How to start an insurance brokerage in the UK: a step-by-step guide

Insurance brokers who have gained a lot of knowledge and honed their skills over the years may consider the next step in their insurance career – that of owning and running their own brokerage. As an insurance professional with many years of experience, you would know that the insurance industry in the UK is among the most competitive.  

In fact, the UK insurance industry is the largest in Europe and is the fourth largest market in the world. As it stands, the Bank of England already regulates approximately 500 other financial services and insurance companies. While plenty of opportunities to make good profits remain, understand that if you want to start your own insurance company, you are entering a market crowded with established players.  

However, this is no reason to discourage your or any other intrepid insurance broker’s entrepreneurial spirit. It’s true that there are some new brokerages that close shortly after starting up, but it's not uncommon for relatively new brokerage firms to succeed and flourish despite the odds.  

In this guide on how to start an insurance brokerage, Insurance business delves into the questions you will have about this endeavour. So, how do you set up an insurance brokerage in the UK and how much does it cost to start an insurance brokerage here? We’ll shed light on these and more.  

What is an insurance brokerage?  

An insurance brokerage is a business entity whose main role is to act as an intermediary between those who wish to buy insurance and those who sell insurance products. A brokerage is much like an insurance broker, only the clients are transacting with a business entity and not an individual person.  

The roles of an insurance brokerage 

Insurance brokerages play an important role as intermediaries for both clients and insurance providers. The intermediary function of an insurance brokerage can be subdivided into these tasks:  

1. Client consultation and needs assessment 

One of the brokerage’s main tasks is to determine the exact needs of their clients. This is done by conducting comprehensive consultations with them to gain a clear understanding of their individual or business insurance needs.  

This process involves assessing many critical factors, including coverage requirements, potential risks, and budget constraints. By assessing their needs, brokerages can ensure that their clients have a more customised approach to purchasing insurance.  

2. Doing market research and comparing policies 

Insurance brokers and brokerages are responsible for doing comprehensive market research to identify which insurance products are available from which insurers. Brokerage houses compare the varying terms, coverages, and premiums, then make their recommendations to clients.  

By conducting thorough research, brokers enable their clients to make informed decisions on their coverage choices. Brokers may also keep clients up to date on changes or trends in the insurance market, which can influence their current or future policy purchases. 

3. Negotiating with insurance companies 

Part of insurance broking is actively engaging in negotiations with insurers. They do this on behalf of and in their clients’ interests. Brokers can leverage their relationships with insurance companies and try to maximise coverage and minimise costs for their clients. Negotiations typically involve discussions on premiums, deductibles, and specific coverage terms that apply to a client’s unique needs and circumstances.  

4. Assisting with and following up on claims 

Assisting clients with their claims is yet another critical part of an insurance brokerage’s services. Brokers support their clients through the claims process, making sure they understand the requirements and documents necessary to ensure the insurance company acts favourably on their claim.  

In this instance, brokers serve as advocates for their clients, speaking with insurers to facilitate timely and fair settlements for the claims they submit. Brokerages can significantly reduce their clients’ stress and tedium experienced from the complex claims process.  

5. Providing ongoing support and policy management 

Even after a client purchases a policy, their business relationship with brokers or a brokerage does not end. Unlike an insurance agent, brokers or brokerages still assist their clients with policy renewals, recommend adjustments if a client’s circumstances change, and update clients on industry trends.  

With this proactive approach to servicing clients, insurance brokerage firms can help clients maintain their coverage over an extended period, potentially resulting in cost savings and improved risk management.  

How to start your insurance brokerage in the UK 

Starting an insurance brokerage in the UK involves careful planning and adherence to regulatory requirements. Apart from first becoming a licensed insurance broker in the UK and gaining the necessary skills and experience, the process involves doing several steps:  

Step 1. Register with the relevant authorities 

First, you must register your insurance brokerage with the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA). You will need to secure your FCA licence if you intend to sell, arrange, or advise on insurance in the UK. It’s likewise required of your brokerage to meet the regulatory requirements set by the PRA.  

Your new brokerage must also follow the FCA’s Senior Managers and Certification Regime (SM&C). This mandates every senior manager in your company to have a clearly defined “statement of responsibilities.” that detail exactly for what items they are and can be held accountable. 

Applying for FCA and PRA certification 

This is a two-stage process which entails the following:  

• Pre-application: Here, you will work closely with FCA and PRA officials to secure the necessary documentation for establishing your insurance brokerage business. This part of the process can involve having several face-to-face meetings where you will be required to submit your business plan and capital management strategy.
    
• Application: Once you have passed the pre-application process, you may move forward to the actual application to the FCA and PRA. The FCA and PRA will advise you on the next steps to take for your insurance business application. These bodies will tell you which forms you need to complete and which offices to send them.  
   

The FCA and PRA should inform you of their decision on your application within the next six months or so. These bodies will give you their decision separately. Although the PRA has the final word on your application, they will not move forward unless you have FCA approval.  
 

Step 2. Develop your business plan 

A solid and well-written business plan is essential for your insurance brokerage. Note that this document may be required when applying for certain certifications. Your insurance brokerage’s business plan should include:  

• Executive summary: this is a concise overview of what your brokerage offers, and its core vision.
    
• Marketing analysis: contains research on your market and competitive landscape.
   
• Marketing strategy: details your brokerage’s plans for branding and acquiring clients.
    
• Service offerings: this is a detailed list of the products your firm can or intends to offer.  
   

Note that your business plan can also function as a means of attracting more investors or potential lenders.  
 

Step 3. Set up your operations 

After successfully obtaining your licences, certifications, and funding, it’s time to start setting up your own office. To officially begin operations, you must obtain:  

• Office space – Starting an insurance brokerage in the UK calls for having an office that’s conveniently located for your clients. However, you may have to consider operating your brokerage via a remote, hybrid, or purely office setup. For this, you will have to balance the needs and preferences of your employees and clients then opt for the appropriate working arrangement.
    
• Software tools – To make your operations more efficient, it’s advisable that you leverage the tech tools available to you. Apart from the usual office software suites (MS Office), you should invest in Customer Relationship Management (CRM) software, financial tracking software, and policy management software. If you haven’t a clue about which software to use for your newly established brokerage, you can check out our special report on the top insurtech companies to choose from among the best.   

Step 4. Do your marketing and get clients 

To ensure your brokerage’s success, be sure to implement an effective marketing strategy that helps you stand out in the marketplace. Most effective brokerages implement a digital marketing strategy for higher chances of success; here are some strategies or techniques you can use:  

• Establish and use an online presence – A professional website is necessary for those seeking a reliable insurance agency or broker. In 2024, a study on internet use in the UK found that 66.3 million Britons or 97.8% of the population search online for what they need. This makes a website and social media engagement a must for your brokerage; a digital presence grants you greater visibility and more chances to succeed.
    
• Use networking – Part of effective marketing is socialising. Be sure to attend industry events and make strategic partnerships. These efforts can generate a lot of business via referrals.
    
• Deploy targeted marketing campaigns – Create strategies that are customised for your target audience, such as small businesses needing liability insurance or individuals who need health insurance.  
   

By harnessing digital marketing and networking opportunities, you can create more possibilities for engaging more potential customers and building your client base. 

What is the cost of starting an insurance brokerage in the UK? 

The startup costs for your insurance brokerage business can vary depending on a few factors: 

1. The business model 

The startup cost of an insurance brokerage can depend on how you intend to operate. There are two main choices for an insurance brokerage:  

• Appointed Representative (AR) - Choosing to operate your brokerage as a small business, and as an AR can potentially require the smallest investment, even £0. That’s because in this model, a new insurance broker partners up with established brokerages for their operational support, significantly lowering if not eliminating operational costs.
    
• Direct Authorisation (DA) - On the other hand, the more self-regulating DA model involves a significant initial investment, somewhere in the £50,000 to the £250,000 range. This model is more costly due to the significant resources needed to ensure regulatory compliance with the FCA, apart from spending on marketing, staffing, and IT infrastructure.  
   

2. Cost of licensing and regulatory fees 

The initial costs of starting an insurance brokerage in the UK include licensing from the FCA and PRA, which are as follows:  

• FCA licensing – the FCA application fee is typically a non-refundable amount ranging from £1,500 to £5,000. The actual cost varies depending on the brokerage firm’s specific circumstances and type of application. For instance, the fee for applying as an insurance intermediary and garnering FCA authorisation costs an average of £300. This may go higher due to the size and complexity of the business.
    
• PRA fees – should your brokerage also require PRA authorisation, which is necessary for some brokerages that offer certain types of insurance, additional regulatory fees will apply. PRA fees include an application fee that can range from £1,500 to £25,000, depending on the size of the firm and its operational complexity.  
   

3. Additional startup costs 

Brokerages also need professional liability insurance to protect against possible claims incurred during operations. The cost of this insurance can vary, depending on the size of the firm, the coverage limits, and the risks associated with the products and services that the firm provides.  

Another significant set of costs are those associated with compliance with regulations like the anti-money laundering rules set by the FCA. Brokerages must pay for compliance consultancy, legal fees, and audits for meeting regulatory requirements. Consultancy services can range from £5,000 to £15,000.  
 

Why put up an insurance brokerage in the UK?  

Owning and operating an insurance brokerage in the UK can be quite lucrative. On average, the commissions brokers earn here are in the 20% to 25% range. If a brokerage handles larger clients, they can charge a flat fee, providing a steady and stable income stream while those clients save on costs.  

And although the market is competitive, there’s good news for business owners – there is still room for new brokerages. In 2024, the insurance market was estimated to rise to £20.5 billion, an 11.37% increase from the previous year. The UK insurance market, though challenging, still presents opportunities for brokerage firms to grow and become among the best in the industry. 

Knowing how to start an insurance brokerage is much like starting any other type of business in the UK. You can increase your chances of setting up and growing your own firm if you know the market environment, can find and keep good clients, and know how to manage your finances wisely.  

All these factors, apart from having sufficient skills and experience can contribute to creating a successful insurance brokerage.  

Did you find this guide on how to start an insurance brokerage in the UK helpful? Let us know your thoughts in the comments.