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Advised vs. Non-Advised Commercial Insurance: FCA Regulation
In the UK commercial market, the boundary between an Advised and a Non-Advised (execution-only) arrangement dictates the legal reality of your protection. Many procurement teams treat the two models as identical price-comparison routes, failing to realise that they shift the burden of risk.
Advised Insurance
In an advised sale, the insurance broker provides personal recommendations to the customer on insurance products that are suitable for their specific needs and circumstances. This advice is based on an assessment of the customer's demands and needs.
The broker conducts a "fact-find" operation to gather information about the customer's situation, needs, and objectives. Based on this information, the broker analyses various insurance options and recommends a product (or products) that best meets the customer's demands and needs.
The Financial Conduct Authority (FCA) requires that any advice given must be suitable for the customer, considering their individual circumstances. Advised sales are subject to higher regulatory standards, including the need for advisers to demonstrate the suitability of their recommendations.
Customers benefit from enhanced consumer protection when purchasing insurance through advised sales. If the advice is later found to be unsuitable, the customer may have grounds for a complaint and potentially compensation.
Non-Advised Insurance
In a non-advised sale, the insurance broker or intermediary does not provide any personal recommendations or advice on the suitability of insurance products for the customer's individual circumstances. Instead, the customer is provided with information about the insurance products, and they must decide which product, if any, meets their needs.
The customer is responsible for choosing the business insurance product based on the information provided. The process involves presenting the customer with options and possibly guiding them through the product features and benefits without steering them toward a specific recommendation.
While non-advised sales are subject to regulatory requirements, including clear, fair, and not misleading communication, the regulatory burden is less than for advised sales since no suitability assessment is required.
Consumer protection is more limited in non-advised sales. Since the customer makes their own choice without reliance on professional advice, it is more challenging to claim mis-selling if the product turns out to be unsuitable.
Advised Vs. Non-Advised Broker Services
Where there are no additional fees charged, businesses should always choose advised commercial insurance rather than a non-advised because the broker is taking responsibility for recommending cover that is suitable for the client’s disclosed needs.
As an advisory broker we can assess the business model, contractual exposures, regulatory requirements, claims scenarios, and insurer wording before recommending a suitable programme. In short, if the cost is the same, advised insurance provides an additional layer of professional protection, accountability, and technical review.
Under the FCA’s Consumer Duty, we are required to ensure that vulnerable clients receive satisfactory outcomes as consistently good as those of any other client.