Insurance broking has changed more for compliance teams in the last few years than in the decade before. Product governance rules, the general insurance pricing reforms, fair value assessments and the Consumer Duty have all landed on firms that, in many cases, still run compliance through one or two people. For a broker or managing general agent, the compliance officer is no longer a box-ticking role. It is the person who has to evidence that customers are getting good outcomes, and stand behind that evidence with the regulator.
This article looks at what the role now involves at an insurance intermediary, how it differs from compliance work elsewhere in financial services, and what to look for when you hire.
What the compliance officer is accountable for
At a directly authorised insurance broker or MGA, the compliance officer usually holds SMF16, the Compliance Oversight function, under the Senior Managers and Certification Regime. That means FCA approval before they start, a Statement of Responsibilities, and personal accountability for how the firm oversees compliance. SMF Capital’s guide to compliance officer recruitment (SMF16) covers the function in detail.
In a typical insurance intermediary, the role covers:
- The compliance monitoring programme, including file reviews of advised and non-advised sales
- Product governance, both as a distributor and, for MGAs, often as a co-manufacturer
- Fair value assessments and the firm’s evidence for them
- Consumer Duty outcomes monitoring and the annual board report
- Complaints oversight and root cause analysis
- Financial promotions sign-off
- Oversight of appointed representatives and introducers, where the firm acts as a principal
- Regulatory reporting, breach reporting and the relationship with the FCA
At smaller firms, the same person may also be the MLRO. Whether that applies depends on what you sell, which we cover below.
Why insurance compliance is its own discipline
An experienced compliance officer from a wealth manager or a lender will understand the Senior Managers regime, monitoring and complaints. What they may not understand is how insurance distribution works, and that gap shows quickly in an interview.
Product governance and the distribution chain
The FCA’s product governance rules for insurance, set out in PROD 4 of the FCA Handbook, place obligations on both manufacturers and distributors. A broker has to understand the target market for the products it sells, get the information it needs from insurers, and feed back when products are not working for customers. An MGA with delegated authority is often treated as a co-manufacturer and carries manufacturer-level responsibilities alongside the insurer. A compliance officer who has only worked on the insurer side, or only in personal lines retail, may not know how those responsibilities sit across a chain of brokers, MGAs and capacity providers.
Fair value
Fair value sits at the heart of both PROD and the Consumer Duty. For a broker, that means being able to show that commission, fees and add-ons do not undermine the value of the product to the customer. The regulator has repeatedly highlighted weak evidence in this area across general insurance and protection. A good insurance compliance officer knows how to build that evidence from the firm’s own data, not from a template.
Commercial lines, Lloyd’s and wholesale
Brokers placing business into the Lloyd’s market or with international capacity face a different set of risks from a personal lines broker: delegated authority, coverholder arrangements, sanctions screening on cross-border business, and the expectations of capacity providers as well as the FCA. Candidates who have worked in that environment are a smaller pool, and worth paying for if that is your business.
Does your insurance broker need an MLRO?
This is one of the most common questions we hear. The answer depends on what you sell. The Money Laundering Regulations apply to firms carrying on certain insurance business, broadly life insurance and investment-related insurance. Many pure general insurance intermediaries fall outside them, and so do not need an SMF17 Money Laundering Reporting Officer under the Senior Managers regime.
That does not mean financial crime can be ignored. General insurance brokers still need systems to counter fraud and financial crime, still need to screen against sanctions, and still have reporting obligations if they suspect money laundering. If your firm brokers life, pensions or investment-linked products, you will need an MLRO, and at a small firm that is usually the compliance officer as well. SMF Capital’s guides to MLRO recruitment (SMF17) and combined compliance officer and MLRO recruitment explain how firms structure those roles. For a dedicated MLRO search, our sister site MLRO Capital specialises in exactly that hire.
Full-time or fractional?
The right model depends on the size and complexity of the firm.
| Firm profile | Typical compliance model |
|---|---|
| Small personal or commercial lines broker, under 20 staff | Fractional compliance officer, one to two days a week, with outsourced file checking |
| Growing broker with its own appointed representatives | Part-time or full-time compliance officer, plus a compliance assistant for AR monitoring |
| MGA with delegated authority | Full-time compliance officer with product governance experience; fractional can work at an early stage |
| Larger broker or consolidator | Full-time Head of Compliance with a team, and a separate MLRO where life or investment business is written |
A fractional appointment gives a smaller broker an approved, accountable compliance officer at a cost proportionate to its size. SMF Capital’s page on part-time compliance officers for small firms explains how those appointments work in practice, and its guide to what you can and can’t outsource sets out where an outsourced provider fits.
If your compliance officer has just left, an interim appointment can hold the function while you search. SMF Capital’s pages on interim compliance officer and MLRO recruitment and urgent SMF replacement cover how that works under the 12-week rule.
What to look for in candidates
When we run an insurance broker compliance search, we test candidates on five things.
Insurance distribution experience
Have they worked at a broker or MGA, rather than only at an insurer? Do they understand how commission, fees and add-ons work in your part of the market? Can they explain PROD in terms of what it means for your firm, not just what the rules say?
Evidence of outcomes, not process
The Consumer Duty moved compliance from “did we follow the process” to “what outcomes did customers get”. Ask candidates how they have measured outcomes at a previous firm, what data they used, and what they changed as a result. The best answers are specific.
Fair value work they have led
Ask for an example of a fair value assessment they built or challenged. What did it find? What did the firm change? A candidate who can only describe the template is not ready to own the work.
Independence
The FCA expects compliance officers to challenge the business. Ask candidates for an example of when they pushed back on a sales director, a product launch or a commission arrangement, and what happened. At a broker, where the compliance officer may sit very close to the founder, this matters more than at a large firm.
Regulatory readiness
Every SMF16 candidate must meet the fit and proper test. SMF Capital checks prior approvals, regulatory history, directorships and financial soundness before a candidate reaches a shortlist, and requests regulatory references early. Its guide to interviewing an SMF candidate has more questions that reveal readiness.
What an insurance broker compliance officer costs
Pay depends on firm size, complexity and whether the role includes MLRO duties. FD Capital’s guide to insurance compliance recruitment sets out current ranges for insurer and intermediary roles, including interim and fractional day rates, and SMF Capital publishes a full SMF and compliance salary guide. As a rough guide, FD Capital’s SMCR compliance recruitment data puts experienced fractional Heads of Compliance at £600 to £1,000 a day and permanent SMF16 salaries at around £75,000 to £130,000, with insurer-side Chief Compliance Officers higher still.
For a smaller broker, the comparison that matters is total annual cost. Two days a month at a typical fractional rate costs far less than a permanent salary plus employer’s National Insurance, pension and benefits, and buys someone who has usually seen more firms than a permanent hire would have.
Mistakes we see insurance brokers make
Hiring from an insurer without distribution experience. Insurer compliance teams are often specialised and well resourced. A candidate who has never worked alone at a broker may struggle with breadth.
Assuming the outsourced provider holds the function. Your compliance consultancy may run file checks and monitoring, but someone at your firm must hold SMF16 and be accountable for the result.
Leaving fair value to the insurer. Distributors have their own fair value responsibilities. If your evidence is “the insurer told us it’s fine”, expect questions.
Overlooking the MLRO question. If you add life, pensions or investment-linked products to a general insurance book, your financial crime obligations change. Plan the MLRO role before you launch, not after.
How we run insurance broker searches
Broker Recruit’s searches are delivered by SMF Capital, which recruits compliance officers and MLROs for insurers, brokers and MGAs. We start from your permissions, your distribution model and the responsibilities your compliance officer will sign, then approach candidates who have done the job in a firm like yours. Every candidate is tested for regulatory readiness before you meet them, and every search is led personally by Adrian Lawrence FCA.
If your firm is also preparing a new application, for example as an appointed representative going directly authorised, SMF Capital’s authorisation support service plans the compliance hire around your submission date.
