Bicycle insurance is a massively growing market. As the size of the cycling market has grown, increasingly we’re seeing home insurers restricting or removing the cover on bikes, which is fuelling the need for independent specialist policies – as the level of cover goes down with the number of cyclists going up, this creates a ‘Void’.
Retailers are increasingly looking to capitalise on this market by offering their customers insurance, it sounds like a great idea. Introduce your customers to the insurer, they in-turn purchase insurance, and you earn a commission or fee – excellent. You may also get replacement work, double bonus.
Things, however, are not all that they seem.
We’re seeing examples of so called ‘insurance companies’ trying to instruct retailers to offer insurance, however, due to limited permissions they’re not doing it correctly and this could potentially land you the retailer, with a fine from the Financial Conduct Authority (FCA).
Insurance sales are governed by the FCA, this means that firms who offer insurance to their customers need to abide by the guidelines set out by the FCA. If you’re introducing customers to an insurance company then you need to have what’s called an ‘Introducer Agreement’ with that company, it works similarly to the old ‘Consumer Credit License’, it permits your business to introduce customers to the insurer.
The problem is that some ‘Cycle Insurance Companies’ are in fact not that, they’re actually Brokers who sell someone else’s insurance, this could mean that they may not be allowed to appoint an ‘Introducer’, as they themselves are already the ‘Introducer’ to someone else.
If you want to introduce customers to an insurance provider, you need to have an ‘Introducer Agreement’ in place.
What to look out for…
There’s a simple rule to help you identify if you need to have an ‘Introducer Agreement’ or not - This is “how you’re being paid”:
If you’re being paid a percentage of the sale value or a fee for every sale (commission) then you do need an introducer agreement.
If you’re being paid a flat marketing fee to put web links on your website or leaflets in your shop then you may not need an introducer agreement. If however you are being paid on the number of visits to the website then you do need an introducer agreement.
Is it better to have an introducer agreement?
When deciding to work with an insurer under an Introducer Agreement or a Third Party by advertising an insurance product, it’s important to compare both facilities and see what’s better for your business.
An Introducer Agreement is considered to be more lucrative, this is because:
You receive a commission on sales
You receive commission on the renewals
Cross sale opportunities
Mid Term Adjustments
Where as a marketing fee is usually a flat fee to distribute advertising, and isn’t related to the ongoing performance of the insurance.
I think I am introducing customers without an agreement, what should I do?
The first thing you need to do is stop; stop distributing flyers, telling your customers, and remove any links from your website. You then need to ask the company that asked you to do this about an Introducer Agreement.
If the company is unable to appoint you as an introducer, then do not try to introduce any more customers. If you have any concerns about this then you should speak to the Financial Conduct Authority ‘Firm Contact Centre’ on 0300 500 0597 and explain what’s happening. Follow their advice.
Who am I to tell you about this?
I am the Operations Director behind Dynamo Cover, a leading cycling insurance provider that provides ‘Own Brand’ cycle insurance to some of the UK’s leading cycling retailers, including the likes of Sigma Sport, Wheelbase, Hargroves Cycles, Specialized Concept Stores & More.
We’re the insurance provider, and thus operate completely on Introducer Agreements with our retailers. Our business also works alongside a home insurance provider, who have over 4,000 introducers around the UK, and thus the introduction of customers into insurance is considered a ‘core profession’ that we’re proud of.