Start an insurance broking business

Choose your route to market

Route 1: Direct FCA authorisation

Apply directly to the FCA for authorisation as an insurance intermediary. This makes you a principal firm with full regulatory responsibility.

Advantages:

• Full independence - you control your business strategy and product range
• Keep 100% of commission and fees (no principal taking a cut)
• Build your own brand and reputation
• Can appoint your own Appointed Representatives later

Disadvantages:

• Longer setup time (6-12 months typical application process)
• Higher upfront costs (application fees, capital requirements, professional indemnity insurance)
• Full compliance burden - you must maintain regulatory systems and controls
• Ongoing regulatory fees and reporting obligations

Route 2: Appointed Representative (AR)

Operate under the authorisation of an existing principal firm. The principal firm takes full regulatory responsibility for your activities.

Understanding FCA authorisation requirements

Key authorisation requirements

The FCA assesses whether your business is:

• Fit and proper: Directors and key staff have appropriate qualifications, competence, and good character
• Adequately resourced: Sufficient capital, systems, and people to conduct business safely
• Well-governed: Clear management structure, compliance oversight, risk management
• Compliant with conduct rules: Systems to meet IDD requirements, product governance, customer disclosures

You'll need to provide:

• Business plan demonstrating viability and regulatory understanding
• Governance structure (directors, compliance officer, money laundering officer)
• Policies and procedures (complaints, conflicts of interest, data protection, financial crime)
• Evidence of professional qualifications (CII qualifications typical)
• Confirmation of capital resources and PII cover

Capital requirements

Understanding capital resources

Capital resources can include:

• Share capital and reserves
• Retained profits
• Director's loans (subordinated and meeting FCA criteria)

Important: Capital must be available to the firm. Money tied up in illiquid assets (like property) doesn't count. Most firms maintain capital as cash or near-cash instruments.

Practical approach: Budget for £20,000-£25,000 minimum capital when starting. If you're holding client money, expect significantly higher requirements and consider alternatives like risk transfer arrangements where client money goes directly to insurers.

Professional indemnity insurance (PII)

Getting PII cover

Obtaining adequate PII is often one of the biggest challenges for new insurance intermediaries:

• Shop around early: Approach specialist brokers who understand intermediary PII market. Get quotes before finalising your FCA application.
• Expect higher premiums initially: New firms without trading history pay more. Budget £3,000-£10,000 annually for minimum cover depending on your activities.
• Check policy exclusions carefully: The FCA has concerns about exclusions that undermine cover (e.g., excluding claims related to unrated insurers). Ensure your policy meets MIPRU requirements.
• Coverage must be continuous: If you cannot renew PII, you cannot continue trading. Notify the FCA immediately if you cannot obtain adequate cover.
• Run-off cover: If you cease trading, you need run-off cover for at least 6 years to protect against claims from past activities.

Tip: Some insurers offer "incubator" arrangements for new intermediaries with lower premiums in year one. Ask specialist brokers about these schemes.

Application fees and timeline

The application timeline

The FCA aims to decide applications within 6 months, but in practice, insurance intermediary applications typically take 6-12 months. Complex applications or those requiring significant clarifications can take longer.

Typical timeline:

1. Months 1-2: Prepare application documents, secure PII quotes, establish capital resources
2. Month 3: Submit application via FCA Connect portal with application fee
3. Months 4-8: FCA reviews application, requests clarifications, may conduct interviews
4. Months 9-12: Final approval, variations agreed, authorisation granted

Warning: You cannot conduct regulated activities until authorisation is granted. Do not arrange insurance, provide advice, or hold yourself out as authorised before receiving FCA approval. Breaches can result in prosecution and being unable to obtain authorisation.

Ongoing costs after authorisation

Budget for continuing regulatory costs:

• Annual FCA fees: Minimum £1,000 plus percentage of income (Fee Block A.13)
• PII renewal: £3,000-£10,000+ annually depending on size and activities
• Professional subscriptions: CII membership (recommended), trade body memberships
• Compliance systems: Software for regulatory returns, complaints tracking, records management
• CPD: 15 hours minimum annually per relevant employee - courses, conferences, materials
• Professional advice: Compliance consultants, legal advice on complex matters

What happens after authorisation

Once authorised, you must:

• Maintain capital and PII continuously - you must notify FCA immediately if you breach requirements
• Submit regulatory returns - financial information, complaints data via RegData
• Comply with Consumer Duty - deliver good outcomes for customers
• Follow IDD requirements - demands and needs assessments, product governance, IPIDs
• Maintain AML systems - customer due diligence, suspicious activity reporting
• Handle complaints properly - 8-week deadline, FOS referral rights
• Keep staff qualified - 15 hours CPD minimum, ongoing competence assessments

Practical steps to get started