Bill for investigation revealed under the Freedom of Information Act
The FSA spent almost £800,000 on its commission disclosure review while planning hikes in brokers’ membership fees, Insurance Times can reveal.
Information released to Insurance Times under the Freedom of Information Act reveals the cost of the review into whether brokers should disclose their commission earning to commercial clients reached £797,311.47.
The development comes just weeks after the FSA confirmed it would be charging brokers a 9.3% increase in regulatory fees in the current financial year. However the final rate was around 10% lower than its proposed increase following an industry backlash.
The FSA said the cost of the review carried out between January 2007 and March 2009, included staff time spent on the project as well as external costs.
Institute of Insurance Brokers chief executive Barbara Bradshaw said, the review called ‘Transparency, Disclosure and Conflicts of Interest in the Commercial Insurance Market’ was a “massive amount of member’s money for something that did not really show that there was a major problem”.
Biba’s head of compliance and training Steve White said the overall cost of the review was a “significant amount” but added that it was important that the FSA had its key people making the big decisions.
Last year, the FSA raked in £33.8m in fees from the 6923 firms in the general insurance mediation block and spent £32.8m on regulating the sector.
On average, these firms will have paid around £115 each towards the cost of the FSA’s commission disclosure review.
However, the amount of regulatory fees paid by brokers varies greatly dependent on the size of the business.
In December 2008, the FSA agreed an industry-led solution on commission disclosure but gave the market until 2011 to prove it can work.
In April the FSA confirmed “industry guidance” status on the industry-led solution after lengthy work by Biba and the wider industry.
It followed years of deliberation by the FSA which included it commissioning consultancy CRA International to carry out a review on whether mandatory disclosure should be introduced, however this was ruled out and led to further reviews.
See analysis: The cost of regulation