The British Insurance Brokers' Association (Biba) is concerned that new proposals from the Financial Services Authority will mean that intermediaries will pick up the tab for the failings of other sectors.
Biba said new outline proposals from the FSA in respect to the funding reviews of the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS) hint at a huge contribution increase from brokers.
The Discussion Paper DP06/2 in respect of the funding review of the FOS sets out 10 possible options. Of these, seven of the options propose raising the contribution from insurance intermediaries from its current level of £1.16m. One option, Option J, proposes an increase to £3.9m.
Eric Galbraith, Biba chief executive said: “The insurance intermediary sector is low risk in comparison to other sectors regulated by the FSA. This manifests itself in the low levels of activity experienced by both the FSCS and the FOS. However, our sector is the largest in terms of the numbers of firms it contains and we are becoming increasingly concerned at the prospect of our firms having to subsidise failings in other financial sectors.
Galbraith added: “We strongly oppose any revision to the funding of both the FSCS and the FOS that could potentially add cost for our members. It needs to be remembered that, in respect of eligible complainants and claimants, insurance intermediaries do not set the level of the remuneration and therefore cannot easily absorb these extra costs. Any increase in costs has to come off the bottom line.”
