Q: Do I need Financial Conduct Authority (FCA) permission to arrange insurance for my landlord buy-to-let clients?
A: The type of FCA permissions needed when advising on landlord insurance does seem to be an area of confusion for many brokers. As part of our due diligence process with new agents, we occasionally come across firms who don’t have permissions to deal with commercial customers and they often think these aren’t needed, but they most certainly are. If the client is a landlord “by way of doing business”, then they’re classed as a commercial client.
You can’t even get around the point by referring the client to a firm who does hold the permissions – you’ll need the permissions even to do that.
A landlord is considered to be a commercial customer if one or more of the following apply:
- They’ve purchased a property with the intention of holding it as an investment property to rent out
- They’ve taken out a buy-to-let mortgage on a property (even if they didn’t initially buy it as an investment property)
- Part or all of the property is used for non-retail purposes (i.e. a shop with a flat above)
- They have more than one investment property
From an insurance perspective, whether it’s a commercial or consumer buy to let, all insurance activity on buy to let is still regulated. Furthermore, for general insurance, the FCA regulations define customers as either commercial or retail (non-investment) and the definition is different from the mortgage regulation definitions of commercial and consumer buy-to-let mortgage clients.
This means that while a broker may not need FCA permissions to arrange mortgages, whether or not they are arranging consumer or commercial buy-to let mortgages they will still need FCA permissions to arrange or introduce the insurance element and they should also ensure they have permissions for both commercial and retail (non-investment) customers.
So, it’s important that you check your permissions immediately if you are, or are likely to be, involved in arranging landlords insurance. Go to the FCA register and take a look.
In the meantime, be wary of doing business with providers who encourage you to believe that it’s okay to carry on without these permissions. Remember, it’s you who’ll be called to account here, so if you don’t have the right permissions, contact the FCA today and get them extended.