional Indemnity insurance or sufficient solvency to pay out any claims made against the insurance brokerage/entity.
• Capital Adequacy to ensure the business is solvent at all times.

This model still very much exists today for insurance entities and brokers alike, which is often referred to as Direct Authorisation.  You may read more about direct authorisation by clicking here.

The Appointed Representative Route: 

There are challenges associated with establishing an appointed representative association through the conventional direct authorisation route.  Typically, they are related to cost and timeframes – both of which may prove challenging to a start-up business. As a result, a new system was developed, involving a new role referred to as the “Appointed Representative” or ‘AR’.  Its characteristics distinguish it from the FCA/direct authorisation route as follows:

• A direct authorised and often established insurance organisation acts as a ‘Principle’ and it appoints the new individual (or company) as one of its appointed representatives or as its more commonly called, an ‘AR’; 
• The Principle is typically responsible to deal with many of the authorisation process and FCA approval issues for the entity and association directors of the AR through the Principle’s FCA CONNECT platform. 
• The Principle is also required to report to the FCA for regulatory reporting and their own capital adequacy provisions, which typically offsets the need for the AR to find substantial sums of money up front;  
• The operating procedures may vary from one Principle to another and that’s why it’s imperative that you set out the agreement in line with your business model; 
• You will be able to develop and maintain your own customer portfolio, with the customers remaining yours and not the principle’.  However, always check with the Principle as not all Principle’s allow the AR to ‘keep’ the clients upon exit.  
• In some cases such as with xBroking, the Principle may allow you the flexibility to offer solutions from other insurers.  This might not be the norm with many Principles, however it’s well worth checking in advance, as is the subject of commissions and fees for business placed with other insurers.  

So, is it right for you?

As to its suitability for you and your model, it might be worthwhile to consider the following questions:

• Would you prefer to leave things such as statutory reporting and compliance to someone else?
• Is your own customer portfolio important?
• Would you rather spend more time on building clients and fostering relationship for your business growth?
• Are you looking for a substantial support structure to assist your business to grow?

If you answered ‘Yes’ to any of the above, then contact us for a confidential meeting and see how we can help.