Funding model suggests that UK firms are paying for supervision of other non-insurance broker entities - MP Craig Tracey
FCA regulation of the insurance industry is not proportionate or cost-effective, Conservative MP Craig Tracey has told a House of Commons debate.
Citing figures from Biba the former broker also said the proportion of the general insurance intermediary fee block, which brokers paid into, was distorted - suggesting that UK firms were paying for supervision of other non-insurance broker entities.
Tracey said: “The FCA recently increased the minimum fee for the general insurance intermediary fee block by 8.4%, with the largest UK brokers privately indicating that they pay “comfortably” over £1 million a year in fees to the regulator.
“Worryingly, in its response to Biba following the rise, the FCA indicated that, if the increase had been in line with the annual funding requirement, the rise could have been even greater—46% over four years.
“The FCA recently divulged the breakdown of the A19 fee block, which showed that £16.4 million, or 56.9%, of that block is used for “supervision”. However, 75% of Biba members are small firms with fewer than 10 members of staff and would not be subject to regular visits or in-depth inspections.”
Tracey also said that with 6.3% of the fee block going toward payment for markets, principally the UK Listing Authority, meant that brokers were cross subsidising others’ regulation despite this not being a sector they operated in.
Another area that Tracey said needed to be reviewed was the Financial Services Compensation Scheme (FSCS).
He blamed an increase in the levy that insurance brokers have faced, on the structure of the intermediary pot. Insurance brokers are included in the same funding pot as secondary brokers, who have been blamed for much of PPI mis-selling.
FCA has said it will review the FSCS funding model.
But Tracey said any changes following the review needed to be fair, equitable and manageable to the broking sector.
During the debate, the FCA was also criticised over actions it had taken in the non-insurance sector:
- Voluntary redress scheme for the mis-selling of interest rate swap products
- The Connaught Income Fund
- The FCA’s involvement in the report on HBOS failures
- The “promised” report on the global restructuring group
- The decision not to move ahead with the review of banking culture
- Level of independence from the government
But the FCA managed to avoid a total vote of ‘no confidence’ from the MPs.