Biba spearheads campaign to stop brokers being ‘lumped in’ with banks as FSA reviews model
Brokers reacted with fury this week at being forced to pay for a massive hike in the Financial Services Compensation Scheme (FSCS) portion of the FSA’s annual fees and levy demands.
Brokers of all sizes have been hit with an increase of up to eight times for the FSCS charge, on top of fees paid to the FSA and Financial Ombudsman Service. One example seen by Insurance Times (pictured) shows a broker’s FSCS contribution jumping from £575.38 in 2009 to £4156.33 in 2010. Brokers with a commission income of around £6m reported increases in excess of £30,000.
The increase in the charge relates to the soaring number of payment protection insurance claims, which led to the FSCS levying a £61.4m total charge on the broker sector for the 2010/11 period.
Biba, which has been leading lobbying efforts to change the FSCS funding model – currently under review by the FSA – says it is “fundamentally wrong” and has called on brokers to engage in an attempt to separate themselves from firms that sell PPI, notably banks and building societies.
Biba’s head of compliance and training Steve White described the current funding mechanism, which sets brokers’ contributions to the fund at a certain level, as “unfair”. He said it was currently the trade body’s number one lobbying issue. “Insurance brokers are the lowest risk and we are being lumped in with sellers of higher risk products; people who sell insurance on a part-time basis, not a full-time basis. They are the ones causing the problems. We want to be separated from them.
“The whole point of compensation is that this arises when firms fail. These firms [banks and building societies] are failing through mis-selling. We have a regulator that is supposed to be regulating the sales process. It would appear they are not doing a very good job of it.”
Personal lines broker MCE Insurance’s managing director, Michael Edwards, said the firm’s total charge for regulatory fees and levies had risen from £39,330 to £85,551. “We have got to make a serious move to find a net figure of £45,000,” he said. “All of our budgets are done. Where is it supposed to come from?”
Brokerbility chairman Ashwin Mistry said he feared the FSCS charge would be coupled with a potential increase in insurance premium tax. “Until we get one single voice sorted out for the general commercial sector, I just think that we are opening the floodgates for additional increases going forward.”
The FSCS said brokers were made aware of the increases earlier this year. It urged brokers to participate in the FSA’s consultation paper relating to its review of the FSCS, which is expected to be released towards the end of the year.