Insurance brokers, as far as life insurance is concerned, fall under the heading of independent financial advisers (IFAs) and as such there are no specific statistics for market share identified by that title. It is widely acknowledged that life insurance forms only a small percentage of overall broker production. It is not clear how many insurance brokers there are in the life market. Of the approximately 16,000 general insurance intermediaries, about 8,500 conduct general insurance as their main business activity; the rest include some IFAs.
Following the adoption of the EU Insurance Mediation Directive which requires general insurance intermediaries to be regulated by a statutory body, the FSA assumed responsibility for this from 14 January 2005, and all life and health insurance business produced by brokers therefore falls within the FSA regulations. Brokers must now also join the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS), which will compensate clients for losses arising from a broker’s insolvency or misfeasance. The amount of compensation follows that for insurance company clients.
Professional indemnity (PI) cover is mandatory for IFAs under FSA rules, but the amount required varies according to a number of factors. Primarily business volume and business type will determine the PI indemnity limit. The IFA networks (which provide central services to their memberships, which generally comprise smaller IFAs) offer PI coverage as part of membership benefits. In order to maintain the principle of independence, brokers are expected to deal with four or more insurance companies and not to derive more than 35% of their commission income from any one insurer.
The main insurance brokers’ association is the British Insurance Brokers’ Association (BIBA). The BIBA provides information, advice and guidance to insurance brokers, providing access to risk management and influencing policy makers in matters concerning insurance. BIBA also provides guidance for consumers, publishing online guides on how to choose insurance policies.
The Society of Financial Advisers (SOFA), which is affiliated to the Chartered Insurance Institute (CII), represents more than 10,000 individual members and largely concerns itself with educational standards encompassing formal examinations and continuous professional development (CPD).