By Howard Pepper, Managing Director, Momentum Broker Solutions

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Having established a start-up in the insurance industry five years ago I completely understand the satisfaction and reward that comes with running my own business. After a career of working for other people, there does come a time when you have to ask yourself whether you are ready to take the plunge and strike out on your own. For some, the security of working for a large, established corporation will always win, but for others an entrepreneurial streak comes to the surface and they look to grasp the opportunity when it arises.

There is certainly no guarantee of success. Any budding entrepreneur needs to be prepared for a demanding time for the first year or two as the business is established. Mistakes will be made, long hours worked and a strong nerve required, but with this comes huge personal fulfilment from doing something for yourself and having the success of the company resting in your hands.

BROKERAGE BUILDING

There are two ways to set up an insurance brokerage: becoming Directly Authorised by the Financial Conduct Authority (FCA) or becoming an Appointed Representative. In the past becoming Directly Authorised was the usual route to setting up an insurance brokerage. There has, however, been a rise in the number of Appointed Representatives in insurance, following the lead of the general financial services sector, where the Appointed Representative model is widespread.

Any broker directly authorised by the Financial Conduct Authority (FCA) will need six to nine months to create the business. This is because of the time taken becoming authorised and regulated by the FCA as well as building relationships and agencies with leading insurers.

The timescales for an Appointed Representative are generally a lot shorter as this is undertaken by the Principal with a combination of their own due diligence and FCA application process.

MAKING AND RUNNING THE BUSINESS

With any start-up you will have to be prepared to do a bit of everything and get involved in all aspects of the business. You will no longer be able to rely on support from other departments or functions because they will simply not exist. While this can be alarming at first, it does mean you will gain greater knowledge of the mechanics of a working business and learn new skills along the way.

Marketing will become an important part of your new business, because building your brand and getting your message out there will be one of the first challenges you face. Having a professional, dynamic website will be crucial to making yourself visible and reaching your desired audiences (it is staggering that hundreds of brokerages out there still do not have one). This should include clear, credible and consistent messaging to make sure you are saying the right thing to the right people. It can then be used to underpin your wider marketing activity whether for collateral, public relations or social media.

There will be a raft of business-related functions and processes that will need to be learnt, but if you have a good network within the industry and people to rely on there will always be someone to go to for support. One of the most important aspects of setting up a business is understanding what investment is required and commitments you will have. You will have to effectively manage cash flow, especially during the first couple of years. With this in mind, collecting premiums will also become fundamental to ensure you are actually getting paid for what you are doing.

STRIVING FOR SUCCESS

Setting up an insurance brokerage definitely requires a long term view in terms of earnings and work/life balance. Yes, there are many benefits to running your own business, but you have to be realistic about how quickly value can be accumulated and how much initial funding is required. However, if you are willing to work hard, there is a great opportunity to fast-track your potential and drive your future success.

Momentum has been providing support services to independent insurance brokers since 2010. Using our expertise and longstanding knowledge of the marketplace, we are well-placed to overcome many of the challenges faced by start-up insurance businesses. In fact, using our Appointed Representative model, we are able to get a new partner up and running in as little as four weeks and then provide the ongoing support needed to help them succeed.