Insurance Regulation for Managing Agents: Loopholes, Lapses and Looming Trouble

The uncomfortable truth is that a large proportion of managing agents are conducting insurance mediation activities without proper authorisation, training or oversight. And when (not if) the FCA decides to shine its spotlight onto this particular corner of the industry, a lot of people are going to look very nervous indeed.

Who actually needs to be regulated?

Let’s start with basics.

If you advise clients on insurance, arrange cover, handle claims or receive remuneration for any of those things, then you are performing a regulated activity. It’s that simple.

There are only three legitimate ways to do this:

1. Direct FCA Authorisation – heavy on compliance, but squeaky clean.

2. Appointed Representative (AR) status – you operate under the umbrella of a regulated Principal firm, which takes responsibility for your conduct.

3. Introducer Appointed Representative (IAR) – you can make introductions, but that’s it. No advice, no negotiation, no “helping the client find a good deal.”

If you’re doing any of those things without one of these arrangements, you’re operating outside the law. That’s not a grey area. 

The company secretary ‘loophole’ 

The infamous company secretary workaround.

This one’s a favourite among managing agents. The theory goes: if you make yourself the company secretary of your RMC or RTM client, you become an officer of that company and therefore you’re acting as the policyholder, not on behalf of them. Voilà! No FCA regulation required.

Legally? It holds water – for now. Morally and regulatorily? The FCA is already raising an eyebrow.

This loophole wasn’t created with property managers in mind; it’s an accidental by-product of company law. It’s being used as a shield by agents who want to handle insurance without the burden of regulation. And when those same agents also receive commissions from brokers without declaring them, it stops looking like a clever workaround and starts looking like something far less flattering (embezzlement?).

Let’s call it what it is: a ticking time bomb.

The RICS DPB exemption 

Another route some agents take is through the RICS Designated Professional Body (DPB) scheme.

This allows RICS-regulated firms to carry out limited insurance mediation activities without direct FCA authorisation. It’s legitimate, but it comes with strings. RICS expects robust training, record-keeping, and annual compliance reviews that can make even the most confident firm break out in a sweat.

The problem? Most managing agents aren’t RICS-regulated in the first place, so this door isn’t even open to them.

The broker’s blind spot

The real scandal, though, is that some insurance brokers are still doing business with unregulated managing agents.

Responsible brokers vet their agent partners. They check the FCA register, they confirm company secretarial roles via Companies House, and they refuse to trade if the agent’s status doesn’t stack up.

But not all do. Some simply don’t ask, others don’t care, and a few pretend not to notice – after all, it’s easier to place business with someone who won’t question your commission structure.

Yet under the FCA’s own rulebook (SYSC 8 & 11), brokers have a duty to ensure their distribution partners are appropriately authorised. Failing to check isn’t just lazy; it’s potentially a breach of their own regulation.

So next time your broker shrugs and says, “Don’t worry, we’ve got it covered,” you might want to ask them exactly who the FCA thinks is doing the covering.

Training? What training?

Even the best-intentioned firms sometimes forget that regulation isn’t just a badge on the website. 

Since 1 October 2018, anyone carrying out insurance distribution has been required to complete at least 15 hours of insurance-related CPD each year, under the Insurance Distribution Directive (IDD). However, this framework is now evolving – the 15-hour rule is expected to be replaced by a more outcomes-based approach, where individuals must be able to evidence their competence rather than simply clocking a set number of hours. The principle remains the same: property managers who get involved in placing or advising on insurance must be demonstrably competent to do so.

How many people in your office could genuinely evidence their competence if the FCA came knocking? Be honest.

Buildings insurance isn’t just an admin task. It’s one of the most consequential things a managing agent ever arranges. Get it wrong – by misunderstanding the unoccupancy clauses, missing an asbestos exclusion or underinsuring the rebuild value – and the financial fallout can be catastrophic.

The enforcement gap

At Proper Talk on 1^st October, our panel agreed: the FCA hasn’t yet turned its full attention to the managing agent world. But that doesn’t mean it won’t.

For now, the regulator’s fire is aimed squarely at brokers, especially those playing fast and loose with commissions and “fair value assessments”. But once the brokerage clean-up is done, managing agents are next in line. And when the FCA starts sniffing around, it will have zero sympathy for “we didn’t realise we needed regulation.”

The Leasehold & Freehold Reform Act 2024 will likely accelerate this, with its planned ban on insurance commission sharing between brokers and managing agents (and freeholders). When that lands, the spotlight will swing squarely onto managing agents’ insurance practices, and there will be nowhere left to hide. That pressure is already starting to bite. 

A growing risk: the retreat of the managing agent

There’s another, quieter danger brewing beneath all this regulatory noise. Faced with mounting pressure, some managing agents may simply throw up their hands and decide it’s safer to step back from insurance altogether, leaving their clients to place cover themselves.

On paper, that might look like a low-risk option (“if we don’t touch insurance, we can’t get it wrong”). In reality, it’s perilous. Most RMC directors have neither the expertise nor the market access to place policies covering tens or hundreds of millions of pounds of declared value. Even a well-meaning board could end up underinsured, over-exposed or bound by a policy riddled with exclusions they don’t understand.

In short, abdicating responsibility isn’t compliance – it’s avoidance. The smarter play is to stay involved, get properly authorised and partner with brokers who operate to the same standard. That way, the expertise stays where it belongs: with professionals who know what they’re doing.

Fair value and the future

The phrase you’ll be hearing a lot more of is “fair value”.

If your firm currently receives commissions, you’ll soon need to demonstrate that those commissions represent genuine fair value for the service you provide, or, better still, replace them with transparent fees, pre-agreed with your client.

Yes, that means paperwork, conversations and probably some awkward moments. But it also means protecting your business (and your reputation) before the FCA decides to do it for you.

What’s the smart play?

The solution isn’t complicated.

• Know your regulatory status. Don’t assume that being a company secretary or having PI insurance magically makes you compliant.

• Train your people. That 15-hour CPD requirement isn’t optional, and it’s the bare minimum.

• Check your broker’s credentials just as carefully as they should be checking yours.

• Document everything. Fair value assessments, fee justifications and client permissions aren’t red tape – they’re your insurance against the regulator.

And if you’re unsure where to start? Talk to a specialist in insurance regulation – someone who lives and breathes this stuff, and can guide you through the regulatory options and compliance frameworks that actually work in practice. It’s far better to get structured advice now than to be explaining your decisions to the FCA later.

Above all, get ahead of the curve. The agents who prepare now will sleep soundly when the FCA finally knocks on the door. Those who don’t may find themselves wide awake, struggling to explain why they thought “company secretary” was a compliance strategy.

Final thought

Insurance regulation isn’t the sexy part of block management (is there one?). But it is the part that could cost you your business if you get it wrong.

If you’re reading this and wondering whether your firm’s insurance activities would pass an FCA sniff test, take that as your cue. Don’t wait for an enforcement letter – start asking questions, tightening processes and getting advice from people who live and breathe this stuff.

Because in this game, the best time to fix a compliance gap was yesterday. The second best time? Today.

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Jonathan Channing is a consultant in the residential block management sector. He helps managing agents, RMCs and service providers navigate insurance, regulation and building safety compliance. He’s also a co-founder and moderator of the Proper Talk panel series. Contact him on jonathan@jcpropertyconsultancy.com