Brokers still picking up tab for PPI debacle, says compliance head David Sparkes
The 15% hike in brokers’ Financial Services Compensation Scheme (FSCS) levies is “disappointing”, according to Biba compliance and training manager David Sparkes.
The FSCS announced this morning that it was planning to charge insurance brokers a levy of £62m for the 2014/15 financial year, compared with the £54m it levied on brokers the previous year.
The main driver of levies in the FSCS’s general insurance intermediation class is claims for payment protection insurance (PPI), which general insurance brokers typically did not get involved in selling.
Sparkes told Insurance Times: “For us and for the broking community it is disappointing to see the price go up again.”
He noted that in its 2012 manifesto, Biba gave an example of a member broker whose FSCS bill had risen 50-fold between 2008 and 2011.
Sparkes said: “This can only be making that number bigger.”
He added: “The biggest frustration is that we are still picking up the costs from the PPI debacle, which is a problem brokers just have not had a major part in creating.
“We are feeding this level of disappointment back to the FSCS that we are still cross-subsidising other sectors.”
The new FSCS levies are the first ones to be calculated using the scheme’s new 36-month approach, which projects claims costs over 36 months rather than just 12 for the purpose of calculating what companies should pay.
The idea is to reduce the volatility in the estimated levies, and reduce the risk of interim levies, which the FSCS uses to top up its funds if the main annual levy is not enough.
While welcoming the efforts to reduce levy volatility, Sparkes noted that the 36-month projections are based on previous experience, which includes heavy PPI claims.
He said: “It is a good thing to iron out that volatility to provide some certainty over budgeting for brokers. But when you are doing it based on previous claims history we are still then paying costs of the poor experience of the past couple of years on the PPI side.”