What qualifications are needed to start a insurance company or insurance broker?

Question

What qualifications are needed to start a insurance company or insurance broker?

Answer 1

I’m afraid to say the above answer regarding Lloyd’s is TOTALLY INCORRECT, ignore it completely.

For a company:

Lloyd's has nothing to do with setting up an Insurance company, at all... nada...never has.....never will.

The biggest qualification for starting an inurance company is lots of cash.... unless you have millions sitting around, forget it....it isn't going to happen. In the UK or any EU country you'll need better than Eur 3.5m 'free assets' as an absolute legal minimum. If you have less than 10m, frankly I wouldn't even bother asking and even that is low.

For a Broker:

You DO NOT have to become a registered Lloyds broker unless you want to do business DIRECTLY with a Lloyd’s syndicate (there are ways round this) and even that requirement is likely to disappear soon under recent government proposals to reform the Lloyd’s Act 1982.

In the meantime there are plenty of companies happy to quote for your business.

Please ignore all that Lloyd’s stuff, it’s incorrect and/or irrelevant, there are plenty of small brokers in the UK who aren’t Lloyd’s registered.

It’s difficult to give you a precise answer as the rules vary depending on what sort of insurance you want to sell, where, how and to whom. (e.g. the rules and requirement for Life business are very different to those on say Travel Insurance)

What you certainly will need is to be licenced by the FSA, the link below takes you to their application guidance brochure which pretty much tells you all you need to know. I’ve found the FSA to be reasonably helpful (though they won’t tell you how to do something, just that you need to do it)

Far more important than any formal qualifications is the need to comply with a whole host of rules and regulations.

You’ll need to comply with rules covering selling the policy, accounting for it, banking it, dealing with claims etc etc etc … trust me it goes on and on.

You will need to satisfy the FSA that you will be able to do this, though as a ‘small firm’ the requirements are less than for a big outfit.  

There will also be certain minimum capital requirements, again how much depends very much on the type and amount of business.

Failure to comply is VERY serious and could see you heavily fined even if it was an honest mistake, saying “sorry I didn’t realise”, won’t cut much ice. (There are lots of examples of fines being issued on the FSA website).

Failure to register is an even more serious criminal offence and can see you doing jail time…. don’t risk it….. and anyway it’s also an FSA requirement that Insurers check that the brokers they deal with are FSA registered, so no-one in the UK will do business with you if you’re not.

You could always hire a qualified compliance officer or firm to look after all this for you, (I’ve known even some VERY large firms to do this for certain specific reasons), but of course that costs money.

If you want to get qualified yourself, The Chartered Insurance Institute (link below) is probably the best recognised outfit, they do a variety of different qualifications, tailored to all sorts of needs including Insurance Broking. The FSA will recognise CII qualifications.

There are other ways you could start up in the business without all this hassle, you might want to speak to some of the bigger brokers and/or insurers about some kind of representative or agency deal. OK you won’t make as much money, but you’ll still be ‘pretty much’ your own boss and have a lot less compliance hassle as they have their own processes (and licence) in place. I could be wrong here, but for the price of a few emails, you could always ask, particularly if you think you’ve identified a product/market. You could also approach an established small broker locally and size them up regarding some sort of ‘partnership’ perhaps.

Hope that helps a bit.

Answer 2

Ray's answer is excellent. The only thing I would add to it is that the FSA will need to see that you have appropriate professional indemnity insurance in place along side the other requirements (experience / qualification / capitalisation / processes.)

If you have a website that collects customer information (rather than just a "brochureware - phone us"-type site, you may also be required to demonstrate its technical capability. We had to demonstrate our security, scalability and disaster-recovery testing results to the FSA as part of our registration.

When we started up, we hired someone with 20 years experience to be our Compliance Director AND hired a Finance Director who was also FSA registered.

The two of them took the company, and us as Directors, through the registration process, which took several months.

Answer 3

To start with you have to be registered at LLoyds of London, and prove you have the necessary finances to operate as an Insurer or broker. The registration is very expensive, because all your dealings will be underwritten by LLoyds. You also have to show you are competent in dealing with insurance risks, and a lot more. References are needed which are followed up. This is to ensure that the public are guarded against any quick rich merchants who will take all the premium cash and then do a runner.

Answer 4

I agree totally with Ray. Good answer.

Answer 5

I'm not sure if this helps but this article talks about being a virtual  insurance agent/broker. If you want to work from home. You do need a license. Its interesing how new tech has changed the way we will conduct our life.