Scheme's budget for GI intermediaries hits £93.5m
Brokers face a 50% plus rise in their levy to the Financial Services Compensation Scheme next year.
The FSCS' draft levy, published today, shows that the scheme's budget for compensating victims of mis-selling by general insurance intermediaries has increased from £61m in 2010-11 to £93.5m in 2011-12.
The rise in the levy will take effect in June when the FSCS will send out its bills for this year’s levy- the increase in which has been almost entirely fuelled by the still spiralling rise in payment protection insurance-related complaints. The FSCS said PPI claims are likely to increase to about 20,000 in the coming year.
Of the estimated £240m expected to be paid by financial services firms (2010/11: £474m), the general insurance provision (£54m) and general insurance intermediation (£93.5m) sub-classes will together account for about £147.5m.
Biba has warned that brokers may have to pass this cost onto customers as they have no other way to pay what it described as an “unfair” levy and thus avoid going out of business.
Biba chief executive Eric Galbraith said: “Our meetings and discussions with the FSCS have highlighted that claims on the FSCS have continued to increase because of the failure of credit brokers and their mis-selling of payment protection insurance.
“Brokers will yet again be unfairly penalised because the FSCS implementation of the rules means that our members pay for failures of credit brokers who have sold this product.
"This is ridiculous and BIBA is doing everything that we can to demand a fairer compensation system. We have also called on the FSCS to ensure they pursue recoveries against the relevant insurer, where it can be proven that the credit broker was acting as the insurer’s agent.”
Insurance Times is fighting, through its Fair Fees campaign, to introduce a fairer levy on insurance brokers when the FSCS carries out its long awaited review of the scheme.