Brokers still set to pay increased rates compared with last year and SMEs receive greatest benefits
Brokers have been handed a financial lifeline after the Financial Services Authority (FSA) backed down over the massive hikes in regulatory fees that it ordered earlier this year.
In an unprecedented climb down by the regulator, the first time it has lowered the final rate it charges firms after consultation, brokers have been spared the hugely inflated fees – which have been cut on average by 10%. But they will still pay higher fees than last year.
The FSA said that following a consultation period it had conducted a detailed review of cost allocation and firms that engage in more regulation will now pay more, with higher fees for deposit takers such as banks.
The result has been seen as a victory for brokers, led by Biba, which raised concerns over the fee proposals.
Fee block A.19, which includes general insurance brokers, were originally expected to pay a 19.7% increase set by the FSA which left brokers with a £41.2m bill for FSA fees. But after consultation, the FSA has now reduced it to a 9.3% increase, lowering the total bill for brokers to £37.6m.
However, the amount a broker will now pay will depend on the size of its turnover. Some will see a bigger reduction than others.
The move will benefit mainly medium and larger firms with turnover between £10m and £25m.
For a firm with an £8m turnover, the original proposal would have seen some firms pay a 24% fee increase. Under the new proposals, they will now pay a 4% increase. Large brokers, with turnover above £100m will not benefit as much.
Steve White, head of compliance and training at Biba said it will make a big difference for some firms.
“We are pleased that the FSA took notice of our considerations and the financial services’ view that the original proposals were disproportionate,” he said.
Institute of Insurance Brokers chief executive Barbara Bradshaw said the representations of the industry had been heard.
“It is just a shame that there has to be any increases at a time when brokers are trying to control costs,” she said.