The FSA has refused to reconsider its rule that exposes brokers to unlimited Financial Service Compensation Scheme (FSCS) claims. The statement was prompted by an appeal by the IIB.
The IIB said: "Under the rule, brokers will in effect be acting as names on an excess of loss underwriting syndicate, providing cover of up to £99.3m any one claim in excess of the £700k minimum professional indemnity insurance limit prescribed by the FSA, for which they will receive no premium or means of point-of-sale financial recovery.
"In stark contrast, the individual compensation limits for both investment and mortgage business are only £48,000. The offending FSA rule amounts to treating general insurance advisers as if they were operating authorised insurance companies themselves, subject to what was the Policyholders' Protection Act."
Before taking the matter up officially with HM Treasury or considering a Judicial Review, IIB director general Andrew Paddick needs to demonstrate that the IIB has first pursued all relevant questions with the FSA and in a further letter to Mr McCarthy written today has asked:
"Given that the Insurance Mediation Directive does not require any member state to establish a compensation scheme in respect of insurance mediation activities, why has the FSA taken it upon itself to 'gold plate' (we would say excessively and inequitably) the IMD, especially when both government ministers and opposition front bench spokesmen have made it clear that the gold plating of EU directives generally can lead to UK businesses suffering competitive disadvantage?
"In your letter dated 5 August 2004 you state that, "after careful consideration, and taking into account feedback from CP174, it was decided that the second option (unlimited individual awards) was the more appropriate approach for claims arising from insurance mediation activities". We would like to know the identity of and have copies of such 'feedback'."
