When it comes to the question of the cost of starting an insurance brokerage, some figures get thrown around, mostly between £50,000 to £250,000. Momentum Broker Solutions, a brokerage solutions provider, said that this number is attributed to becoming a broker via the direct authorisation (DA) model. Currently, however, most brokers choose the appointed representative (AR) model instead, and for quite a few good reasons.
First and foremost, Momentum puts the cost of starting a brokerage as an AR at £0. As a brokering services firm, Momentum offers solutions to make the investment on a prospective brokerage’s behalf, leaving the broker to focus their time, resources, and money on building their businesses instead.
The firm also listed several other disadvantages under the direct authorisation model. AR brokerages need separate arranging agencies for their terms of business agreements (TOBAs), manage a schedule and adequate resources for regulatory returns, implementation of consumer duty/fair value assessments, manage software implementation and maintenance, recruiting and managing staff, marketing, and all the other bells and whistles that come in running a business.
While a DA broker can take advantage of joining a network for resources and partial access to the market, Momentum said that this is less comprehensive than being an AR and comes with a cost. In the industry, directing all efforts on clients and potential clients is the priority when starting out – the luxury of different choices comes once a broker has been fully established.
With all these things in mind, Momentum Broker Solutions managing director Howard Pepper said that being an appointed representative is the way to go, especially for any prospective broker worth their salt.
“With the insurance industry predicted to continue its growth trajectory in the next several years, it also presents a massive opportunity for those wanting to venture into the insurance brokerage business,” Pepper said. “At Momentum, we understand that some people may be deterred to start up due to cost implications. However, partnering with us costs nothing. We have over 12 years experience supporting our Appointed Representatives in making their business dreams a reality and helping them to establish successful brokerages.”
Summing it up, while a prospective broker can spend a range of capital to start their own business, there are options available so that they won’t have to. To further explore the costs in starting up as an appointed representative in the industry, Momentum also announced a Q&A webinar on June 13 where business development director Alistair Body will be joined by four broker partners who have started their own ventures in the past year.
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