Dealing With Brokers – Best Practice

We asked Sales Manager Victoria Slade to cut through the red tape and give us her 7 top tips to achieve success and best practice when dealing with Brokers.

1. Regulatory Checks

Under FCA rules you are required ONLY to accept broker business from properly authorised firms. It’s an offence under the Financial Services and Markets Act 2000 for a broker to operate in the UK without FCA authorisation, so regulatory checks need to be carried out to ensure proper authorisation is, and remains, in place. For brokers overseas you will need to check the relevant local licencing authority or regulator, which is not always a straightforward job.

2. Business Verification

It sounds obvious, but it’s critical to accurately identify and verify the legal entity, and its officers, that you intend to deal with.  There are several million insurance brokers worldwide and there are lots of similar names as well as some complex ownership structures. Understanding the legal status and identity of the business is vital to completing further enquiries.  Most countries maintain a register of companies where critical due diligence data points can be checked and verified, but statuses change regularly.

3. Credit Risk

Data about directors and shareholders, financial performance and key risk indicators (such as CCJs, late or missed payments) is processed to determine a credit risk score. As any supply chain is only as strong as its weakest link it is important to check the financial stability of any business you seek to trade with. It you are granting risk transfer, there’s an increased risk a corporate failure in your supply chain will cause you financial and reputational damage.

4. Anti-Money Laundering

Due to the nature of the business, insurance transactions are often subject to financial crime, including money laundering and terrorist financing. You have obligations to make a ‘risk-based assessment’ of brokers, depending on factors such as class of business, policy type location and, of course, exposure to any sanctioned or politically exposed people. Failures to create and operate appropriate AML policies can lead to serious fine, sanctions and in the worst case, imprisonment.  


Your relationship with a broker must be governed by a Terms of Business Agreement which details the obligations and responsibilities of the parties. These are not ‘boilerplate’ agreements, as the authorities you will allow a broker will depend on a number of factors, including their regulated status and their client money permissions. They need to be kept up to date too, especially when legislation changes.

6. Ongoing

Just the basic onboarding due diligence can be expensive and take days, especially when relying on application forms and manual checks. But just like the MOT for a car, a ‘pass’ on the day doesn’t guarantee 12 months trouble free. Maintaining constant surveillance on the risk factors posed by your broker estate is the only safe way to ensure you can proactively manage risks should things change.

7. Business Case

It’s a shame this is the last point. Understanding the commercial opportunity of a relationship should be number one, but with so much red tape, it often takes second place to due diligence. Identifying synergies, cultural fit and mutual growth opportunities is what makes business thrive. Get it right and the broker relationship can flourish for years. That’s why it’s such a shame that so many insurance suppliers limit the number of brokers they trade with solely because the cost of agency management and compliance is prohibitive.

At REG we believe that trade need no longer be slowed and frustrated by regulatory, legal and bureaucratic processes that lead to making decisions that are counter-productive to their growth and success aspirations.

Through our smart technology we put customers in control of their counterparty trading risks and relationships, mitigating threats, maintaining compliance and opening channels for trade supply and distribution.

Victoria Slade
Victoria Slade
Victoria Slade is our Head of Sales at REG Technologies. Victoria helps insurance businesses adopt RegTech solutions, to manage existing and emerging regulatory and legal risks efficiently.
Connect on LinkedIn and find out more about how REG can help you, or call 0203 946 2885.

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