Q I want to start selling lettings insurance; what my options and do I need FSA authorisation?

A With the spotlight focused sharply on authorisation in the financial markets, it is critical for letting agents to fully understand the implications of selling insurance and what the different status options mean. There are four basic options for letting agents wanting to sell insurance.

• Directly regulated. Directly regulated agents are, as the name would suggest, regulated directly by the Financial Services Authority (FSA). They are 100 per cent responsible for their own compliance issues but are not beholden to one provider. Usually at the larger end of the market, directly regulated agents can use several different insurance providers and can get fully involved in all aspects of sales and claims handling to maximise revenue.

• Appointed representative. The majority of letting agents opt to become an appointed representative of a service provider. In this instance, the insurance provider is responsible for all compliance issues and is instrumental in supporting and ‘handholding’ the agent throughout the application to the FSA. The principal advantage over the less regulated options below is that an agent can handle claims as well as sales issues themselves. If, for example, a landlord is abroad when a pipe in his property bursts, the letting agent can complete all the claims paperwork and oversee progress with the claim in his absence. This is exactly the sort of premium service which sets agents apart from their competitors and helps them to offer a more rounded, better quality service to both landlords and tenants.

• Introducer appointed representative. An introducer appointed representative can proactively introduce customers to an insurance provider but they cannot get involved in the sales process themselves. In practical terms, this means that an agent could forward the contact details of a customer to an insurer but that the sales lead would have to be followed up by the provider not the agent.

• Non-regulated representative. A non-regulated representative does not have to submit any application to the FSA but is strictly limited to only passive marketing of insurance services. An agent could display sales literature in their office but would not be allowed to actively sell it. Commission rates are usually dependent on the agent’s level of participation in the sales process; the higher the FSA status, the higher the commission rate. Before you start, it’s essential that you find out how much support the insurance provider is willing to offer with any FSA application. Your insurance provider should work closely with you to help you complete all the necessary paperwork and be able to advise on compliance issues.

Q With tenancy evictions on the increase, are landlords aware of the potential legal costs of the eviction process and are they taking sufficient steps to protect themselves?

A The ongoing recession and worsening unemployment figures means that landlords are likely to find themselves under increasing pressure to evict tenants who lose their jobs, get into serious rent arrears and refuse to move out. In law, tenants are supposed to act in a ‘tenant-like manner’, adhering to the tenancy agreement and paying rent on time. Landlords can apply to the courts for a fast-track eviction but even this takes about six weeks on average and according to the NLA, a standard eviction can take 15 weeks. Such timescales can quickly add up to many thousands of pounds in legal costs and non-payment of rent. Insurance can help cure what can be the most common headache for landlords – and eliminate a source of ongoing anxiety. Rates and limitations of cover vary from insurer to insurer. LetSense provides insurance against the rent and legal costs of gaining repossession up to £60,000 and also covers the landlord’s accommodation costs whilst they are trying to regain possession of their property.

LetSense is a specialist provider of residential lettings insurance and tenant referencing services for letting agents. www.letsense.co.uk