Insurance Brokerage

[RumelA]

Hi guys

I've just registered on this forum to get some advice.

I am hoping to, along with two friends, start an insurance brokerage in the very near future specialising in commercial and private/public hire insurance. I have worked as an Account Executive for almost 7 years so have built up a rather large client portfolio. The only thing which concerns me is I'm not 100% sure on exactly what is required to do this.

I understand I need FSA regulation, DPA licence, CCL licence, professional indemnity insurance - but is there anything else? I can't seem to find much info in terms of pricing for FSA regulation. There are also several levels of cover for PI ranging from £50,000 to £5m. Which level is recommended?

I have also read that I will need 'adequate financial resources.' Any idea how much is considered 'adequate.' Also, how difficult is it to get agencies being a new broker?

I know there are lots of questions, but I am confident I can make this business work due to the contacts I have in the industry. Any help will be much appreciated.

Rumel

 

[RumelA]

Any advice at all guys?

Thanks

 

[TheGuru2010]

Have you thought about backing from a network? they may be able to help with alot of the questions

 

[RumelA]

Not as yet, no.

But with regards to joining a network, are there a lot more restrictions in terms of products you can offer? For example, I couldn't offer a Public Hire policy unless their is such an agency?

Do you know of any reputable agencies I could read up on?

Thanks

 

[TheGuru2010]

You will usually find that been part of a network will give you better access to insurers / schemes / rates etc.

There are a lot of networks out there & to be honest I could not recommend one as we are not part of one.

I have worked for a broker who was part of the "Broker Network" & from my experience then it really worked.

http://www.brokernetwork.co.uk

Hope it helps

 

[RumelA]

Thanks a lot, you've been a great help.

I will look into this.

From your experience, I'm assuming you have your own brokerage, how difficult was it to obtain FSA regulation? Would you say it's difficult, if at all, to win agencies with competitive rates? I'm aware certain insurers will require 12 months of trading before they will consider an agency.

Thanks

 

[TheGuru2010]

Hi,

Sorry no I dont own the brokerage I work for.

I really would not know how long the regulation would take. What sectors are you looking to trade in.

You have mentioned Public / Private Hire (I assume you have a good base of taxi referrals?), You also mention commercial - is this all commercial sectors?

 

[RumelA]

I have a huge base of taxi clients, including constant referrals.

In terms of commercial, I'm talking offices, shops, takeaways, fish and chip shops, hotels, restaurants, pubs - mainly SME's. Again, I have a fairly large client base.


Thanks

 

[TheGuru2010]

Brilliant, I just wanted to make sure you did not your self to reliable on one product - as you know the insurer calls the shots with rates etc.

 

[RumelA]

Thanks.

I've just had look at Broker Network, seems very interesting. Just contacted them via email - need to know what initial investment would be required. We have a combined budget of £15,000.

 

[TheGuru2010]

Have you given some thought to the platform you will be looking to run?

 

[RumelA]

Sorry, I don't understand your question.

 

[TheGuru2010]

Your trading platform, Misys, Electra, Acturis etc?

 

[RumelA]

Oh sorry, my bad.

Preferably, I'd like to run OpenGI, Misys (Sirius) or maybe CDL - I've had experience in both, but a large chunk of it is OpenGI.

 

[RumelA]

I've put it the wrong way around, OpenGI (which was Misys), SSP (Sirius) and CDL

 

[TheGuru2010]

No Worries,

Have you done the costing into this? I have used electra (not suitable for your line) & acturis. So sadly no idea on the costing of OpenGI.

I assume this would be a big chunk?

 

[RumelA]

I haven't as yet, I know it's going to be a big cost. I can't seem to find much info.

I read Broker Network allow you access to OpenGI which is why I'd like to know more in terms of costs.

 

[TheGuru2010]

A poster here named lockyer is a broker network member, he may be able to give you a bit more knowledge.

He post's quite often so sure will be along soon

 

[RumelA]

Thanks, you've been a great help. Especially in making me aware of Broker Network.

 

[TheGuru2010]

No problem,

Best of luck

 

[RumelA]

Thanks.

Will keep you up to date on how things go.

Take care.

 

[lockyer]

Hi rumel,

I guru used to work at my brokers, and we are broker network members. Broker network don't restrict who you can deal with but would want to see;

1. Relevant experience in the industry
2. A business plan showing growth to 2m gwp in 2/3 years

They are part of towergate who own open gi so there is potential for a deal to done on the Broking software but that will cost around 5-10k plus £200+ a month

You will need £5k for your fsa application, plus ongoing fees.


Warning though they are not looking for taxi insurance brokers.


If you want to talk, and an intro into the network drop me your details on a pm.

 

[ZboMotor]

I'll be very interested to hear about your application to the FSA soon to become FOS. As a director of a brokerage thats been established 20 years i fear the increased regulation in the industry. The set up and ongoing fee's are becoming prohibitive. Without new entrants in the market and their innovation's growth will be stunted.

 

[Saxon Heights]

We are a member of TEn insurance network and they are very good. We did look at broker network, but didn't want the initial layout they were looking for. There was no cost for the FSA application and they split the commission with you.

They are always happy to set up new agencies for you if you need them.

 

[lockyer]

I'll be very interested to hear about your application to the FSA soon to become FOS. As a director of a brokerage thats been established 20 years i fear the increased regulation in the industry. The set up and ongoing fee's are becoming prohibitive. Without new entrants in the market and their innovation's growth will be stunted.

The bit governing brokers is going to be the FCA not FOS

 

[scm5436]

So how did it work out for you? Did you go ahead? Using a network or on your own? How much did it all cost...?

 

[scm5436]

2. A business plan showing growth to 2m gwp in 2/3 years

How realistic is that for a startup broker?

We are a member of TEn insurance network and they are very good

Do they have a similar requirement?

 

[Saxon Heights]

How realistic is that for a startup broker?

Do they have a similar requirement?

TEn don't have any minimum requirement on GWP as far as I'm aware.

 

[scm5436]

is there still money to be made as a smaller broker? I hear the regulations are benefitting the big players at the expense of the little ones.

 

[Saxon Heights]

I think so, the network handle most of the compliance.

We offer much better service than a big broker we have one contact point for everything so our clients grow to trust us as people.

 

[scm5436]

How realistic do you think the £2m GWP is in 3 years for a startup broker (1-2 people)?

 

[TheGuru2010]

That depends on alot of factors, are you going for a neich? or the same as all brokers.

I think £2m GWP for 1 - 2 people should be achivable within 3 years, it wouldnt be a easy task but could be done with the correct market corner & effort!

You need to find something that no one else wants !

Good Luck

 

[scm5436]

That depends on alot of factors, are you going for a neich? or the same as all brokers.

yes, we were planning on going niche, as long as that's not what the other brokers are doing!

 

[scm5436]

Want Even Cheaper Car Insurance? Just Ask !
Want A Better Deal On Your Business Insurance? Just Ask!

Can I assume "all the other brokers" are going for things like car insurance and commercial insurance?

Specialist commercial insurance brokers - 25% discount for all UKBF.

Can I also assume margins are still pretty good (if you can offer 25% off I'm assuming margins are at least 25%!).

Actually, thinking about it, you'd need a margin of 33% in order to knock 25% discount off and still break even, as unintuitive as that sounds.

That seems quite high for what you would think would be a relatively cut-throat business? Or are the high barriers to entry keeping the discounters out?

 

[lockyer]

To give you a handle:

yes margins are good in commercial insurance, but not in personal lines.

I think 2m gwp for 1-2 will be too much admin for you to handle. we're at 2.5 and I have 6 people, as with the compliance and admin the workload is heavy. If we we're in personal lines we would need another couple of bodies as the work load is heavier.

Are you starting from scratch or with the help of a network?

 

[TheGuru2010]

As lockyer has stated I would keep clear of personal lines insurance, its a tad cut throat for the commision levels involved & the admin workload that comes with it.

I assume you have experiance in the sector? do you already have a field you are looking at?

I would stick with commercial lines but you need a neich within that, a trade where most insurers dont want to know.

If you know what you are doing and sift the good from the bad this can be a good way to go but it aint easy.

What experiance do you have?

 

[scm5436]

yes margins are good in commercial insurance, but not in personal lines.

By personal lines do you mean things like personal car/house insurance etc? Or does that include other consumer, but niche, products?

we're at 2.5 and I have 6 people, as with the compliance and admin the workload is heavy.

Is that on your own or with a network. I've had a look at the TEN network and they seem to handle a lot of the compliance stuff for you?

Are you starting from scratch or with the help of a network?

I assume you have experiance in the sector? do you already have a field you are looking at?

No, that's the problem, we have no experience in the sector at all. So we'd need to go with a network. By the sounds of it the Brokers Network looks a bit too selective - ie. they appear to be looking for experienced players, who can hit the ground running and have a proven track record. While the other one seems more aimed at startups - but presumably has some downsides (probably take a big cut or charge high fees?)

 

[TheGuru2010]

Well given there is no experiance in the trade your not going to be hitting that target in 2 - 3 years.

Insurance is not easy & you need experiance, one slight error can bring your whole world tumbling down.

My best advise would be to get into a decent broker & spend a few years learning how the trade works before you dive in.

Insurance is not a case of taking details & getting a price & selling it, you will have to understand each business & what they do, spot potential risk's & make sure every angle is covered.

You will need to check health & saftey is in place for clients - its a mind field without experiance & this will show through when you see potential clients.

Jamie

 

[TheGuru2010]

Just to answer your questions:

Yes Personal Lines Covers things like Household - Car Insurance - Travel Etc,

Lockyer is part of the broker network

You will need very deep pockets to get things going !

 

[scm5436]

Well given there is no experiance in the trade your not going to be hitting that target in 2 - 3 years.

Sure, that was way outside of my expectations, it's just someone mentioned that was the sort of level that the brokers network were looking at, and I just wondered how realistic that was for a start-up. In this case, not realistic, so I'd be more looking at the other network.

Insurance is not easy & you need experiance, one slight error can bring your whole world tumbling down.

Can you give an example?

My best advise would be to get into a decent broker & spend a few years learning how the trade works before you dive in.

We already have a business to run, so it's not like we can take a few years off to learn a new trade. We could look at the possibility of bringing in an experienced broker in though as an employee.

Insurance is not a case of taking details & getting a price & selling it, you will have to understand each business & what they do, spot potential risk's & make sure every angle is covered.

Sure but that's for the commercial side. We were looking at starting in very niche areas where there are a lot less variables.

Just to answer your questions:

Yes Personal Lines Covers things like Household - Car Insurance - Travel Etc,

We wouldn't be touching that...

You will need very deep pockets to get things going !

If we went with someone such as the TEN network what big upfront costs would there be? From their website they seem to pay the upfront licencing fees etc. Assuming we already have premises, in house marketing/website skills etc what other costs will there be apart from advertising?