Regulator estimates 35 intermediaries will fail – and cost the FSCS another £35m
A further increase in the Financial Services Compensation Scheme (FSCS) levy is expected next year following the publication of new FSA rules on how firms should handle PPI complaints.
The watchdog’s policy statement on redress of PPI complaints, published this week, says that firms that have been found to have mis-sold such payment protection policies must go back to customers who have not complained after buying the products.
The steep increase in PPI-related claims has fuelled the recent explosion in the FSCS levy, which Insurance Times’s ‘Fair Fees’ campaign is seeking to reform.
The FSA’s assessment of the additional costs estimates that 35 intermediaries may fail as a result of the new rules, costing the FSCS an extra £35m over the next five years.
Meanwhile, an Insurance Times investigation has revealed that the chief executive of the company linked to the greatest number of PPI mis-selling compensation claims in the insurance intermediary sector is back in business as chief executive of Pure Options, a new company offering income protection insurance products.
The FSA authorised the new company earlier this year.
Neville Allport’s previous company, Picture Financial Service, was the subject of 908 PPI-related complaints to the FSCS in 2009-10, according to the scheme’s latest annual report.
The Newport-based firm sold PPI policies on the back of loan consolidation deals.
Insurance Times has also learnt that the FSCS has received another 567 claims against Picture since April. Of these, 55% have been settled, with 87% of decisions resulting in an offer of compensation.
Picture went into administration in 2008 and the FSCS announced last year that the company had defaulted on the scheme.
Allport denied that Picture had mis-sold PPI policies, adding that an FSA review had found no actual evidence of mis-selling in spite of the subsequent settlements by the FSCS.
He also said that Picture had not been subject to FSA enforcement action. “As an authorised intermediary, Picture took its responsibilities very seriously.”
An FSA spokesman said the regulator did not comment on any decisions to authorise individuals.