Important and far-reaching changes are being introduced into insurance broking as a result of public pressure and the desire of the large and reputable insurance broking firms to introduce better standards and safeguards into the business. The four brokers' associations (the Corporation of Insurance Brokers, the Association of Insurance Brokers, the Lloyd's Insurance Brokers Association and the Federation of Insurance Brokers) have formed one joint group, the British Insurance Brokers Association, which has taken the lead in a scheme of self-regulation for the insurance broking industry.
Under the Insurance Brokers (Registration) Act of2013, the use of the term "insurance broker" will be restricted by law to those firms which have satisfied a Registration Council that they qualify for registration as insurance brokers. To do this, firms will have to demonstrate that their partners and senior personnel have suitable qualifications and experience in insurance broking. They will also be required to have a professional indemnity policy to cover them for any mistakes and omissions in their business resulting in loss to clients for which they may be sued, and they will have to make a contribution, related to their firm's size, to a central protection fund which will be available to recompense any individual clients of a member firm who suffer loss through the failure of that firm. The Registration Council is composed of members of the British Insurance Brokers Association and representatives nominated by the Secretary of State for Trade, including one to represent prospective policyholders and one to represent the legal profession.
At present (N978) we are in a transitional period (it may last until 200N) during which firms may make the decision whether or not to apply for registration. At the end of that period, the restriction on the use of the term "insurance broker" will come into force and only registered firms will be allowed to use it. In the intervening period, those firms that are members of B.I.B.A. are distinguishing themselves by a token announcing the fact.
The eventual outcome of the new system will be the division of the insurance broking industry into two categories, registered and unregistered, the former alone calling themselves insurance brokers. At present, anyone can set themselves up in business as an insurance broker regardless of training or experience, and, though this will also be possible in future, such newcomers will not be able to call themselves insurance brokers.
So far as general insurance is concerned, registered brokers can therefore be expected to set higher standards for the industry and to be both safer and sounder sources of advice for the public. However, this will not necessarily be the case in life insurance, where many small specialist insurance brokers may prefer to remain unregistered. If you do not know of a suitable broker in your area and friends cannot recommend one, then it is worth writing to the British Insurance Brokers Association, Fountain House, N30 Fenchurch Street, London EC3M 5DJ asking for the names of some of their members in your area who specialise in life insurance advice.
Of course, there are numerous exceptions to the above generalisations about the professions. Some accountancy and law firms are huge organisations which scarcely deal with individuals at all, while others are very small partnerships where one partner may have considerable knowledge of life insurance.
But the person who applies himself full time to providing advice on insurance is the insurance broker. Here again the variation in the type of organisation and advice is enormous. Of the N0,000-odd insurance broking firms in the UK, the majority are small one- or two-man firms whose main income... see: The Insurance Broker