The financial services sector, which includes insurers andinsurance brokers, is mainly regulated by two bodies:
- The FinancialConduct Authority (FCA). They set stringent regulations that anyone whowants to sell, arrange, or advise on insurance must meet.
- The Prudential RegulatoryAuthority (PRA). As part of the Bank of England, the PRA regulates andsupervises financial services, including insurance brokers.
What Does the Financial Conduct Authority (FCA) Do?
The FCA regulates financial service firms and financialmarkets in the UK. Their regulations are designed to ensure that financialmarkets are “honest, fair and effective so consumers get a fair deal.” Insurancefirms and individual insurance brokers must be authorised or registered bythe FCA before they carry out certain activities.
As part of their authorisation process, firms andindividuals must demonstrate how they meet the FCA’s requirements.
The FCA will then supervise these firms on an ongoing basisto ensure they continue to meet their regulations. And if any firm orindividual fails to meet their standards, the FCA canissue a number of fines and enforcements.
What Does the Prudential Regulatory Authority (PRA) Do?
Like the FCA, the PRA creates policies for firms andindividuals to follow, while carrying out ongoing supervision to ensure thatfirms continue to follow their regulations. The PRA also “tests” firms tosee how they’d respond to unexpected events. They then work with thesefirms to develop strategies that will help the entire financial sector betterrespond to crisis situations.
Like with the FCA, insurers and insurance brokers mustregister with the PRA before they can carry out certain activities.
Who Else Regulates Insurance Brokers?
A few more bodies play a part in regulating the insurancesector:
- The Association ofBritish Insurers (ABI) – Theywork closely with both the PRA and the FCA to ensure the UK’s regulatoryframework supports both insurers and their customers.
- TheInformation Commissioner’s Office (ICO) – An independentauthority dedicated to improving information rights practices. For example,they were responsible for overseeing the implementation of General DataProtection Regulation (GDPR) in 2018.
- FinancialOmbudsman Service (FOS) – If a disagreement between a consumerand a financial services firm cannot be resolved, the FOS works as anindependent mediator between the consumer and the firm.
How Do I Register To Become an Insurer?
If you want to set up an insurance firm, or work as anindependent insurance broker, you’ll have to register with both the FCA and thePRA. Usually, prospective insurers will apply to both regulatory bodies at thesame time. Each body will decide independently on whether to authorise you.
Usually, the PRA has the last word on this. However, theywill not register you as an insurer without the FCA’s consent.
You can read the PRA’sguide to the application process.
We also have a couple of detailedguides on our site:
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