FSCS funding to be reviewed despite lack of political pressure on FSA
Brokers can expect a small drop in fees for the next financial year, as the FSA has published its final annual guide on the subject.
The FSA put out a report in February that predicted brokers’ FSA fees would drop from £24.9m for 2011/12 to £24.2m this year, and that FSCS fees would drop from £69.5m to £57m.
The new FSA guide, Policy Statement PS12/11, shows that brokers’ FSCS fees will remain at £57m but that their FSA fees will drop an additional 3.1% to £23.3m for next year.
Biba head of compliance and training Steve White said: “I think we are grateful for small mercies.”
The small drop in FSA levies will come as little comfort to brokers, especially as their FSCS levies have risen almost tenfold in two years.
However, the FSA is reviewing FSCS funding, and will publish a report before the end of June that could see brokers paying less.
White added that there was no political pressure on the FSA to cut the cost of broker regulation. “Once the regulator is convinced we are a compliant low-risk sector we’re likely to get less supervisory oversight, and that’s what drives costs.”
The regulator attributes the general 18% drop in FSA fees across all financial firms to a cut in its infrastructure investment and a £10.6m surplus carried over from last year.
General insurers’ 2012/13 FSA fees will be £38.9m, down from the predicted £40.1m earlier this year but up from the £29.4m charged last year.
Pass notes: Broker fees
Why has the FSCS bill gone down this year?
Because the average value of each payment protection insurance (PPI) claim handled by the FSCS has fallen, even though the volume of PPI claims has gone up. A typical broker with a £250,000 turnover would save around £500 in FSCS fees under the suggested new system.
Why are brokers’ FSCS bills so high?
The FSA kept raising the amount brokers needed to pay the FSCS to handle payment protection insurance claims. IIB figures show that a broker with revenues of £1m a year will have paid £1,649 in 2011/12 compared to just £175 in 2009/10.
We say …
● General insurance brokers pay far too much for the failings of others, and the FSA should recognise this when it launches a consultation on the new funding of the FSCS later this month.